5 ways to get a private student loan

A jar with pennies in it reading, "coins for college"
  • A good credit score can land you a loan with a low interest rate.
  • Work with an institution that's familiar with your track record.
  • See if your school offers emergency funding, or tap peer-to-peer sites.

Students who assume that they'll have legions of lenders vying for their business may have another thing coming this fall. According to the student finance Web site, since August of 2007, some 200 lenders have exited or suspended their student loan programs, significantly raising the competition for those seeking nonfederal education funding. Thankfully, you don't have to sit on the sidelines and watch your loan buzz by. Take these steps to increase your private student loan eligibility.

No. 1: Raise the score

Your credit score, that is. Cindy Bailey, senior policy analyst for the College Board in New York City, says that if you want to land a private student loan -- after you've maxed out your federal loan options, of course -- it all boils down to your score.

"There aren't nearly as many people out there making these loans and the rates are not particularly impressive, so you've got to have a high credit score and a co-signer," she says. "The benefit of having a good credit score is twofold -- the approval rates are better and the interest rates are better."

Students with scores below 650, the minimum usually required to land a private loan, according to, can start cleaning up their scores by obtaining a free copy of their credit report from any of the three major credit bureaus -- Experian, Equifax or TransUnion -- checking for mistakes and paying off outstanding debts, starting with any accounts that have gone into collection first.

No. 2: Get a partner

"When a student is in their junior or senior year and has established a credit record, we can start to look at them taking a loan for themselves. But almost all freshmen and sophomores are going to need a co-signer," says Jeff Hommes, senior vice-president of loan originations for Wells Fargo.

Parents, family members, even trusted friends can serve as loan co-signers, but Hommes warns that to land a loan with Wells Fargo, co-signers should have a credit score above 680, a low debt-to-income ratio on their accounts and at least a few years' worth of established credit history.

No. 3: Mine your relationships

Hommes adds that your best shot of landing a private student loan is by working with institutions that are familiar with your track record.


"If we know the customer and we know their repayment history, it will be more likely that we'll make the loan," he says. "Students should definitely reach out to banks with whom they have an established relationship."

If you don't have a good relationship with one particular institution, perhaps your school does. Before signing onto one particular loan, shop around with institutions on your school's preferred lender list as well as with local community banks and credit unions.

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