Private loans are loans that students can borrow from outside lenders. These loans are designed to bridge the gap between costs and traditional funding sources, such as federal student and parent loans, grants and scholarships. It is up to borrowers to do their own research and decide which loan(s) are best for them.
A good place to start is ELM SELECT, which is a private loan database of various lenders and their products:
The student or the parent can be the borrower. However, a credit-worthy co-signer is required if the student is the borrower. Repayment varies by lender; the borrower may have the choice of repaying the loan while in school, paying interest only, or deferring payments until they are out of school (interest accrues). Interest rates can vary with different lenders, as well as fees. Private loans can also be an option for international students (most but not all require a U.S. citizen as a co-signer); part-time students; and non-matriculated students. These loans are private loans specifically used for educational expenses and are limited to the cost of attendance minus other aid offered.
Due to fluid changes in the current lending market, Binghamton University does not have a preferred list of lenders. We recommend that students research lenders and loans to find the loan product that meets their individual needs (see “Research on your own” section below).
The following points are offered to assist you when making your decision to borrow a private loan:
- Federal aid first - Since federal student loans offer fixed interest rates, low loan origination fees, and much more flexibility in loan repayment, deferment, forbearance, and forgiveness, a student should not use a private loan product until the federal loan option has been exhausted.
- Effective July 1, 2023: The Federal Parent PLUS Loan has a fixed interest rate of 8.05% with an origination fee of 4.228%. (Interest rates adjust every July 1st.) The Parent PLUS Loan can now be deferred until the student graduates and does not have as stringent of a credit check as private loans. For parents intending to assume responsibility for paying the student’s private loan, the PLUS Loan might be a better option.
- For graduate students, the Federal Graduate PLUS Loan is an option after the unsubsidized loan has been exhausted. Since the interest rate is fixed at 8.05% with an origination fee of 4.228% and the credit check is less stringent than private loans, the Graduate PLUS Loan might be a better option than an private loan. (Interest rates adjust every July 1st.)
More on private loans
- Most lenders have a tiered interest rate strategy tied to the borrower’s and cosigner's credit scores. Lenders entice with their best rates, but fewer than 25% of students generally qualify for those rates.
- A student will need a credit-worthy co-signer if pursuing the private loan option.
- Private loans are certified by the school and the proceeds go directly to the school to pay account balances. The amount of the loan cannot exceed the difference between Binghamton’s cost of attendance and the student’s accepted financial aid. Any money remaining after the semester balance has been paid is refunded to the student. We recommend you apply at least two to three months prior to the first semester of enrollment. It is the responsibility of the student to resolve issues with the lender during the application process.
- Private loans cannot be added to future federal student loan consolidations. However,
some lenders offer private loan consolidation products for consolidating only private
loans.
- Student loan consolidation may extend your repayment term, increasing your overall financial obligation. However, your monthly loan payments may be reduced. You can choose to prepay principal with no prepayment penalties, which reduces the overall cost of your loan.
- WARNING: Due to the current market, loan consolidation products are not offered by most lenders. Before you borrow, ask if private loan consolidation is an option.
- It is not recommended that multiple loans be applied for as a method of securing one with the lowest rates—each application lowers credit scores by approximately 5 points.
Research on your own
Before taking out a private loan, we recommend you explore the ELM SELECT site to view:
- A comprehensive list of lenders and their rates, which can be filtered by program or status (Undergraduate, Graduate, International and DACA students)
- A loan comparison tool
- A financial literacy tool
After selecting a loan product, it is strongly recommended that the student contact the lender to be sure the rates and terms are still current.
What to ask when you call
- How long have you been in the private loan lending business?
- Is this your own loan product and do you service your own loans? If not, who does?
- What percentage of students are approved at the top (most favorable) interest/loan fee tier?
- How long can the loan be deferred before I have to start repaying it?
- Do you have any repayment incentives? Are they guaranteed for the life of the loan or might they be changed later?
