When Should You Apply for a Private Student Loan?

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Paying for a college education can seem daunting, with tuition often reaching six-figure territory. Contact your school’s financial aid office to find out what student aid you can receive and other options available like a grant or scholarships. Getting a private student loan can help you cover the balance of your college costs after student aid and federal financial aid.

Prospective student borrowers can take advantage of the competitive rates offered by T&I Credit Union’s private student loans. Speaking with our staff can help you increase the likelihood of loan approval.

What is a Private Student Loan?

A private student loan is a type of financing you can use to cover your education costs. Private student loans are not backed by the government and typically have higher interest rates than federal student loans.

Private student loans also tend to have less favorable repayment terms than federal student loans. As a result, you should only consider taking out a private student loan if you have exhausted all other options, such as grants, scholarships, and federal student loans.

When you take out a private student loan, you will be responsible for repaying the loan in full, plus interest and fees.

Private Student Loans vs. Federal Student Loans

Private and federal student loans differ in key ways, and choosing between the two requires understanding these differences.

One key difference is that private student loans allow you to choose between fixed and variable rates, while federal student loans only offer fixed interest rates. This means that your monthly loan payments on a private student loan could go up or down over time if you choose variable interest rate loans, while your payments on a federal student loan will stay the same.

Deciding on the right rate type can mean the difference between an affordable loan and one that ends up costing you more than you thought at the time of application.

Private student loans can cover the total cost of education, whereas federal loans have borrowing limits. Specifically, federal loans have an aggregate loan limit of $138,000 on amounts for graduate students, while only up to $65,000 of this total can be from subsidized loans.

Undergraduate students can borrow a total of $57,500 in federal student loans. Student loan limits can cause you to split your undergraduate or graduate school costs between federal and private options.

Private student loans often have fewer repayment options than federal student loans. For example, federal student loans offer repayment plans based on your income, while private student loans typically do not. As a result, if you’re having trouble making your monthly payments, you may have more options with a federal student loan than a private one.

Types of Student Loans

Depending on your goals and needs, the loan type that fits your specifications can fall into one of a wide range of options.

Subsidized vs. Unsubsidized Student Loans

Subsidized loans are need-based, and the government pays the interest on these loans while the borrower is in school. Unsubsidized loans are not need-based, and the borrower is responsible for all interest payments. Both types of loans have their advantages and disadvantages.

Subsidized loans have lower interest rates and offer more flexible repayment options, but they are only available to students with financial need. Unsubsidized loans have higher interest rates, but they are available to all borrowers regardless of financial need.

Undergraduate vs. Graduate Student Loans

Undergraduate and graduate students have slightly different options when it comes to the student loans they can obtain. Repayment terms can vary depending on the type of loan you choose. Undergraduate loans typically have shorter repayment terms than graduate loans.

International Student Loans

If you’re an international student attending school in the United States, you are ineligible for federal student loans. However, you can take out an international private student loan. Most lenders place a requirement that international students have permanent residents of the United States as cosigners on their student loans.

Benefits of Private Student Loans Over Federal Loans

Private student loans can be a great way to finance your education. Unlike federal loans, private loans are not based on financial need, meaning you may be eligible for higher loan amounts. Private lenders also offer a variety of repayment plans, which can help you manage your debt after graduation.

If you have a good credit score, you may be able to qualify for a lower interest rate. Most lenders will look for a credit score of 670 or higher. Private student loans can be used to cover room and board costs, books, and other expenses.

Private loans also offer flexible repayment options, including deferment and forbearance.

The Safety Net of Deferment and Forbearance

When you take out a loan to pay for your education, you are usually required to begin making payments six months after you graduate or leave school. However, there may be times when you are unable to make your loan payments. If this happens, you may be able to receive a deferment or forbearance on your loan.

A deferment is a temporary postponement of loan payments. If approved for a deferment, you will not be responsible for making any payments on your loan until the deferment period ends.

Forbearance is also a temporary postponement of loan payments, but it is typically used when the borrower is experiencing financial hardship. You may be required to make interest-only or reduced monthly payments with forbearance.

When Should You Apply for a Private Student Loan?

Since private student loans can have fixed or variable rates, understanding where the economy is going can significantly impact your choice of loan type. With interest rates largely dependent on the Federal Reserve’s Federal Open Market Committee (FOMC), staying up-to-date with the FED’s announcements can give borrowers a good understanding of where rates will be in the near future. This is crucial when choosing between fixed and variable interest rate options.

Besides offering you a free credit score analysis, T&I Credit Union staff can help you determine whether a fixed or a variable interest rate makes sense for your needs in conjunction with the economic conditions.

Generally, you should only consider taking out a private loan after you have exhausted all other options, such as scholarships, grants, and federal student loans. This is because private loans tend to have higher interest rates and stricter repayment terms than federal loans.

That being said, there are some circumstances in which it may make sense to apply for a private loan sooner. For example, if you have a good credit score or a creditworthy cosigner, you may be able to qualify for the lowest interest rate possible. Or, if you need the money right away to cover college expenses like tuition or housing, you may not have time to wait for a federal loan to be processed.

Ultimately, there is no hard-and-fast rule for when to apply for a private student loan. Examining your goals and current creditworthiness can lead you to the right choice for your chosen path.

What Can Private Student Loans Be Used For?

Most private student loans can be used for educational expenses, including tuition, room and board, books and supplies, and other miscellaneous costs. Some private student lenders may require that the loan be used for certain expenses, such as tuition, before releasing the funds. It is important to check with the lender to find out what restrictions may apply.

Private student loans can cover living expenses or consolidate other education-related debt, such as federal student loans or other private loans. Consolidating debt can often result in a rate reduction and a lower monthly payment. However, it is important to compare the terms of the new loan with the existing debt to make sure that consolidating makes financial sense.

Where to Find Private Student Loans for College

Private student loans can be a great way to fill the gaps left by federal student aid. But first, you need to know how to get a private student loan.

There are a variety of lenders in the private student loan market, including banks, online lenders, and credit unions. Each type of lender has its own pros and cons, so it’s important to compare options before choosing a loan.

Banks are typically the most expensive option. Online lenders are usually cheaper than conventional banks, but they may not offer the same level of customer service.

On the other hand, credit unions have some of the lowest rates, but they may not have as many branches or ATMs. On the other hand, since credit unions like T&I Credit Union have a strong sense of community, their staff is eager to go the extra mile to help members. As a result, credit unions can be the most affordable and flexible option for those who don’t mind a limited number of locations in exchange for competitive interest rates and reliable support.

The application process for private student loans is similar to other types of loans. You’ll need to complete an application and submit it to the lender, along with some documentation.

Once your application is approved, you’ll need to sign a promissory note agreeing to repay the loan. Then, the money will be disbursed to your school (or directly to you if you’re attending an eligible institution).

Private student loans typically have higher interest rates than federal student loans, so working with a credit union can ensure you have access to the lowest interest rates available on the market.

What to Look for When Choosing a Private Student Loan?

Choosing the right type of student loan can feel overwhelming. There are several factors to consider, and it is important to compare options from multiple private student loan lenders to get the best deal. Here are some of the most important things to look for when choosing a private student loan:

Loan Terms

Private student loans typically have shorter repayment terms than federal loans. Examine your loan term options and choose a repayment period that results in a monthly payment you can afford in your first steps out of college.

Interest Rates

Private student loans typically have higher interest rates than federal loans, so it is important to compare rates from multiple lenders. Choosing wisely between a fixed or variable rate loan is also essential. Choosing a variable interest rate in an economy with increasing rates can mean you end up paying more than you initially planned.


Some private student loans have application fees (also known as origination fees) or other loan costs. Reading the fine print can help you avoid signing a loan agreement with more extra costs than you bargained for.

Repayment Options

Some private student loans offer flexible repayment options, such as income-driven repayment plans. Speaking with your loan representative can help you find the most flexible loan for your needs.

How to Get Approved for a Private Student Loan

The more prepared you are for the student loan application process, your chances of approval are higher. Finding a creditworthy cosigner with an excellent credit score can help you achieve favorable terms on your loan. Getting a cosigner is a serious responsibility as failing to adhere to on-time payments can damage your cosigner’s credit score.

First, you need to fill out a free application for Federal Student Aid (FAFSA). This will give you an idea of how much money you need to borrow after any student aid you qualify for.

Next, you need to find a lender that meets your needs. Once you’ve found a lender, you’ll need to complete a loan application. Include all pertinent information, including your name, address, and social security number. The lender will also want information regarding eligibility requirements, such as your financial aid package and your ability to repay the loan, which may include proof of income, also known as income verification.

Once you’ve submitted your application, the lender will review it and make a decision. If approved, the money will be deposited into your account, and you can start using it immediately for your college costs.

How Much Can You Borrow in Private Student Loans?

There’s no one-size-fits-all answer to this question, as the amount you can borrow in private student loans will depend on several factors, including your credit history, income, and the cost of attendance at your chosen school.

However, most private lenders will allow you to borrow up to the full cost of attendance, less any other financial aid you may receive. That means if you’re attending a school with a high tuition rate, you could potentially borrow a significant amount in private student loans.

When making your decision, it’s important to remember that borrowed funds will need to be repaid with interest, so it’s always best to borrow only what you need. By carefully considering your borrowing options, you can ensure that you’re taking out the right amount of loans to cover your educational expenses without putting yourself in undue financial hardship.

Private Student Loans With T&I Credit Union

To enjoy the borrower benefits of an affordable loan from T&I Credit Union, you will first need to become a member. T&I Credit Union partners with Student Choice to provide a simple student loan or loan refinancing application process.

Student Loan Pre-Qualification

Student loan prequalification is the process of determining how much money you are eligible to borrow for your education. Lenders will consider factors such as your current income and debt-to-income ratio, and run a credit check to determine how much you can afford to repay.

Prequalifying for a student loan can help you narrow down your options and choose a loan that is right for you. It is important to remember, however, that prequalification is not the same as approval. Lenders can still deny your loan application even if you have been prequalified.

Repayment of Your Private Student Loan

As an undergraduate student, you may be required to begin repayment on your private student loan while you are still in school. Once you graduate, you will have a grace period of six months before repayment begins. Your repayment term will be based on the borrowed amount and may last up to 20 years. You will need to make monthly student loan payments to your lender during this time.

With student loans, there are no prepayment penalties. If you can pay off your college loans earlier than expected, the lender cannot charge you prepayment penalties.

Loan autopay is another feature that private student loan borrowers may find helpful. Autopay allows borrowers to automatically make their monthly loan payments from their checking or savings account. This can be a helpful tool for borrowers who want to ensure that their loan payments are always on time.

For autopay sign-up, borrowers need to provide their bank account information to their lender. Once the feature is set up, the borrower’s monthly payment will automatically be deducted from their account on the date it is due.

If you have trouble making monthly payments, you can contact your lender to discuss alternative repayment options.

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Apply for a Private Student Loan with T&I Credit Union Today

T&I Credit Union offers private education loans through Student Choice, our Student Lending Center. Within Student Choice you can:

  • Start an application for a new student loan
  • Explore student loan refinancing options
  • Make a payment on your existing student loan debt
  • Access student loan resources like videos and smart borrowing tips

We offer a simple application process for undergraduate student loans. To apply for a student loan in the Student Lending Center, click on “get started” under the Pay for College section. You can view additional information about applying for your student loan and see available loan interest rates.

Our private education loans are dispersed in a unique, flexible arrangement that allows you to draw funds from your line of credit when you need them for school. They have accessible repayment terms and allow for deferment options for the period you are attending your university.

If you enroll in automatic payments, you may be able to achieve a .25% rate reduction on your student loan. Our current loan interest rates range between 6.00% and 7.50% APR on up to $75,000. Our flexible terms allow you a repayment term of between 20 and 25 years.

Eligibility requirements for our student loans include:

  • Enrolling in a degree program at an approved school
  • Being a U.S. citizen or permanent resident
  • Being at least 18 (or 19 or 21 in some states)

97% of our applicants have a creditworthy co-signer on their student loan application, so it’s wise to think of who may co-sign with you so we can give you the most affordable option possible.

You may also fund your education with a personal loan or credit card through T&I Credit Union. Depending on your credit score or a co-signers credit history, we can approve you for up to $20,000 at 10.9% APR.

Call us at (248) 588-6688 to get started on your college journey with our experienced team by your side.

About Ester Havisham

Ester is a media professor and content creator based out of Pittsburgh, PA. She has an MA in English Literature and Creative Writing. In her free time, she enjoys reading and writing about technology, health and wellness, and travel. Her favorite book is Zen and the Art of Motorcycle Maintenance.

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