Private Student Loans: How Much Can I Borrow For College?

How much do you think private student lenders can lend you? The answer depends on several factors we'll dive into today. You could borrow anywhere between $75,000 and $120,000 with private student loans. In this post, we'll explore what determines your borrowing potential and guide you in making an informed decision about your college financing strategy.

Key takeaways

• The borrowing limit for private student loans typically ranges between $75,000 and $120,000 but can go up to your total cost of attendance minus financial aid
• Your credit score greatly affects your borrowing potential — higher scores correlate to larger loans and lower interest rates
• The cost of attendance at your school directly influences the amount you can borrow

How much can I borrow with private student loans?

So, how much can you get in private student loans? The loan amount varies by lender and is influenced by factors like your credit score and cost of attendance at your school, among other things. You could potentially borrow from $75,000 to $120,000 with private student loans when federal loans, scholarships, and grants don't quite cover it all.

However, some lenders may allow you to borrow up to the full cost of attendance minus any other financial aid received. This means if your education expenses are higher, you might be eligible to borrow more.

What's the maximum borrowing limit for private student loans?

Private student loan limits are often based on the total cost of attendance minus any other financial aid you receive. They can range from a few thousand dollars to the full cost of your education.

Compared to federal loans, which limit you to $5,500 to $20,500 per year based on your dependency status and school year, private loans can help fill the gap. Plus, if you have an existing relationship with a lender, don't hesitate to negotiate; they could be more willing to offer you a higher loan limit.

Keep in mind that some private lenders have aggregate loan limits, which cap the total amount you can borrow over the course of your education. For undergraduate students, this maximum private student loan amount might be around $150,000, while for graduate or professional students, it could be higher.

Is my credit score a deal-breaker?

The difference between private and federal student loans lies in the basis of loan eligibility. Federal student loans are available to almost all students, whereas private student loans are credit-based.

Have a good-to-excellent credit score, or a Learn moreco-signer with a great score? Then you're more likely to qualify for a larger loan with a more manageable interest rate.

Get a cosigner with good credit on board and watch the doors open up for you. Having a cosigner can potentially land you a private student loan with a lower interest rate. Do bear in mind though, the cosigner must be both willing and able to repay the loan if you're unable to do so.

If your credit score isn't that great, consider taking steps to improve it before applying. This can include paying down existing debts, making all payments on time, and correcting any errors on your credit report.

How does the school cost of attendance impact the loan?

Don't forget to factor in your school's cost of attendance, which has substantial implications on your private student loan amount. This means taking into account tuition, fees, books, housing, and meal plans.

Most lenders use a simple equation to determine your loan amount. They subtract your other forms of financial aid (if any) from your estimated cost of attendance. Hence, if your school has a higher cost of attendance, it's more likely you can borrow more.

Additionally, some lenders may require certification from your school's financial aid office to verify the cost of attendance and your enrollment status.

What about interest rates and repayment terms?

Interest rates on private student loans can vary widely between lenders. You'll often have the option to choose between fixed and variable rates.

Fixed rates remain the same throughout the life of the loan, providing predictable monthly payments. Variable rates may start lower but can change over time, potentially increasing your monthly payments.

Repayment terms also differ among lenders. Some may offer grace periods, allowing you to defer payments until after graduation, while others might require payments while you're still in school. Understanding these terms is crucial to managing your debt effectively.

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Taking on a private student loan – is it worth it?

The more you know about your borrowing potential, the better-equipped you'll be to have a good financing strategy. Factors like maximum borrowing limit, your credit score, and the cost of attendance play key roles in this.

But remember to borrow only what you need, even if you qualify for more. Choosing federal student loans and scholarships first is a good strategy. Remember that taking on big student loan debt can affect your finances for years post-graduation, so be wise, plan ahead, and then follow through.

When I was going to college, I knew I was going to need some help paying tuition. After taking out as much as I could in federal loans and pursuing every scholarship, I was left with a small remaining balance. I was able to take out a private student loan to fill the gap, but I made sure to pursue better options first.

It's also important to consider the potential return on investment (ROI) of your degree. Assess your expected earnings after graduation and whether they'll be enough to repay your loans comfortably.

Dos and don’ts of borrowing private student loans

As you learn about private student loans, it's essential to know the do’s and don’ts. These guidelines can steer you clear of common hurdles and help maximize your borrowing power.

How to apply for a private student loan

Applying for a private student loan involves several steps:

1. Research and compare lenders: Look for lenders that offer favorable terms, interest rates, and repayment options suitable for your financial situation.
2. Check eligibility requirements: Ensure you meet the lender's criteria, which may include credit score, income, and enrollment status.
3. Gather necessary documents: This typically includes identification, proof of income, school information, and financial details.
4. Complete the application: Fill out the lender's application form accurately. If applying with a cosigner, they will need to provide their information as well.
5. Wait for approval: The lender will review your application, which may take a few days to a few weeks.
6. Review the loan terms: Upon approval, carefully read the loan agreement, paying close attention to the interest rate, fees, and repayment schedule.
7. Accept the loan: If you agree with the terms, accept the loan, and the lender will coordinate with your school to disburse the funds.

Advantages and disadvantages of borrowing private student loans

When sorting out your college financing strategy, weighing the pros and cons of private student loans could be a genuine eye-opener. It arms you with a more comprehensive view of whether this is the right path.

Advantages of borrowing private student loans

• Higher borrowing limits: Private loans can cover the full cost of attendance, providing a comprehensive financial solution.
• Flexible eligibility: Private student loans are available to a wide range of students, providing financial aid without strict requirements.
• Customized loan terms: Private lenders offer flexible repayment options, allowing you to tailor your loan to your unique financial situation.

Disadvantages of borrowing private student loans

• No federal benefits: Private loans lack federal benefits such as income-driven repayment plans and loan forgiveness programs.
• Credit and cosigner requirements: Private lenders may require a credit check and a cosigner, limiting accessibility for some borrowers.
• Potentially higher interest rates: Interest rates on private loans can be higher, especially for borrowers without excellent credit or a cosigner.

Why trust TuitionHero

At TuitionHero, we understand college finances can be challenging. That's why we teach you about private student loans, how much you can borrow, and the factors that affect it. Additionally, we offer support with student loan refinancing, scholarships, FAFSA help, and credit card advice. Our goal is to help you create a financial plan that fits your education needs without causing stress.

Frequently asked questions (FAQ)

Can I refinance my private student loan if the interest rate is too high?

Yes, refinancing your private student loan is an option if the interest rate is pinching your pocket. Refinancing essentially means replacing your current loan with a new loan at a lower interest rate. At TuitionHero, we offer student loan refinancing services to help simplify your financial obligations and make repayment more manageable.

Who can be my cosigner for a private student loan?

A cosigner for a private student loan can be any adult who has a good credit score and a steady income history. This could be a parent, guardian, or other relative. Remember, the cosigner takes on the responsibility of repaying the loan if you can't, so it's important that they are aware of this commitment.

What other financial aid options can I explore before turning to private student loans?

Before you borrow from a private lender, we recommend making the most of federal student loans, grants, and scholarships. These sources often have favorable terms and lower interest rates. Also, you might want to check out our FAFSA assistance services. By completing the FAFSA, you can access many federal student aid options and take the first step toward funding your education.

Can I increase my private student loan amount midway through my degree?

It really depends on your lender. Some private lenders might allow you to take additional loans or increase your existing loan amount, especially if your school's cost of attendance rises. Always talk to your lender about your options before deciding.

Final thoughts

Going to college is a big deal, and figuring out how to pay for it is a whole other challenge. Private student loans can help, but they can also be a headache. The important part is knowing how much you can borrow, thinking about the costs, and looking at all the ways you can get financial aid.

And guess what? You've got a team with you! At TuitionHero, we're all about helping you make smart choices about your college finances. Take a look at what we've got to kickstart your own plan for paying for college.

Sources

• FDIC: FIL-6-2015: Guidance on Private Student Loans with Graduated Repayment Terms at Loan Origination
• Student Loan Repayment