Private Student
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Private Student
From Wikipedia, the free encyclopedia
^ https://www.measureone.com/downloads/MeasureOne%20Private%20Student%20Loan%20Report%20Q3%202017.pdf
^ 11 USC 523(a)(8)
^ Collinge, Alan. The student loan scam : the most oppressive debt in U.S. history, and how we can fight back. Boston, MA : Beacon Press, c2009. ISBN 978-0-8070-4229-8 http://lccn.loc.gov/2008012230
^ "Cuomo: School loan corruption widespread" . U.S.A. Today . April 10, 2007 . Retrieved 2008-04-08 .
^ Lederman, Doug (May 15, 2007). "The First Casualty" . Inside Higher Education . Retrieved 2008-04-08 .
^ Field, Kelly (August 15, 2010). "Nelnet to Pay $55 Million to Resolve Whistle Blower Lawsuit" . The Chronicle of Higher Education . Retrieved 2011-07-14 .
^ Cullen, Kevin (December 18, 2008). "Ungrateful Sallie Mae" . Boston Globe . Retrieved 2018-03-23 .
^ "Relief for Student Debtors" . The New York Times . 26 August 2011.
^ PÉREZ-PEÑA, RICHARD (April 22, 2014). "Student Loans Can Suddenly Come Due When Co-Signers Die, a Report Finds" . The New York Times .
^ "Private Student Loans" (PDF) . Consumer Financial Protection Bureau .
^ Clark, Jane Bennett (July 2007). "Best Deal on Student Loans" . Kiplinger's Personal Finance . Archived from the original on 21 September 2011 . Retrieved 6 July 2010 .
^ http://www.finaid.org/loans/lenderlayoffs.phtml
^ https://www.nerdwallet.com/blog/loans/student-loans/student-loans-federal-vs-private-loans/
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans , Perkins loans and PLUS loans . Private loans, which are heavily advertised, do not have the forbearance and deferral options available with federal loans (which are never advertised). In contrast with federal subsidized loans, interest accrues while the student is in college, although repayment may not begin until after graduation. While unsubsidized federal loans do have interest charges while the student is studying, private student loan rates are often higher, sometimes much higher. Fees vary greatly, and legal cases have reported collection charges reaching 50% of amount of the loan. [ citation needed ] Since 2011, most private student loans are offered with zero fees, effectively rolling the fees into the interest rates.
Interest rates and loan terms are set by the financial institution that underwrites the loan, typically based on the perceived risk that the borrower may be delinquent or in default of payments of the loan. Most lenders assign interest rates based on 4-6 tiers of credit scores. [ further explanation needed ] The underwriting decision is complicated by the fact that students often do not have a credit history that would indicate creditworthiness. As a result, interest rates may vary considerably across lenders, and some loans have variable interest rates. More than 90% of private student loans to undergraduate students and more than 75% of private student loans to graduate students require a creditworthy cosigner. [1]
Unlike other consumer loans, Congress made student loans, both federal and private, exempt from discharge (cancellation) in the event of a personal bankruptcy , except when repaying the student loan would represent an undue hardship on the borrower and the borrower's dependents. [2] This is a serious restriction that students rarely appreciate when obtaining a student loan.
Financial aid, including loans, may not exceed the cost of attendance .
The increase in use of private student loans came about around 2001 once the increase in the cost of education began to exceed the increase in the amount of federal student aid available. [ citation needed ]
The recent history of student loans has been compared to the history of the mortgage industry. [ citation needed ] Similar to the way in which mortgages were securitized and sold off by lenders to investors , student loans were also sold off to investors, thereby eliminating the risk of loss for the actual lender.
Another parallel between the student loan industry and the mortgage industry is the fact that subprime lending has run rampant over the past few years. [ citation needed ] Just as little documentation was needed to take out a subprime mortgage loan, even less was needed to take out a subprime or "non-traditional" student loan.
After the passage of the bankruptcy reform bill of 2005, even private student loans are not discharged during bankruptcy. This provided a credit-risk-free loan for the lender, averaging 7 percent a year. [3]
In 2007, the then-Attorney General of New York State, Andrew Cuomo , led an investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with " kickbacks ." This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers. [4] [5]
The biggest lenders, Sallie Mae and Nelnet, are criticized by borrowers. They frequently find themselves embroiled in lawsuits, the most serious of which was filed in 2007. The False Claims Suit was filed on behalf of the federal government by former Department of Education researcher, Dr. Jon Oberg, against Sallie Mae, Nelnet, and other lenders. Oberg argued that the lenders overcharged the U.S. Government and defrauded taxpayers of millions of dollars. In August 2010, Nelnet settled the lawsuit and paid $55 million. [6]
Prior to 2009, most private student loans did not offer death and disability discharges. After the Boston Globe published an article critical of Sallie Mae's failure to discharge the private student loans of a Marine killed in action, Sallie Mae launched a new student loan program with death and disability discharges similar to those available on federal student loans. [7] Since then, about half of private student loans offer death and disability discharges.
In 2011, The New York Times published an editorial endorsing the return of bankruptcy protections for private student loans in response to the economic downturn and universally increasing tuition at all colleges and graduate institutions. [8]
A 2014 report from Consumer Financial Protection Bureau (CFPB) , shows a rising problem with these types of loans. Borrowers face “auto-default” when cosigner dies or goes bankrupt. The report shows that some lenders demand immediate full repayment upon the death or bankruptcy of their loan cosigner, even when the loan is current and being paid on time. [9]
The biggest student loan lender, Sallie Mae , was formerly a government-sponsored entity, which became private between 1997-2004. A number of financial institutions offer private student loans, including banks like Wells Fargo , and specialized companies. There are also a number of state-affiliated, nonprofit student loan lenders, which account for approximately 10% of the private student loan market. This segment includes organizations such as VSAC and MOHELA , [10] Student loan search and comparison websites allow visitors to evaluate loan terms from a variety of partner lenders, and financial aid offices in universities typically have a preferred vendor list, but borrowers are free to obtain loans wherever they can find the most favorable terms. [11]
As the economy collapsed in 2008-2011, many players withdrew from the private student loan lending world. [12] The remaining lenders tightened the credit criteria, making it more difficult to receive a loan. Most now require a credit-worthy cosigner. [13] After the economic collapse of 2008, a number of peer-to-peer lending and alternative lending platforms emerged to help students find private student loans. For example, U.S. online marketplace lending platform LendKey allows consumers to book loans directly from community lenders like credit unions and community banks.
Private Student Loans | Best Options for 2020 - 2021
Private student loan (United States) - Wikipedia
7 Best Private Student Loans of January 2021 | LendEDU
private student - Russian translation – Linguee
Private Student Loans
Compare the Best Private Student Loans
Get prequalified for a loan, and see what interest rates you can personally expect, without any impact to your credit score
Choose between full, interest-only, flat, or deferred payments while in school
A grace period of up to 12 months if approved for an additional six
Get prequalified for a loan, and see what interest rates you can personally expect, without any impact to your credit score
Four months of free Chegg ($100 value)
Wide range of repayment terms available
An eligibility check with no impact on your credit score
No fees
Skip one payment once per year
Get prequalified for a loan without any impact to your credit score
Choose between full, interest-only, flat, or deferred payments while in school
2% principal reduction per loan with proof of graduation
No fees
Get prequalified for a loan without any impact to your credit score
Multiple forbearance periods
1% cash back upon graduation
Get prequalified for a loan without any impact to your credit score
A 0.125% rate discount to SoFi members
Up to $360 when your student loan is funded
Career coaching
Get prequalified for a loan without any impact to your credit score
Many or all of the companies featured provide compensation to LendEDU. These commissions are how we maintain our free service for consumers. Compensation, along with hours of in-depth editorial research, determines where & how companies appear on our site.
Private student loans can be used to pay for college after you’ve exhausted all of your scholarship, grant, and federal student loan options.
If you already filled out the FAFSA to see what other aid you qualify for, the next step is to compare private student loans to find the lowest interest rate.
To help you do this, we researched and analyzed our partner lenders to find the best private student loans available today. Having a good credit score or creditworthy cosigner can increase your chances of being approved and qualifying for the lowest rates.
With so many private student loan lenders out there, it can be difficult to decide which is the best for you. To help solve this problem, we researched and analyzed lenders to find the best options for specific situations.
The following companies are LendEDU partners who have been extensively vetted by our Editorial Team. Our partners update us of any product changes, so we can be sure to keep the information on this page accurate for our readers. Note that these lenders don’t represent all of the options available to you.
Click a lender’s name to jump down to that section:
$1,000 – 100% of school-certified cost of attendance
College Ave is our top-rated private student loan lender offering loans that can cover up to 100% of your cost of attendance, including tuition, fees, books, housing, transportation, and more.
Prospective borrowers can prequalify and see what interest rates they may receive with no impact on their credit score. Applying for a loan can be completed in three minutes.
Borrowers can defer payments until after school or choose between making full, interest-only, or flat $25 payments while in school. The standard six-month grace period may be extended by an additional six months by applying and receiving approval.
$1,000 – 100% of school-certified cost of attendance
Sallie Mae is one of the largest private student loan companies in the country. The company began in 1972 as a government-sponsored organization, but in 2004 became fully privatized.
Some benefits include offering loans to non-U.S. citizens with a U.S. citizen or permanent resident as a cosigner, offering loans to part-time students, and offering the shortest cosigner release period of all companies reviewed.
Sallie Mae was determined to be the best for flexible repayment due to its wide range of repayment terms. Borrowers can defer payments until after school or choose between making interest-only or fixed $25 payments while in school. Unfortunately, prequalification is not available. To see rates and loan options, the company must conduct a hard credit check.
$1,000 – 100% of the school-certified cost of attendance
Earnest is our top-rated lender offering no fees on student loans. This means no origination, late payment, or prepayment fees, letting borrowers stay focused on repaying their principal and interest.
Other benefits include getting your choice of repayment, including choosing between making payments every two weeks or monthly, skipping a payment once a year, and a grace period that is 50% longer than most other lenders.
Flexible repayment plans include your choice between five term lengths during repayment and deferring payments until after school or making interest-only or fixed $25 payments while in school. Earnest offers an eligibility check that will not impact your credit score.
Best for: Earning a reward upon graduation
$1,000 – $99,999 ( $180,000 aggregate)
Custom Choice has over 25 years of experience facilitating more than $23 billion in private student loans for lenders and schools. The company has helped more than one million families pay for their education.
Custom Choice is our highest rated lender offering a reward for borrowers who graduate. This reward is a 2% principal reduction per loan after showing proof of graduation.
Borrowers have the option to defer payments until after school or make full, interest-only, or flat $25 payments while in school. Prequalification is available and can be completed within minutes with no impact on your credit score.
Best for: Multiple forbearance periods
Ascent is a private student loan lender that provides access to higher education funding for an expanded population of undergraduate and graduate students while encouraging the financial wellness of students and their families.
The company offers cosigned and non-cosigned loans that provide more opportunities for students to qualify for a loan. Prospective borrowers can prequalify for a loan without any impact to their credit score.
Some Ascent benefits include a 1% cash back reward upon graduation and up to 24 months of forbearance over the loan's life.
Borrowers can defer payments until after school or make interest-only or $25 fixed payments while in school.
$5,000 – 100% of school-certified cost of attendance
SoFi is our pick for the lender offering its customers the most benefits. Currently, borrowers can receive $10 after checking their rate by January 31st and another $350 when their loan is funded by February 15th.
Additionally, SoFi members can receive an added 0.125% rate reduction on their interest rate, receive career coaching and unemployment protection, and pay no origination, late payment, or prepayment fees.
Borrowers have the choice to make deferred payments or immediate, interest-only, or partial $25 payments while in school. Checking your rate will not affect your credit score and can be completed in three minutes.
Best for: Working with local banks and credit unions
$1,000 – 100% of your school-certified cost of attendance
LendKey partners with banks and credit unions to offer borrowers various loan options through a digital platform. Aside from offering competitive rates, the benefit of this is that these financial institutions prioritize customer service and member happiness as community banks.
Unfortunately, LendKey does not list any in-school, military, or residency deferment options and does not offer the possibility to defer payments while in school. Borrowers interested in checking their rate can do so without any impact to their credit score.
LendEDU has rated and reviewed private student loan lenders since 2014. To find the best student loan lenders for this article, we analyzed 14 data points for our partner lenders.
Here are some of the most important data points we considered:
Here are some of the most common questions we receive when it comes to private student loans. Click a question to jump down to it or keep scrolling to read them all.
In most cases, college students can use private student loans for any costs associated with their higher education. These often include tuition, room and board, books , computers, and even living expenses like food.
Typically, lenders will send your student loan money directly to your college. First, the money will be used for mandatory expenses like tuition. Then, your college will give you any leftover money for you to use how you see fit.
There is no set time in which you can apply for private student loans. If an unexpected expense comes up in the middle of a semester and you need some extra money to help pay for it, you can apply for a new loan.
It can, however, take anywhere from a week to up to two months for colleges to receive your loan funds. If you need the money for a mandatory expense like tuition, make sure that you leave enough time to get through the process.
We also recommend waiting to use private loans until you’ve exhausted all other financial aid options including scholarships, grants, and federal student loans.
Each lender has its own eligibility requirements, but most lenders will examine your credit history, debt, income, college or university, field of study, and residency status.
Generally, you will need to be a U.S. citizen or permanent resident, have a credit score of 700 or higher, be attending school at least half-time, and meet some income threshold to be eligible for a private student loan without a cosigner.
Our State of Private Student Loan report found that the average approved private student loan applicant had a credit score of 748 and annual income of just under $77,000. In addition, only 8.84% of applicants without a cosigner were approved for a loan.
If you aren’t able to qualify for a private student loan on your own, adding a creditworthy cosigner can help. The same study found that when students applied with a cosigner, the approval rate jumped to 30.69%.
If you don’t have a cosigner and don’t meet the eligibility requirements on your own, you should consider looking into student loans for those without a cosigner or student loans for those with bad credit .
Applying for private student loans is usually easy and can almost always be done online. There are also many mobile-friendly applications that allow you to apply directly from your phone.
Here are the general steps of applying for a private student loan:
Your interest rate is the biggest factor in the total cost of your student loan. The higher your rate, the more you will pay.
Interest starts accruing on most private student loans the day they are disbursed. Each month, your payment will first go towards unpaid interest and then will be applied to your principal balance.
Private student loan interest typically compounds daily. So each day, some interest will be charged based on your principal balance. The next day, the interest charge will be based on your total balance including the principal and any unpaid interest.
To figure out how much interest accrues on your loan each day, you can divide your interest rate by 365 to find the daily rate. Then multiply this number by your total loan balance (including both principal and unpaid interest) to find how much interest you are charged daily.
If you are curious how much interest you will pay over the life of your loan, you can use our student loan payment calculator.
Having a good credit score or a creditworthy cosigner can help you secure a lower rate. To help you get a better idea of what rates you can expect, here are the average rates LendEDU users received in 2019 based on our State of Private Student Loans Report :
Variable interest rates fluctuate with the market whereas fixed rates remain the same for the life of the loan. Generally, if you anticipate that rates will go up, or if you don’t want to have to worry about your rate increasing, you should go with a fixed rate. If you think rates will go down in the future, a variable rate may be the better (yet riskier) choice.
Keep in mind that rates will vary based on the lender and other factors. It’s important to shop around for the best rate so you can pay as little as possible on your loan.
Yes, you can deduct up to $2,500 in student loan interest from your taxable income each year if you meet certain requirements . Most private student loans qualify for this interest deduction.
If you are a parent that cosigned your child’s student loan, you can deduct the interest from your taxes if your child is your dependent and you make payments on it.
While most of the lenders shown on this page don’t charge any fees, it’s important to know what kinds you may come across when shopping around.
This is a fee that is charged when you take out a loan and is calculated as a percentage of the loan amount. For example, if you have a $10,000 loan with a 5% origination fee, the cost would be $500.
Origination fees are typically deducted from the amount of money you are given. In the example above, you would only receive $9,500 after the origination fee is taken out.
One advantage of private student loans over federal loans is that they typically don’t have any origination fees. Federal loans currently have origination fees of 1.057% or 4.228% depending on the type of loan.
This is a fee that is charged if you don’t make a payment on time. Late fees may be a flat amount (such as $25) or may be based on a percentage of the payment (such as 5%).
This is a fee that is charged if you pay off your loan early. Typically lenders charge this because it cuts into their profit when you prepay your loan. Luckily, most private student loan lenders don’t charge this fee, so you can pay your loan off at any time without penalty.
While in school, most private lenders give you the option of making payments or deferring them until after graduation. Here are the most common in-school repayment options lenders offer:
We recommend maxing out your federal student loans before turning to private loans. Federal loans typically have lower interest rates, better financial hardship options, and more repayment plans to choose from.
For example, with federal student loans, you have the option of enrolling in an income-driven repayment plan that caps payments at a percentage of your income.
In addition, federal student loans have fixed interest rates whereas private loans may have fixed or variable rates. The government may also pay the interest that accrues while you are in school and during periods of deferment with subsidized federal student loans.
Lastly, federal student loans are much easier to qualify for than private loans. Whereas private student loans typically require you to have good credit or a creditworthy cosigner, any student attending an eligible school can usually qualify for federal loans.
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Working with local banks and credit unions
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