Best Private Student Loans for Parents

When private student loans can be a good option

A private student loan will originate with a financial institution like a bank or credit union instead of the federal government, like other college loans. That means you may be paying higher interest rates, and the repayment terms may not be as lenient.

To benefit the most from private student loans, you'll want to be a strong borrower and know you can repay the loans once you graduate.

Here are some qualifications you'll want to hit before applying:

• Strong credit (690+ score) or have a cosigner.
• You've already maximized your undergraduate federal student loans and don't have a way to pay for the rest of your school expenses.
• You have already completed your FAFSA application to see what financial aid you might qualify for.
• You have at least a part-time job (it's not a requirement, but it's a good idea to go this route first).
• Borrowing for a degree with a high probability of immediate job placement after graduation.

You don't want to take a private student loan if you aren't confident in your ability to repay it once you graduate. That's why these loans can be the best fit for graduate programs like law or medicine or those who have exhausted all other options.

How interest rates compare in private student loans to federal loans

Federal student loans have flat interest rates set by the government. This doesn't mean these loans are always the most affordable, but you will know what you're paying when submitting your application. Private student loans can vary in interest rate quite broadly based on your credit or whether you have a cosigner.

It's important to point out that federal loans also have more protections for borrowers and repayment options if you struggle to repay them. Private loans do not have these protections and will be treated like any other loan in repayment. However, that also means it could be easier to get private loans forgiven than federal loans.

How do you qualify for a private student loan?

Every lender is going to have their own criteria for loan qualification. Some will require a co-borrower no matter what since you are in school, while others will base their decision on credit history and income. This makes it more advantageous to have a job while you're in school if you're looking to maximize the amount you could qualify for.

Some institutions are also more likely to approve your loan if you have a work history and are taking out loans to go back to school. It's important to evaluate the specific requirements of the institution you want to apply with before you apply. Lenders perform a credit check every time you apply for a private student loan, so you should be selective in the application process.

Can you get a private student loan with bad credit?

Getting a private student loan will be much more challenging if you have a bad credit history than getting a federal student loan. Most institutions will require a cosigner to guarantee any private loan you take out, and that cosigner needs to have a strong credit profile. However, those with a bad credit history should consider other financial aid options before considering private student loans.

How do you apply for a private student loan?

Every lender has its own application process, so once you find the right loan for you, you'll want to check that lender's website for details. However, just about every lender today allows for online applications, which is almost always the first step.

Once your application is received, an underwriting process will check your credit and the credit of any cosigners and then submit additional information requirements to you. Depending on your personal situation, there may be some back-and-forth for the lender to get your loan approved, and you will be required to submit some documentation. The process could take anywhere from a few days to a few weeks.

Before applying for a private student loan, you should do your research to find the right loan option with the lowest potential costs. This means a loan with low interest rates and favorable repayment terms. Don't be shy about having any cosigners borrow with you. Check out each loan option you like best before applying, and consider applying to multiple lenders for the best rates.