Private student loan requirements: What you need to know

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A private student loan can be a great way to pay for college if scholarships, grants and federal student loans don’t cover all of your expenses. But you’ll need to fit the criteria to qualify. Every private lender sets its own requirements, but you’ll typically have to meet minimum credit and income requirements, find a co-signer and enroll at an eligible institution. Plus, there are rules about how you can use private student loan funds. Here’s what to know.

Factors to consider before applying for a private student loan

Before borrowing money to pay for school, it’s important to know the difference between your two main options: federal student loans and private student loans. Even though private student loan lenders offer attractive starting interest rates, it’s usually best to start with federal student loans. Here’s why:

  • Federal student loans don’t have a minimum credit score requirement. If you’re borrowing as an undergraduate, you won’t even need to go through a credit check for federal loans. This makes federal loans more accessible and more affordable for new borrowers.
  • Federal student loans have one fixed interest rate. With private loans, the lower your credit score, the higher interest rates you’ll receive — sometimes into the double digits. Interest rates are the same for all borrowers who apply for federal student loans, and the rate you receive on your loan will never change during your loan term.
  • Federal student loans come with borrower protections. Flexible repayment plans based on your income, generous hardship programs and loan forgiveness are a few of the perks exclusive to federal student loans. While private lenders may offer some hardship programs, the options aren’t nearly as robust.

After applying for federal student loans, you may still need to cover leftover expenses with private student loans. When shopping for private loans, compare these factors among each lender:

  • How much you can borrow.
  • Whether you can invite a co-signer and if there’s a co-signer release.
  • The loan’s interest rate and fees.
  • The loan term, which influences the monthly payment and total cost of interest.
  • When you must start repayment.
  • Hardship programs, such as forbearance and deferment.

5 major requirements for private student loan application

Before applying for a private student loan, check whether you meet the basic requirements. The five requirements below are the most common among lenders, although all lenders have different standards.

1. Enroll in an eligible school

Private lenders typically start with the basics, so they’ll first require that you’re a student who’s pursuing some kind of education. You’ll also need to attend an accredited school, which typically includes four-year colleges and sometimes includes two-year community colleges and trade schools.

Most lenders also require you to be enrolled at least half time at your school, but some lenders have private student loans specifically designed for part-time or career-training students.

How to prepare: If you’re not sure whether your school qualifies, ask the lender for a list of acceptable schools or ask about the specific school you’re interested in attending. Your school’s financial aid office can also give you tips on paying for your education.

2. Meet credit and income requirements

Private lenders typically check a borrower’s financial standing to help them analyze the risk they take on by lending money. They may:

  • Run a credit check to see how you’ve handled debt in the past.
  • Ask for documentation that shows your employment status and earnings.
  • Calculate your debt-to-income ratio to see how much of your monthly income goes toward debt.

Every lender sets its own financial requirements, but it might be tough to qualify if you have little to no income, delinquent accounts in your credit history or a bankruptcy on file. Many lenders won’t advertise a specific minimum credit score, but generally, a score in the mid-600s or higher can help you qualify. As your credit score increases, you’ll have more borrowing options and may receive a lower interest rate.

How to prepare: If you don’t have the credit history to qualify for a private student loan, you might consider holding off on your application for a few months. Work on improving your credit so you can qualify for the loan and get a good interest rate. And if you don’t have the income to qualify, look for jobs you can take on while enrolled in school.

3. Get a co-signer

If you’re new to credit or you’re recovering from a financial setback, you might not have the credit history to qualify for a student loan. But most lenders help you get around this by allowing (or requiring) you to apply with a creditworthy co-signer. This person agrees to make the monthly loan payments if you can’t, which means that you both share the responsibility for repayment. Many borrowers turn to parents and other relatives for this role.

Your co-signer won’t have to worry much if you always make timely payments, but they’ll be on the hook for repaying your debt if you fall behind. That’s why it’s a good idea to figure out how you’ll repay your student loans before borrowing the money.

You can also look for private lenders that offer a co-signer release. After you make a certain number of on-time payments, the lender removes your co-signer from the debt altogether.

How to prepare: It might be difficult finding someone who’s willing to co-sign your private student loan, especially if you’re taking out a large amount. Prepare for the conversation by researching how much you’ll borrow, the monthly payment on the loan, your postgraduation salary and how you’ll fit the monthly payment into your budget. This might alleviate your co-signer’s concerns. If you’re still having trouble finding a co-signer, look for private lenders that approve students without one.

4. Use loan funds for qualified expenses

Private student loans are designed to cover your cost of attendance, which usually includes:

  • Tuition and fees.
  • Housing expenses.
  • Transportation to and from school.
  • Meals.
  • Textbooks and supplies.

Your lender determines your cost of attendance by contacting your school’s financial aid office after you apply. The school will confirm the cost of attendance, certify the amount you’re asking to borrow and disclose other financial aid you’ve received. The lender uses this information to confirm your loan amount and then typically sends the funds directly to your college. The school will send you any leftover money, which you can use to pay for books or other related expenses.

How to prepare: While a private student loan can be a convenient way to cover expenses while you’re in school, it’s still money that will eventually need to be repaid. Consider paying for some of your costs with savings, income from a part-time job or college scholarships and grants. These options can minimize your postgraduation costs.

5. Meet age and citizenship requirements

Most lenders also include a set of requirements surrounding age and citizenship status. An applicant usually needs to have a Social Security number and be a U.S. citizen or permanent resident.

Borrowers must also be at least 18 years old with a high school diploma or equivalent, such as a GED. Some states set the minimum age at 19.

How to prepare: If you don’t meet age requirements, ask the lender if you can qualify with an older co-signer. And if you’re an international student, you may still be able to qualify for a private student loan with a co-signer who is a U.S. citizen.

Next steps

Some lenders are more flexible about minimum requirements, so your best bet is to compare private lenders and see what they’re looking for. You’ll need to check whether your school is eligible, how you can use the loan funds and whether you meet income and credit requirements. Some lenders offer a loan prequalification, which lets you check your rate without hurting your credit score. Once you find the right fit, it’s time to apply for the student loan and create a student budget for long-term success.

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Written by
Kim Porter
Contributing writer
Kim Porter is a personal finance expert who loves talking budgets, credit cards and student loans. In addition to serving as a contributing writer for Bankrate, Porter also writes for publications such as U.S. News & World Report, Credit Karma and Reviewed.com. When she's not writing or reading, you can usually find her planning a trip or training for her next race.
Edited by
Student loans editor