Loans
Private Alternative Loans
What are private student loans?
Private student loans are credit-based loans applied through individual banks or lenders that help students “bridge the gap” between the financial aid they have been awarded and any additional amount they feel may be needed to help achieve their educational goals. Being approved for a private loan depends mainly on the credit score of the borrower (and co-signer). While rates and repayment terms on private loans typically aren't as solid as those offered on the various federal student loans, it is ultimately the responsibility and choice of the borrower (and co-signer) to make the best personal financial decision for themselves.
UMMC does not have a preferred lender for private student loans. However, you may research online or through your local banks for more information on private lenders.
Who should consider private student loans?
Private student loans may be an important source of funding for students who are in one of three situations, either 1) ineligible for federal student loans, 2) in need of loan funding beyond that which federal programs permit during the year, or 3) owe a balance to UMMC which occurred in a prior academic year.
As of July 1, 2008, federal legislation forbids an institution from using financial aid funds from a current academic year to pay a prior year balance in excess of $200. If you fall into this category and are unable to pay the prior year balance out of pocket, then you will need to consider applying for a private student loan to cover the prior year balance.
Do I need a co-signer to apply for a private student loan?
While there is no requirement to apply with a creditworthy co-signer, doing so often increases both your chances of being approved for a private student loan and potentially lowers front-end fees and interest rates. Most lenders require student borrowers themselves to have an excellent credit history among other criteria, so it is in your best interest to have a knowledgeable and willing co-signer assist you in applying for a private student loan in most cases. Understanding that co-signers don't want to feel financially responsible throughout the life of the loan (in the event the actual borrower defaults), many lenders now offer “co-signer release” options after a certain number of on-time payments have been made, once the borrower passes a credit check at that time.
How do I process a private student loan application?
- Make sure you have completed the FAFSA and accepted your annual maximum in federal student Stafford Loans, and exhausted all other financing options first.
- Consider applying with a willing, creditworthy co-signer, as doing so will likely increase your chances of approval and potentially lower your interest rate.
- The lender with whom the student and/or co-signer apply will conduct a pre-approval credit investigation and notify the applicant(s) as to approval or denial. If approved by a lender for a private student loan, the student and co-signer will need to review the Master Promissory Note (MPN) for accuracy, sign, and return to the lender. However, most lenders offer an e-sign option online.
- Loan proceeds will be sent directly to UMMC. The proceeds will be applied to the student account to clear any balances, and remaining funds will be direct deposited or mailed directly to the borrower if direct deposit is not set-up.
We recommend you request a copy of your credit report from each of the three credit bureaus (Equifax, Experian and TransUnion) as you are entitled annually by law. While you must pay a fee to each of the three credit bureaus to obtain your actual credit score(s), it is important to at least check your credit report(s) annually for any errors or illegal use.