Private Education Loan Programs
Alternative Loans (Private Education Loans) are offered through private lenders and are meant to provide additional educational funding only after a student and his/her family has exhausted all other sources of funding such as federal and state aid. These loans are not guaranteed by the federal government and may carry high interest rates and origination fees. All the loans require a credit check and most will require a cosigner if the borrower has little or negative credit history. CUNY does not recommend any specific lender/programs. Contact the lender of your choice for details about their program and application process.
Before receiving a private education loan you need to print and fill out the Private Education Loan Applicant Self-Certification form <pdf> and submit it to the Financial Aid Office at your school.
Private loan shopping
- As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan.
- The Internet makes it easy. All you have to do is type in "private education loan" on any search engine and a whole slew of lenders will pop up.
- Don't forget to check your university's Web site. Some financial aid departments list private loan information online.
- You'll also want to check to see if your parent's bank offers private education loans. Having a co-signer who is a longtime bank customer may land you a lower rate on your loan.
- Be sure to study the fine print of each and every deal. What kinds of interest rates are available?
- Does the loan charge a disbursement fee or a repayment fee? A disbursement fee is a fee that's charged once your student loan check is cut. A repayment fee kicks in when it's time to start paying on your loan.
- Keep in mind that the terms offered in big, bold letters are probably reserved for people with squeaky-clean credit. There's no guarantee you'll qualify for that rock-bottom rate, even with a co-signer.
- They should also file the Free Application for Federal Student Aid (FAFSA), which may qualify them for grants, work-study and other forms of student aid.
- Undergraduate students should also compare costs with the Federal PLUS Loan, as the PLUS loan is usually much less expensive.
- The fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees can ultimately cost more than a loan with a somewhat higher interest rate and no fees.
- Often the interest rates, fees and loan limits depend on the credit history of the borrower and co-signer, if any, and on loan options chosen by the borrower such as in-school deferment and repayment schedule. Loan term often depends on the total amount of debt.
- Be wary of comparing loans with different repayment terms according to APR, as a longer loan term reduces the APR despite increasing the total amount of interest paid.
- Lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost. For example, many lenders will only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 4% higher, loan fees that are as much as 9% higher, and loan limits that are two-thirds lower than the advertised figures.