Private Student Loan FAQs for 2019 |
What are my private student loan options?

Frequently Asked Questions: Private Student Loans and Refinancing for 2019

A private student loan is a credit-based loan for college that can cover the gap between financial aid received and the full cost of attendance. Private student loans are issued by private lending institutions, such as banks and credit unions. Lenders will require you to submit an application. Upon receipt of your application, they will confirm you meet their credit approval criteria, and ask you complete any other requirements (such as verification of school registration).

Private student loans should not be confused with student loans offered by the U.S. Department of Education, which does offer federal student loans through the federal student aid program. To learn more, please see an Introduction to Federal Student Loans.

Here are some of the key differences:

  Private Student Loan Federal Student Loan
Lender Bank, credit union, financial institution, state agency, or college/university U.S. Department of Education
FAFSA Required? No Yes
Interest Rate Type Fixed and variable options available Fixed
Rates Based on Credit Criteria? Yes No
Cosigner Required? Yes, unless borrower has strong credit history No*
Repayment Plans Varies by lender. Some lenders may offer multiple options. Multiple plans (including income-driven) available
Forbearance Options Varies by lender. Typically one year. Three years

*Direct PLUS Loans offered to parents of students attending college, or graduate students, require a credit check. If the borrower is found to have adverse credit, a cosigner may be required.

Lenders accept and process private student loan applications throughout the year. You may apply at any time.

One method is to enter your school at You will be presented with a list of our lender partners who work with your school. If you have any additional questions, or would like to seek additional options, it would be best for you to contact your school’s financial aid office.

It depends. If you make all of your payments on time, your credit may improve over time. Late and missed payments may damage your credit.

If you need to obtain a loan later (additional private student loan, car loan, or mortgage), your debt-to-income ratio will likely be considered. It is always recommended to borrow only what you need.

Yes, some private student loan lenders offer options for students who are seeking professional training and trade certificate programs. 

Many students enrolled in non-degree programs don’t know where to turn when they need help paying their tuition and fees. And like them, you may be considering other types of funding, like using a credit card or obtaining a personal loan. You would want to weigh your options carefully, credit cards may come with high interest rates, and personal loans may not offer flexible options for student borrowers. 

Compare private student loan lenders that work with your school today. 


Private student loan terms and conditions vary by lender. However, there are some terms and conditions that tend to be pretty similar from lender to lender.

  • The interest rate on a private student loan is determined by the credit of the borrower and cosigner (if needed), among other factors.
  • The loan funds are sent directly to the school.
  • Repayment typically begins six months after leaving school, but interest may begin to accrue immediately after the loan is disbursed.
  • The amount borrowed usually determines the time period for repaying the loan.

Failure to meet the terms and conditions of the loan you chose may damage the credit of both the borrower and cosigner.

Borrower benefits, like forgiveness, vary by lender. Before you obtain a private student loan, it is recommended you review the terms and conditions for each loan you are considering.

Some lenders allow borrowers to consolidate private and federal student loans together into a private consolidation loan. In some circumstances, this may be a desirable option. If you consolidate federal student loans with a private lender, you will lose the associated federal student loan benefits. Therefore, most borrowers who want to refinance their student loans choose to consolidate private and federal loans separately.

Private student loans cannot be included in a federal consolidation loan.

90% of undergraduate students and 75% of graduate students need a cosigner to get approved for a private student loan. Some students may have the credit qualifications to get approved without a cosigner. It all depends on your credit rating and history.

Different lenders have different qualifying criteria. To determine eligibility, it’s best to contact a potential lender directly.

The exact amount of time will vary by lender, school, and time of year. Generally, the process can take as little as two weeks and as long as two months. Since the loan funds will be sent directly to your school, any money left over after the school applies your loan to your account will be refunded to you.

Private student loan lenders, generally, will not let you borrow money in excess of your cost of attendance. Your school will let you know the maximum amount you can borrow in a private student loan, which will be determined by subtracting all the aid you have been awarded/accepted from your total cost of attendance.

Unless you have a strong credit rating and history, you will probably need to apply with a credit-worthy cosigner. It's also important to remember that not all lenders provide loans at all schools, so you will need to select a lender that works with your school.

Technically, yes. But private student loans, like federal student loans, are very difficult to have discharged through bankruptcy proceedings. You will need to demonstrate that the repayment of the loan would “impose an undue hardship on the debtor and the debtor’s dependents.” (U.S. Bankruptcy Code). For more information it is best you discuss your options with your legal adviser.

Many lenders do not charge fees on their private refinance loans. Some lenders roll the fees into the interest rate. We recommend you ask any potential lenders to explain any fees they may charge.

As with all federal and private student loans, there are no prepayment penalties for making extra payments or paying off your balance early.

Some lenders provide auto-debit discounts for making automatic monthly payments by direct debit from a bank account. Typical discounts include an interest rate reduction of 0.25% or 0.50%.

Yes, it is possible to consolidate private student loans. This process is also known as refinancing and is done through a private lender.When you consolidate via refinancing, you can choose to refinance one, some, or all of your loans.

You can also choose to include your federal student loans and private student loans when you refinance with a private lender.

But you must be sensitive to some important things:

  1. Private student loan consolidation (a.k.a. refinancing) is based on credit worthiness and income criteria. If you do not have a strong credit and employment history, you will likely need a cosigner to qualify.
  2. Should you choose to include federal loans in a private consolidation, be prepared to forfeit certain borrower benefits such as generous deferment periods, income-based repayment plans, and possibly loan forgiveness programs. Some private lenders offer brief periods of loan deferment under specific circumstances, but they are not comparable to the benefits of the federal program.
Refinancing can increase or decrease your credit score, or it may remain unchanged. Refinancing reduces the number of loans, but is usually not treated as new indebtedness since it is replacing existing loans. If refinancing reduces your monthly payment through a longer repayment term, it may improve your credit score by reducing your debt-to-income ratio.
Private refinance loans are generally not school-certified since they are refinancing existing private student loan debt after the student has graduated or is no longer enrolled.
Some lenders offer cosigner release as an option on their private refinance loans. Typically, these require 12, 24, 36, or 48 months of consecutive on-time payments by the primary borrower. The primary borrower must also satisfy credit criteria.
If your spouse will be listed as a cosigner on the refinanced loan, both of your incomes will be considered. Also, if you choose to work with a lender that offers combined, spousal refinancing (such as PenFed), both incomes will be considered.

If you’re refinancing, but not including your spouse as a cosigner on the loan, it’s important to note that 100% of any joint debt you hold (like a mortgage) will be considered your debt. The lender will compare this debt to your income only. If the debt-to-income ratio is too high, you may be asked to add a cosigner.

You will need to find a lender that offers student loan refinancing. To review lenders who offer student loan refinancing, and to check your eligibility, we would suggest
The length of the repayment term varies by lender, typically 15, 20, or 25 years. Lenders offering fixed interest rates may have shorter repayment terms. The repayment term may depend on the amount of the loan.
Typically, it takes 30-60 days from loan approval until the private loan refinance is complete.You should continue making payments on your old loans until the lender notifies you that the old loans have been paid off. Any overpayments will either be forwarded to the new lender or refunded back to you.

If you do not satisfy a lender’s credit criteria, a cosigner may be required. Recent college graduates may not have a long enough credit history or work history to qualify without a cosigner.

Even if a cosigner is not required, adding a cosigner may yield a lower interest rate. A cosigner is a co-borrower, equally obligated to repay the loan. The private refinance loan will be reported as debt on the credit history of both you and your cosigner until the loan is paid in full.

No. If you are able to qualify for a private refinance loan on your own, you can combine your existing student loans into the new refinance loan without a cosigner. This will pay off your existing loans, and create a new loan solely in your name.

Yes. Until you receive confirmation from your new lender of your new loan, you should continue making payments to your existing lender. Any overpayment with either be forwarded to your new lender or refunded back to you.

NOTE: Keep track of your payments during this time period. If you are due a refund from your former lender, it’s a good idea to know how much so you can follow up, if needed.

Some benefits of refinancing a private loan may include:

  • Simplify repayment by combining several loans into one (reduces the number of loan payments you need to keep track of each month)
  • Reduce the amount of monthly payments by increasing the term of the loan*
  • Qualify for a lower interest rate
  • Change from a fixed to a variable interest rate or vice-versa
  • Borrowers who don’t like their current lenders can switch to a different lender
*NOTE: Increasing the term of your loan may increase the total interest paid over the life of your loan, but can help make your monthly payments more manageable.

Loan limits and minimum balance requirements vary by lender. Some will allow you to get a private refinance loan for as little as $7,500 or $10,000. Others require a higher initial loan balance.

The loan limits may vary based on whether you have an undergraduate or graduate degree. It may also depend on your credit score and income.

Interest rates on private refinance loans vary with the lender, and may be variable or fixed. Typically, the interest rate is based on the credit score of the borrower and the cosigner (if any). Generally, a better credit score will lead to a lower interest rate. 
Most private student loans and federal student loans are eligible for refinancing, including loans taken out for undergraduate and graduate studies. Some private lenders may determine loan eligibility based on the college attended, degree level, or field of study.

It depends. 

A private refinance loan may reduce your monthly payment by increasing the term of the loan. This may help you free up some cash for other things such as paying off higher-interest debts. This could help save you money. However, increasing the term of your loan often leads to more interest being charged over the life of the loan. 

If you qualify for a lower interest rate, and don’t extend the term of the loan, the total cost of the loan will be lower, and you will ultimately end up paying back less money than you would have if you had not refinanced.

They are very similar, but there are subtle—and important—distinctions. Consolidation brings multiple loans together. Refinancing may bring multiple loans together, or may be done with just one loan. People typically choose to refinance because they are also looking for a lower interest rate.

The Direct Consolidation Loan program for federal student loans will not help you lower your interest rate, is only available for federal student loans, and does not require a credit check. The lender in this case will remain the U.S. Department of Education and your Direct Consolidation Loan will be serviced by a federal student loan servicer.

Refinancing can include federal and private loans together, is done with a private lender, and requires a credit check. Terms and underwriter criteria will vary between different private loans, and your interest rate will be based on your credit.

The answer to this question is “it depends.” We’ll explain. First, if you’re looking at saving money each month on your student loan payment, then it is quite likely you could shave costs on your monthly obligation. This is because federal consolidation—and refinancing, for that matter—allows you to extend the repayment period from a standard 10 year window to up to 20 years, or in some cases even 30 years. Longer repayment timeframes mean lower monthly payments. For refinancing, private lenders typically have a cap of 20 years which is often reserved for those with professional degrees (i.e. medical) and extremely high loan balances.

Second, if you choose to refinance your loan, you are able to shop around for a lower APR (annual percentage rate) which helps you save on the overall amount of interest to be repaid IF you stay close to your original repayment timeframe. If you extend your loan repayment through either consolidation or refinancing, you will increase the total amount of interest repaid over the life of the loan. But you can choose up front to reduce the repayment term. And you can also accelerate how quickly you repay the loan. There are no prepayment penalties, after all.

Final note: you can only combine your federal and private student loans together through refinancing vs. federal consolidation. And you can only qualify for a lower interest rate through a refinance, not a Direct Consolidation Loan.

There is no federal option to refinance loans. Under the Direct Consolidation Loan program, you may consolidate any federal student loans held in your name (including Parent PLUS, Grad PLUS and any other types of federal student loans borrowed), but keep in mind, this is not the same as refinancing the loans to qualify for a lower interest rate. 
There are some distinct methods student loan scammers will attempt to use:
  • They ask you to pay up-front fees.
  • They charge monthly fees which are not part of loan repayment.
  • They promise you immediate, or some sort of loan forgiveness.
  • They ask for you to share your FSA ID username and/or password.
  • They ask you to sign and submit written agreements or contracts to give them permission to make decisions on your loan.
  • They claim that the offer they have is limited.
  • They have spelling or grammatical errors in their ads, emails, and communications.

If you feel like you have been approached by one of these companies, please contact your loan servicer. For more information please go to,

Federal student loan consolidation enables you to combine all of your federal student loans into a single new loan with one monthly payment. You may not consolidate your federal student loans with any private student loan debt or your parent's Parent PLUS Loans.

Most federal loans are eligible, such as:

  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • PLUS Loans (both Parent PLUS and Grad PLUS)
  • Federal Perkins Loans
  • HEAL Loans
  • Supplemental Loans for Students

For a complete list, please refer to the U.S. Department of Education.

In general, most individuals who have federal student loans will be eligible to consolidate their loans. However, there are some requirements:

  • Your loans must be in repayment or in their grace period.
  • Generally, if you already have a consolidation loan you will need at least one additional eligible loan to consolidate again.
  • If you're in default, you will need to agree to additional terms set by the U.S. Department of Education.

Loan consolidation is a personal choice.

Here are some of the pros:

  • If you have more than one servicer, it may be easier for you to manage your loans if they are all in one place.
  • If you have a Federal Family Education Loan Program loan and would like to take advantage of some of the loan benefits offered in the Direct Loan program (e.g., certain income-driven repayment plans or Public Service Loan Forgiveness (PSLF)).
  • If you have loans with a variable interest rate and would like to have a fixed interest rate.
  • If you need smaller monthly payments, you can extend your repayment term to make your monthly payments more affordable. (Keep in mind you will pay more over the life of the loan.)

Here are some of the cons:

  • Your overall interest rate will slightly increase. If you are consolidating in hopes of a lower interest rate, then you should reconsider your strategy. Your interest rate for a Federal Direct Consolidation Loan is not based on your credit score, but rather the weighted average of the interest rates on the loans you are consolidating loans rounded up to the nearest 1/8 of a percent. If you are looking to lower your interest rate you may want to consider private loan refinancing.
  • If you have already been making eligible payments towards PSLF or forgiveness under one of the income-driven repayment plans, your eligible payments restart.
  • You could lose borrower benefits on your underlying loans. For example, a consolidated Perkins loan will lose its interest subsidy and cancellation benefits.
  • A longer repayment term will mean it will take you longer to repay your loan, and it will cost you more.
In some cases, you can include an existing consolidation loan in a new Direct Consolidation Loan, particularly if you've taken out one or more additional federal student loans. Check with to learn more.
No. Eligibility for federal student loan consolidation does not depend on the borrower's credit history or credit scores.
Direct Consolidation Loans use a fixed interest rate. Your interest rate will be the weighted average of the interest rates on the existing federal student loans, rounded up to the nearest one-eighth of 1%. Our Consolidation Loan Calculator can help you estimate your new rate and monthly payment.
You can consolidate your federal student loans once they are in repayment or in the grace period. And generally, you can’t consolidate an existing consolidation loan unless you include an additional (eligible) federal student loan in the consolidation. 
No. Students may not consolidate their federal student loans with their spouse's federal student loans. However, some private refinancing lenders, like PenFed, will allow you to refinance your debt together.
No. Students may not consolidate their federal student loans with their parent’s Parent PLUS Loans.  However, a parent may consolidate their Parent PLUS loans with their own federal student loans. 
A Direct Consolidation Loan cannot include private student loans or other types of non-student loan debt. However, you may be able to include your private student loan balances for the U.S. Department of Education to determine your overall education debt, which will determine the length of your repayment term (up to 30 years). If you would like to combine all your loans—both federal and private—you may want to consider private student loan refinancing. Keep in mind, if you do refinance your federal loans with a private lender, you will lose the federal benefits on those loans.
Consolidation typically takes 30 to 60 days, but can take up to 90 days. While you wait, you should continue to make your payments. Any payments received after the loan consolidation will be returned to you.

If you choose to combine your loans into a Direct Consolidation Loan, you will need to submit an application at The application process should take about 30 minutes. The Direct Consolidation Loan program is run by the U.S. Department of Education.

  1. Log in with your FSA ID
  2. Choose the federal loans you would like to consolidate. Though you can’t roll your private student loans into the Direct Consolidation Loan, you can include the loan balances of your overall student debt—which will give you an option to extend your repayment term up to 30 years. 
  3. Select your servicer, unless you are working towards Public Service Loan Forgiveness (PSLF). If you are working towards PSLF, the Department will choose the loan servicer who is working with all PSLF borrowers.
  4. Pick a repayment plan. If you choose an income-driven repayment plan (like income-based repayment), you will need to link the application to the IRS in order to confirm your income. 
  5. Review the terms and conditions carefully. You are committing to these terms so do not just scroll down to the end.
  6. Enter your personal information as requested. This will be where you have to include two references who must have different addresses and telephone numbers from each other.
  7. Review and sign your application.

The repayment period is determined by your total education debt, which considers both federal and private student loan debt. In your application you can report the amount of your private student loans, even though you can't include the actual loans in your consolidation.

The following table shows the maximum repayment term under the standard repayment plan:

Loan Balance Maximum Repayment Period

 Less than $7,500         10 years
 $7,500 to $9,999         12 years
 $10,000 to $19,999         15 years
 $20,000 to $39,999         20 years
 $40,000 to $59,000         25 years
 $60,000 and above         30 years

You do not need to choose the standard repayment plan. You are free to choose another repayment plan if you prefer a shorter term.

There are no prepayment penalties on federal student loans. Making extra payments is a great way to pay off your loans faster and save money on interest. 
Federal student loans, including federal Direct Consolidation Loans, offer borrower benefits such as deferment and forbearance. As long as you meet the criteria and have not used up all your time, you will be able to temporarily postpone payments on your loans. You may want to also consider income-driven repayment plans which will base your monthly payment on your income rather than your loan balance.
You can consider consolidating your loans via private student loan refinancing.
If you have other types of debt to refinance, you can look for a personal line of credit or loan from a bank, credit union, or other financial institution. 
What are my private student loan options?