In some cases, students do not qualify for federal student loans, or they need more funding for the next semester. When that happens, lenders that handle private student loans can be your best option for education-related expenses and more. If you have a gap in funding and know you need help, now is the time to look into this option. While each has their own criteria, you need to have the following requirements before going to a private lender.
Enroll in an Eligible School
You have to be a currently enrolled student to qualify, but that doesn't mean that every student will automatically be approved. Most look at the school's accreditation to ensure that it is a legitimate college. Most four-year colleges will qualify, but there are some for-profit schools that are not always eligible. Some private lenders specifically help out students who attend community colleges and vocational schools. Odds are the college of your choice should not have any issues.
Age, Education, and Citizenship
In addition to being an eligible student at the right school, you also have to meet requirements concerning your age, citizenship, and education. Most require that you be 18 years old with a high school diploma. However, lenders may also accept an equivalent such as a GED or homeschooling certificate. You will have to check on what they consider acceptable for education prerequisites. In addition, you also must have a social security number and be a US citizen or a legal resident, or even granted permanent status in some cases.
Credit and Income
While a federal student loan through FAFSA may be a smooth application process, private lenders can review your entire financial picture and approve based on criteria such as your credit history, income, and debt-to-income ratio. You may have to work with a co-signer such as a parent or family member who you not only trust, but that can count on you making the payments as they are on the line as well. If you have a limited credit history this can help secure the balance you need at a competitive interest rate.
Talk to Your School's Financial Aid Office
Your financial aid department can inform you of the many loan programs available to you so you can select the best that meets your needs. The lender will communicate directly with your school to ensure the proper funding is set up. Any remaining funds in excess of your tuition expenses, the school issues a payment to you directly and you can use this money for other education-related expenses.
Financial planners warn that it's best to return any amount you don't use on education-related expenses so that you have a lower loan amount. While some may use the extra funds to pay for Spring Break or nights out at the bar, digging an even deeper debt hole now will only lead to further expenses down the road. You can also sign up for fellowships, scholarships, and side hustle income to help you pay for other expenses. This ultimately keeps your long-term finances in a better position.
