In planning the financial aspect of your education you should start by maximizing the funding available to you under federal programs. Once you know how much the government contribution will be you can than begin to consider a private loan.

If you have completed the free application for Federal Student Aid and you realize that what you have received in financial aid award is not going to allow you to study on a comfortable budget, you will then know the approximate amount you may want to consider obtaining through a private loans to cover any financial need that was not met through federal fundings.

Start early and try to receive your aid award information from your school in the spring or early in the summer.

An additional consideration before applying for a private loan had to do with making sure you fit the profile necessary to be approved. Here are some of the qualifications necessary:

As undergraduate, graduate or professional student you need to be enrolled at least half-time in a degree-granting program at a college or university that participates in the federal education loan programs.

You should be making satisfactory academic progress.

You need to be of the age of majority in your state of permanent residency. For most states it is 18 years of age.

You also need to be a U.S. citizen or permanent resident.

If you are an international student you may apply with an eligible co-borrower who is a U.S. citizen or permanent resident.

You need to be able to meet minimum credit criteria.

Your school must be a degree-granting college or university that participates in the federal education loan programs. During the application process, a list of eligible schools will be presented to you.

With regard to the amount you can borrow the minimum and maximum amount varies by school, academic program and grade level. You are usually made aware of these limits at the start of your application process.

The interest rates and any fees associated with these loan programs will vary by school, academic program and grade level. Interest rates are variable and will fluctuate based on changes to the Prime or LIBOR index. Both the product interest rate and fees, if any, will be presented to you during the application process and again with your Truth in Lending disclosure.

Interest rates and fees also vary, depending on your credit history and that of your co-borrower if you have one. Well qualified co-borrowers are definitely a way to drastically improve your chances of approval.

A co-borrower with a good credit history could be helpful in reducing your interest rate and saving you money over the life of your loan. If you lack sufficient credit history or currently have limited earnings, utilizing a co-borrower becomes almost a necessity.

A co-borrower with a good credit history will positively affect your interest rate and any fees you may pay.

A co-borrower can be anyone you know, although typically parents, grandparents, or legal guardians are a common choice, anybody who has a more established credit history and is willing to be your co-borrower can be the one helping you lower your interest rate and fees.

Well qualified borrower benefits will vary by school, academic program and grade level. They may include:

- Interest rate reductions to qualified borrowers who make on-time payments
- Interest rate reductions for utilizing auto-debit payments
- Co-borrower release to qualified borrowers who make on-time payments


A credit check is used for most consumer loans to determine your ability (and your co-borrower’s ability, if applicable) to repay your debt obligation.

As for any type of loan certain derogatory items on your (or your co-borrower’s) credit history would preclude you from eligibility to a private student loan:

- Student loan default.
- Delinquent payments on consumer loan account(s).
- Significant judgments, charge-offs, or unpaid tax liens unless payment arrangements have been made.
- A bankruptcy.
- A low credit score or an insufficient credit history.
- Inability to pass a debt-to-income test.


Having an adverse credit history does not mean that you can not apply for a private student loan, you can still be eligible if you apply with a creditworthy co-borrower.

So, you have been working hard, met all your requirements and you wonder when the funds will be released. Typically, your loan will be funded as early as one business day after the date your completed application. Of course, if all required documentation is presented and approved.

Now you have a pretty stack of money in your account and suddenly you wonder... when am I going to have to start making payments?

Full deferral of principal and interest is available on the majority of private loans. If your loan is fully deferred, then repayment will start 180 days after your graduation date or school separation date.

Once again repayment terms will vary by school, academic program and grade level. Your repayment terms will be presented to you during the application process and with your Truth in Lending disclosure.

Yes, obtaining the necessary funds to finance your education is not a walk in the park. It takes a lot of research and time spent reading a massive amount of fine prints but all this work is definitely going to pay off. You certainly don't want to give up the chance to a good education which in turn will lead to a financially healthy life simply because of a little red tape, do you?

Mark Van Neem

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