Many students need to supplement their financial aid award with private loans. Consider your options carefully and borrow only what you need to cover your school-certified costs of attendance minus other aid.

Private loans from are credit-based and may require a cosigner. Having a good credit score can help you qualify for more competitive interest rates and loan terms.

Interest Rates

Private loans offer a range of interest rates that are not fixed like federal loans. Generally, the lowest rates are available to those with the best credit and/or cosigners. Some lenders will prequalify applicants without a hard credit check, making it easier to shop for the best rate.

The most important factor in determining the total cost of your loan is your interest rate. A lower rate means your monthly payments will be lower and you will pay off your loan faster. Some private lenders may capitalize your interest on the loan, meaning you will start paying interest on the money you borrowed before it is actually disbursed.

Many private loans will have a variable interest rate, which means your rate can go up or down over time depending on the market. The lender will typically provide a reference or index such as LIBOR or PRIME financial rates to indicate the basis for your variable rate.

Federal student and parent loans have fixed interest rates that are set before each academic year. These rates are often lower than private student loan interest rates and much lower than credit card interest rates. Additionally, you can defer (put off) repayment of your federal loans until you graduate or leave school or change your enrollment status to less than half-time.


Private loans usually require a credit check, and interest rates vary according to the borrower’s or co-signer’s credit score and income. In addition to the variable interest rate, many lenders impose origination and disbursement fees, which can add up quickly. Some also impose late payment and deferment or forbearance fees, which may also result in a higher total loan cost. Private loan borrowers have fewer borrower protections than federal student loan borrowers, including options to change repayment plans or get loan forgiveness.

Private loans are typically a last resort for financing college costs. Before considering them, carefully review your financial aid offer and make sure you have exhausted all other sources of assistance. Borrow only what is necessary to fill the gap between your total financial aid package and your college’s estimated cost of attendance. Leverage other types of aid, such as scholarships, grants and savings accounts, and consider seeking out a low-interest loan with a credit-worthy co-signer to help with payments. When you do take out a private loan, compare the terms of multiple lenders to find the best offer and to set yourself up for successful repayment by maximizing your other options.

Repayment Options

Private lenders set the repayment options available for their loans. Most private lenders allow you to defer payments while in school and give you a six-month grace period after graduation before the first bill arrives. However, interest continues to accrue during deferment and during the grace period. At the end of a deferment, all accrued interest may be capitalized (added to the unpaid principal), which will increase your Monthly Payment Amount and total loan cost. Some private lenders also offer forbearance, which temporarily postpones your payments but allows the interest to continue to accumulate.

Most private lenders allow you to choose a fixed or variable interest rate. Private loans with a variable rate may have a cap or floor that limit how much the rate can go up or down. Private student loan rates are typically more expensive than personal loans with a fixed interest rate.

Some private lenders, such as Earnest, offer a flexible repayment option that lets you choose between a 7-15 year term and a variety of payments per month. However, eligibility depends on your or your cosigner’s credit score and income. Our loan payment calculator can help you estimate your potential payments for different loan terms. Some lenders also have special repayment plans for borrowers in financial hardship.

Application Process

Private loans are credit-based and require an application directly with a lender. They should only be used after all other types of financial aid are exhausted (grants, scholarships and Federal Direct Loans). Private lenders have their own criteria for lending and have different terms and conditions including borrower protections such as deferment and forbearance.

Most private student lenders do a credit check before approving or disbursing loan funds. Students with poor or no credit may need to apply with a co-signer who has good credit and is willing to be responsible for making the payments on time.

During the certification stage, the lender will ask your school to confirm your enrollment status (half or full-time) and that you are enrolled in a degree-granting program. Lenders will also want to know if you are receiving other loans or financial aid and how much your estimated cost of attendance is.

Once the lender has finalized your application, you will receive a credit decision and e-sign your loan documents. Then the process is complete and your loan will be disbursed. It can take 4-6 weeks from the beginning of your loan process to when UNM sees the money in our account and it is applied toward your tuition.