Typical requirements imposed by a private student loan lender (e.g. a bank):
- Verification of graduation or the completion of a multi-course certificate or license is required.
- Reduced interest rate requires continued automatic payment from a personal checking or savings account. If the automatic payment is cancelled at any time after repayment begins, the discount will be lost until automatic payment is reinstated. The automatic payment interest rate reduction is separate from the graduation reward interest rate reduction and available to both borrowers who graduate and those who do not.
- Maximum in-school periods apply and vary by loan program.
- Loan amount is dependent on loan product and the school you attend. A cosigner may be required. If you make less than $12,000 annually, you'll likely need a cosigner.
Questions to Ask Your Prospective Lender
- What is the current interest rate? Is it fixed or variable?
- What is the maximum interest rate?
- Are there loan fees? How and when are they charged?
- Is there a cap on the interest rate?
- What are the credit criteria?
- Is a co-signer required?
- Is there a co-signer release option?
- When does repayment begin?
- Is there a grace period?
- What deferment options are available?
Repayment
When you have to start repaying your student loan, the default plan is usually to pay the same amount every month. However, often other plans are available: a flex plan, for example, where you start out with small payments right after graduation, and your payments increase over the repayment period. This approach assumes that you will be making more money later. Most education lenders do not penalize for early repayment.
Buyer Beware
It is easy to fall victim to loan offers that come in the mail, over the Internet, or to your personal email. Some marketing techniques encourage a “quick fix” approach and as a result, some students end up taking on loans that may be more costly to them than the best options available.
Dealing With Problems
Make sure to establish a positive relationship with your lender, if possible with a specific representative there. Keep your contact information current and make your loan payments on time. If you cannot make a payment, call the lender's office right way and discuss your situation, rather than not sending the payment without communicating. Because bankruptcy does not apply to student loans, many lenders readily excuse payments periodically for hardship (called a hardship deferment), and others are willing to take partial payment in a month when you are having a hard time.
FinAid.org provides an extensive list of lenders: please see its website page for the list and more details.
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