I recently released my co-signer (my dad) from the burden of being responsible for my student loan payments. A co-signer is responsible for the payment of a student loan if the student who ‘owned the loan’ was unable to make payments, and deferment or forbearance wasn’t an option.

I thought this would be an easy, no ceremony (or notification) process needed. I didn’t realize how big of a deal this can be to your co-signer, the relief, and the adult-like responsibility you embody when you complete this process.
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If federal aid and scholarships have left you staring at a financial abyss to pay for college, you might be considering applying for a private student loan. To be eligible for a loan, you must meet the following criteria:

You must be a U.S. citizen or permanent U.S. resident. If you are using a cosigner, he or she must also be a U.S. citizen or resident. You will both need a valid social security number.

You must attend an eligible school, such as a community college, two or four-year college or university, or eligible graduate program. Contact your financial aid office to ensure the school can certify a private student loan for you.

You must pass a credit check to be approved.  Lenders typically prefer borrowers have a credit score of 650+. If your score is below that mark, you may have to tab a cosigner with a stronger credit history to cosign the loan for you.

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Here we are in early July and in less than a couple of months, the fall semester will be underway. Now is the time when many students and their families are scrambling for financial aid. This is especially difficult if scholarships and federal loans left them well short. That is where private student loans come in. Unlike federal loans, you don’t fill out a FAFSA. So how can you get the best private student loan for you? Here is a handy guide.

1. Exhaust your federal loans and scholarship options. Always be sure that you are getting the most you can in federal loans. Remember scholarships are the best option for paying for school because you don’t have to pay back a lender. Visit www.StudentScholarshipSearch.com for a comprehensive database of scholarship options.
2. Determine how much you will need to take out. Be sure to look on your Student Aid Report for information on the total cost of education. You may need to take out funds for more than just tuition, but also housing, books, supplies, etc.
3. Browse around. Many students and their families are tempted to take the first private loan they see. But in many cases, you will be taking out thousands of dollars. If you were going to spend thousands on a car, wouldn’t you want to do some research? Look into interest rates and repayment options. If you are unsure about a lender, do a quick internet search for customer reviews. At PrivateStudentLoans.com, we have provided a handy private loan comparison tool, which lets you browse up to six leading lenders at a glance, as well as their rates and benefits.
4. Make a repayment plan. The elephant in the room with any loan is that you will eventually have to pay it back. So before borrowing a huge sum, check to see how much this will ultimately cost you. Use our private loan repayment calculator for help.
5. Apply! For undergraduate students and some grad students, your credit history might not be strong enough to receive a private loan on your own. In that instance, make sure to tab a trusted cosigner to help you get approved.

Have questions about the private loans process?  Ask them in the forums!

If you are an undergrad looking to take out a private student loan to pay for college, you almost certainly do not have the proper credit history necessary to be approved. In almost all cases, you will need a cosigner to assist you in getting the loan. A cosigner is someone who agrees to take responsibility for the debt incurred from a loan if you are unable to pay.  There are many benefits to using a private student loan cosigner, including a higher chance of approval and potentially lower interest rate.

In many cases, the obvious choice of a cosigner will be a parent or legal guardian. You may also elect to tab a relative or other trusted adult.

When deciding on a cosigner, you must make sure they have a solid credit history. If a person’s credit rating isn’t much better than your own, it won’t do a lot of good to have them as a cosigner. Before you ask them to cosign your loan, make sure that he or she regularly makes payments on time, and receives a steady income. Conversely, let them know you are a responsible person who can ultimately make regular monthly payments on the loan. Be sure to let the person know that their credit score can be adversely affected if the loan is not paid back properly.

A lot of students and their families are hesitant, for a variety of reasons, about taking out a private student loan. While federal aid and scholarships/grants are always the best options, it is often necessary to use a private loan to cover the remainder of the cost of attendance. Here are some facts to help ease your concerns about private loans:

1. You CAN get a private loan with bad credit. You just need to find a parent or trusted family member to cosign the loan for you. A good cosigner is anyone who regularly pays his or her bills on time and is not trapped under a mountain of debt. Plus, a good cosigner can help you get a better interest rate, which can save you money.
2. You CAN afford a private loan, if you plan accordingly. Among the best ways to plan ahead is to only take out what you need. If you take out more than one loan, you may also choose to consolidate in order to receive a lower monthly payment and better interest rate.
3. You CAN find a trusted lender. Yes, there are plenty of shady lenders out there who are only out to scam you. Always be sure to do some research before providing personal information to a lender. One great area to start is with our Private Student Loan comparison tool, which features only trusted, legitimate private loan lenders.

If you have been looking for a private student loan, you might have come across the word FICO. Your FICO score, or your credit score, is basically a rating assigned to you based on your credit history. A good score can help you get a car, a house, and, yes, a private student loan. So what do you need to know about FICO?

For starters, you should get your free credit score online. Here you will be asked a little about your financial history and background. If you’re a prospective undergraduate, don’t be alarmed if your score is very low.

Chances are unless you have been living on your own or developed some kind of credit history (i.e. you regularly pay off credit cards, pay back loans, etc.), you won’t be eligible for a private student loan and will require someone with a higher rating to a cosign the loan with you.

If you have checked your FICO score recently, here is a general look at what the figure means:

• 330 – 619: Odds are if you fall into this range you have either had a negative history or no history. If you want a loan, you will almost certainly need a co-signer.
• 620 – 659: This is a bit of a tough area. You will likely need a co-signer for a private loan. If you are a parent, you might be eligible to apply for a Parent PLUS loan, which has a fixed interest rate and has lower requirements for borrowers.
• 660 – 720: This is the range of average credit scores. Prime financing will be available to you, and you should be eligible for most loans at an average rate of interest.
• 721 – 750+: This is an excellent credit rating. You will get the best interest rates and have your pick of lenders.

So what are these numbers based on? A majority of your FICO score is based on how consistently you make credit card payments and how much of your credit you actually use.  If you consistently use your credit card, but still carry a low balance (read: pay them off regularly), your score will be higher.

Got a bad credit rating and looking to improve it? Visit our Student Platinum site!

If you’re an estranged parent or the child of divorce, you might be wondering which parent is responsible in certain student loan situations. Here is a brief overview.

Parent PLUS loans: Only one parent may apply for a Parent PLUS loan. The parent must (1) live with the child who will be using the loan; (2) claim the child as a dependent on taxes; and (3) support them more than 50%. This loan may not be transferred at any time and is the sole responsibility of the parent who applies.

Private Student loan cosigning: Either parent may elect to cosign for a student loan. The parent must have good credit and be responsible to pay in the event the student defaults following their post-graduation grace period.

Student loan consolidation: Only the parent who takes out the Parent PLUS loan may consolidate. If both parents co-signed for separate private loans for a child, an individual parent may only consolidate the loan(s) for which he or she co-signed.

We get a boatload of questions daily in our Financial Aid forums concerning private student loans. While such a loan can help you close the gap between your federal loan allowance and your total cost of education, there may be some concerns. Here are a sampling of questions found in our forums and some ways to answer them.

1. “My parents don’t want ANOTHER loan hanging over their heads.” – As you may have heard, the U.S. economy hasn’t exactly been great last couple of years. Virtually no outside lender will approve you for a private student loan without a cosigner. But Mom and Dad, already burdened by the cost of education, might feel queasy at the thought of borrowing even more and facing a potentially damaging interest rate. One way to solve this problem is to take out a Parent PLUS loan, which has a fixed interest rate of 8.5% and the payments can be deferred until after graduation.

2. “My parents have lousy credit.” – Again, you will almost definitely need a co-signer for a private student loan these days. One trick is to ask your parents to apply for the Parent PLUS loan. If they have bad credit, they will get denied. You, however, can become eligible for up to $6,000 more per year with an unsubsidized Stafford loan. You may also seek out another trusted adult as your guardian. (Read this checklist for finding a private student loan co-signer.)

3. “I don’t know which lender to trust.” -  Sad to say, there are a LOT of shady lenders out there who would love nothing more than to sucker you into a bad loan. Always (repeat: ALWAYS) shop around and perform your due diligence before providing personal information to a lender. One great place to start is right here, with the Private Student Loan comparison tool.

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If you’re interested in taking out a private student loan that could hopefully bridge the gap between your federal loans, scholarships and your total cost of education, chances are you have some questions. The first of which is almost certainly, “which private student loan is the right one for me?”

To answer that question, it is best to know  what your current financial aid situation is. There are a bevy of offerings out there, and no two are alike. Use this handy checklist to get an idea which loan fits your lifestyle and financial situation.

• Can you afford to start paying back the loan now, or do you want to wait until after you graduate? Some private student loans offer less fees or no fees if you start paying early.
  
• What kind of interest rate will I get? Unfortunately, you can’t determine your exact interest rate until you apply. But one way to get a good idea is to check your credit report.  Do you have a number of late payments or overdrawn accounts? If so, you likely will get a higher interest rate.
• Can you afford to pay an origination fee?
• Do you plan to consolidate? Hint: Yes, you probably should.
• Will you use a cosigner? Using a cosigner can help you get a better interest rate down the line.
  

Click here for a complete private student loan comparison.

Apply for a private student loan here.

Unlike federal student loans, private student loans do not have a universal fixed interest rate.Private student loan interest rated are calculated based on a published index, such as the Prime Rate or LIBOR, and a margin based on your credit score and credit history. Private student loan interest rates fluctuate over time and interest begins accruing as soon as the loan is disbursed.

Prospective borrowers usually want to know what their interest rate will be before they apply for a loan, however an exact interest rate cannot be determined until you apply for a private student loan. If you are thinking about applying for a private student loan you should check your credit report first. If you have a lot of late payments, overdrawn accounts, and other credit issues your interest rate will be higher or you might not be approved for a loan at all.

If you have not built up a credit history, or if you have poor credit, you can apply for a private student loan with a cosigner. Applying for a private student loan with a cosigner not only improves you chanced of being approved, but it can also get you a lower interest rate.

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