Can You Get A Private Student Loan? What Lenders Look For
Paying for college has become more challenging for many households. In fact, tuition and related expenses at public universities have climbed by 179% over the last 20 years, with the average yearly cost per student reaching $38,270 in 2024, based on data from the Education Data Initiative. While family contributions, grants, scholarships, and federal loans help, they often don’t cover the entire expense. One additional resource to bridge the financial gap is a private student loan.
After a significant pause on federal student loan payments and interest accrual, initiated as a relief measure during the COVID-19 pandemic, the U.S. government has resumed loan collections. This resumption, which began to take full effect with referrals to the Treasury Department’s offset program around May 2025 for defaulted loans, has brought renewed financial pressure to millions of borrowers.
Many now face the challenge of fitting these payments back into their budgets amidst other economic pressures, and delinquency rates have surged. This situation underscores the critical need for borrowers to understand all their options, including the distinctions between federal and private loans, as they navigate their repayment obligations.
Below is a closer look at private student loans; how they’re distinct from federal options, what’s needed to qualify, and situations where having a cosigner might be necessary.
Unlocking Private Student Loans
Private student loans come from non-government sources such as credit unions, traditional banks, or organizations tied to individual states. The lending institutions, rather than the federal government, determine the rules and conditions for these loans. While students are the primary borrowers, a creditworthy adult typically signs alongside them. Loan funds are generally sent straight to the college or university.
Meanwhile, the government is responsible for issuing and backing federal student loans. There are three primary federal loan categories: subsidized loans for undergraduates who show financial need, unsubsidized loans for students regardless of financial status, and PLUS loans designed for graduate or professional-level study.
The terms and advantages of federal loans are defined by law. These benefits can include interest rates that remain constant and repayment plans based on income; features that are not usually part of private loan packages. Federal borrowing is also often more affordable compared to loans from private lenders.
What Lenders Require for Approval
Meeting the criteria for a private student loan can be more challenging than qualifying for a federal one. Unlike federal loans, which usually don’t involve credit checks or income documentation, private lenders often assess your credit score, financial stability, and may require a co-signer. Since these loans go through credit-based evaluations, borrowers face stricter requirements and have fewer legal safeguards during repayment.
Let’s break down the main eligibility factors for private loans:
- Age and Residency Status: To apply, you typically need to be at least 18 and either a U.S. citizen or a lawful permanent resident. Some financial institutions might accept international students if they apply with a co-signer who is a U.S. citizen.
- Credit Rating: Most lenders want borrowers with a credit score of 650 or up. Those with higher scores can often lock in lower interest rates and better borrowing terms.
- Income and Job History: Lenders usually prefer applicants or co-signers who show steady employment and earn a reliable income. A yearly income of $35,000 or more is commonly expected.
- School Enrollment: In most cases, you must be attending an accredited college or university to be eligible. However, a few lenders may offer funding even if you’re enrolled in an unaccredited institution or taking a nondegree course. Be sure to check with the lender to understand their school eligibility list.
Also, depending on the lender’s policy, you might need to be registered for at least half-time coursework to qualify.
Using Your Private Loan: Approved Educational Costs
Private student loans can be used to pay for a variety of school-related costs, including tuition, housing, textbooks, travel, and even a computer. In many cases, lenders also permit the money to be used for day-to-day needs such as meals, clothing, hygiene products, and other personal items. Typically, the loan amount is first sent to the educational institution, where it is applied toward tuition and school fees. Any leftover balance is then given to the student to help with other necessary living expenses. If you’re unsure what’s allowed, it’s best to check with your lender for a full list of approved uses.
How a Co-Signer Can Help You Qualify
If you’re a student with limited credit history or low income, qualifying on your own for a private loan can be tough. Even if you do meet the basic requirements, the interest rate you’re offered might be higher than you’d prefer. To improve your chances or get better terms, you’ll likely need someone to co-sign the loan.
A co-signer is a financially responsible adult, often a parent, relative, or guardian, who agrees to take on the obligation of repayment alongside the borrower. Only one individual can serve in this role per loan, and both parties are equally liable for making payments. If payments are missed or delayed, it can negatively impact both the borrower’s and co-signer’s credit records. Should the loan go into default, the co-signer could be pursued by collections and possibly face legal consequences.
Because it’s difficult for traditional undergraduates to secure private loans without help, co-signers have become very common. In fact, a 2023 report from Enterval Analytics LLC revealed that almost 91% of private undergraduate loans include a co-signer.
Requirements for a Co-Signer
Lenders may have varying guidelines for who can co-sign, but most require that the co-signer be a legal adult, usually 18 or older, have a Social Security number, and be either a U.S. citizen or a lawful permanent resident. They must also meet the lender’s specific credit qualifications.
Typically, a co-signer is expected to have a credit score of at least 670 and earn at least $35,000 per year. Having a qualified co-signer gives the lender more confidence in repayment, which can help the borrower secure more favorable loan conditions.
