Step-by-Step Guide to Applying for Private Student Loans

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Updated on Wednesday, May 15, 2019

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Once you’ve maxed out your eligibility for federal financial aid, you might turn to private student loans to cover the costs of college. But you’ll soon discover that applying for private student loans is a different process than applying for federal ones.

To access private loans, you’ll need to seek out a bank, credit union or another financial institution. Along with all the required paperwork, you might also need a cosigner to sign on to your application. Learning how to apply for private student loans before you act will help ensure there are no delays along the way.

Applying for private student loans in 7 steps

1. Determine how much money you need to borrow

Your first step to getting a private student loan involves figuring out how much money you need to borrow. Private loans can be used for any eligible educational expenses, including tuition, fees, textbooks, room and board and other living expenses.

Take a look at your school’s estimated cost of attendance, which you can typically find on its financial aid website or your financial aid letter. Take the amount listed and subtract any other aid you’ve already received, like federal student loans, grants or scholarships.

If you haven’t received aid yet, the FAFSA4Caster tool can help you estimate your award. After submitting the Free Application for Federal Student Aid (FAFSA), you’ll also see your Expected Family Contribution (EFC), or the amount your family is expected to pay out of pocket.

If you still have a gap in funding after aid has been applied, you might fill it with a private student loan. But be careful about borrowing too much — you don’t want to be stuck with a burdensome amount of debt after you graduate.

What’s more, you probably can’t borrow much beyond your school’s cost of attendance anyway, since your school will likely have to certify any amount you request from a private lender. Estimating your costs will give you a good sense of how much you’re eligible to take from a bank.

From there, you can look for ways to lower the amount you need to borrow in student loans, whether that involves applying for more scholarships or working a part-time job during college.

2. Research private lenders

Once you have a sense of how much you want to borrow in private student loans, it’s time to research your options. You have lots of choices when it comes to borrowing a private student loan.

To save you some time, we’ve vetted private student loan lenders to help you find some of the best ones. Here are a few of our top recommendations for lenders with excellent rates and terms.

Since each lender is different, it’s useful to compare your options to find one that’s best for you. Along with finding the lowest interest rate, you might also look for other perks, such as flexible repayment options or a reputation for good customer service.

3. Compare private student loan offers

Another advantage to several of the lenders mentioned above is their offer of an instant rate quote. After heading to their website, you can check the rates available to you with just a few pieces of basic information, such as your name, school, and the amount you wish to borrow.

At this point, you can immediately see some pre-qualification offers, along with the rates you might get if you apply. This instant rate quote makes it easy to compare offers from multiple lenders so you can find one with the best terms.

Plus, it won’t impact your credit at all, since it’s just a soft credit check. Remember, however, these are only pre-qualification offers — you’ll need to submit a full offer and consent to a hard credit check to see your final loan offer.

But these pre-qualification quotes do give you a good sense of what you could be eligible for, as well as help you narrow down your options for lenders. Note that not every lender offers an instant rate quote, and you probably shouldn’t neglect the ones that don’t.

If you belong to a bank or credit union, for instance, it could be worth speaking with them about a loan to see if you can get an even better deal. Still, taking advantage of instant rate quote or loan comparison marketplaces such as LendKey will help you get an initial sense of what’s available.

4. Find a cosigner if necessary

Unlike the federal government, private lenders have underwriting requirements for credit and income. You’ll need strong credit and a steady income to qualify for a loan, as this reassures the lender you’ll be able to pay back your debt.

Most undergraduates can’t qualify on their own, so they apply with a cosigner, such as a parent. However, know that your cosigner becomes just as responsible for the debt as you are — their credit is on the line in the event you can’t pay, so have a conversation with your cosigner before applying for private student loans to ensure you’re both on the same page about who’s paying back the debt.

Cosigning debt isn’t a decision that should be made lightly. It’s important to clarify expectations so no one’s finances (or relationships) get hurt.

5. Gather the required paperwork

Once you’ve done the preliminary research, the time has come to collect all the necessary documentation. If you’ve submitted the FAFSA, you might already have some of this information on hand.

Although requirements can vary, most private lenders ask for the following:

  • Social Security numbers for you and your cosigner (if any)
  • Personal data, such as your date of birth, home address and phone number
  • Annual income, with pay stubs or W-2s as supporting documentation
  • Employment information
  • A copy of the previous year’s tax returns
  • Monthly rent or mortgage payments
  • A list of assets and their values
  • Contact information for a personal reference
  • The Private Education Loan Applicant Self-Certification form, which you can obtain from you school’s financial aid office or the Department of Education

Each lender sets its own requirements, but the majority will want most of the documents on this list. Gathering them in advance will help your application go smoothly.

6. Submit your application for a private student loan

Once you’ve done your research, chosen a lender and gathered your information, the time has come to submit your private student loan application. Most lenders make it easy to apply for a private student loan online.

This process shouldn’t take long, especially once you have all the relevant documents at the ready. You’ll usually start by filling out your personal information, as well as the details for any cosigner. You’ll have to indicate where you’ll be attending school, as well as the loan amount you’re requesting, and likely upload verifying documents, such as pay stubs or tax returns.

Your final step will be acknowledging the lender’s terms and conditions before hitting submit. At this point, most lenders will reach out to your school to certify the amount you requested.

Assuming all goes well, the lender will likely send the funds to your financial aid office. After applying it to your tuition bill, your financial aid office will return any remaining funds to you.

You can use this money on living expenses, or you can return it to the bank so you don’t have to pay interest on it. In fact, you can always prepay your student loan ahead of schedule without penalty.

Note that some lenders will send the funds directly to you, rather than to your financial aid office. In this case, it’s your responsibility to get the loan money and pay your tuition bill.

While you can borrow a private student loan at any time throughout the school year, don’t leave your application until the last minute. The process can take some time, so you want to ensure the money arrives in time to pay your tuition bill before the deadline.

7. Read over the terms of your contract before signing

Once your application has been submitted and approved, make sure to read over your student loan contract before you sign it. Check to see exactly how much you’re borrowing, along with your repayment term, interest rate and monthly payment.

Find out if you need to make any payments while you’re still in school, or if you have a grace period that extends for a few months after you graduate. Use our student loan calculator so you have a clear understanding of the long-term costs of your loan.

Finally, find out if your lender offers any alternative repayment options in the event you lose your job or return to school in the future. For instance, some lenders will postpone payments temporarily if you run into financial hardship or go to graduate school.

Learn about your options beforehand so you don’t make any false assumptions about your private student loan options.

Applying for private student loans doesn’t have to be arduous

Applying for a private student loan might feel daunting when you’re heading to college the first time, but the process will seem easier after you’ve gone through it once. Learn how to get private student loans well before the school year starts, so you won’t be left scrambling when tuition is due.

And make sure you shop around with multiple lenders before choosing one to finance your education. By putting in your due diligence now, you can find a private student loan with the best rate and lowest costs of borrowing.

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