Private student loan basics

What to know about private student loans

Private student loans are offered by banks and credit unions—not the government

The government offers financial aid and federal student loans. After you explore these options to pay for college (plus scholarships, grants, and savings!), a private student loan can help cover the rest.

Private student loans are credit-based

That means lenders check your credit history to see how responsible you are with borrowing money and paying it back before approving your student loan application. 

Your private student loan interest rate depends on a few things

Your interest rate is based on your credit history and how reliable you are with borrowing money and paying it back. It can also depend on the interest rate and repayment plan options your lender may offer.

Lenders may let you choose a fixed or variable interest rate

A fixed interest rate stays the same for the life of the loan, so your monthly payments won’t change. A variable rate can go up or down based on market conditions. Variable rates may start lower than fixed rates, but payments will be less predictable over time.

You can apply for a private student loan with a cosigner

Most students haven’t built up their credit yet, so they apply with a cosigner—a creditworthy adult who can make it easier for your loan application to be approved and who shares responsibility for the loan.

You have options

Not all private student loans are the same. There are different types of interest rates, repayment options, and more. Make sure you read all the information and disclosures provided to you, so you can fully understand your student loan. If something’s unclear, reach out to the loan provider with any questions.