Understanding Private Student Loans
Private student loans are provided by banks, online lenders, and credit unions to help cover college expenses. These loans are typically considered after all federal aid options have been used, serving to fill any remaining financial gaps. To qualify, lenders usually expect applicants to meet certain criteria, such as having a good credit score, generally in the mid-600s or higher, and a reliable income that can support monthly payments.
Due to these credit requirements, many undergraduate students need a co-signer to be approved. While a few specialized lenders offer loans without looking at credit scores, these often come with higher interest rates. Most private loans are aimed at full-time university students, but loan options are also available for those attending school part-time.
The suspension of loan collections enforced during the COVID-19 pandemic has been lifted as of May 2025. This brings about significant changes in the student loan landscape in the United States. This change affects borrowers in terms of how they can obtain funding from federal loans and the increasing attention on private student loans as an alternative. Borrowers who defaulted or are in delinquent status will face different collection methods.
Although resuming collection efforts do not directly affect loan applications and approvals, borrowers may face stricter reviews in the long term. Related government institutions will also pay more attention to loan counseling for new and graduating borrowers to ensure that they understand their payment obligations.
How Much Funding Can You Get from a Private Student Loan?
The amount you can borrow through private student loans depends on your school’s total cost of attendance minus any financial aid you receive. However, each lender sets its own borrowing limits. For instance, some lenders like Ascent cap undergraduate loans at \$200,000 and graduate loans at \$400,000 over a borrower’s lifetime.
In comparison, federal student loans have set limits: undergraduates can borrow up to \$57,500 in total, while graduate students can borrow up to \$138,500, which includes any previous undergraduate loans. Federal PLUS loans don’t have a lifetime cap but can only be borrowed up to the cost of attendance and tend to have higher interest rates.
Regardless of the borrowing limit, it’s important to only borrow what you truly need, since you’ll be responsible for repaying the loan amount along with interest.
Fixed vs. Variable Rates: What to Know About Private Loan Interest
Private student loans usually come with interest rates that are higher than those of federal loans. However, if you or your co-signer has strong credit and a stable income, you may qualify for a lower rate. In some cases, private lenders may even offer rates below those of federal loans, but qualifying typically requires excellent credit.
Still, choosing a private loan with a lower rate means giving up the benefits that federal loans provide, such as income-driven repayment plans and loan forgiveness options.
Private lenders typically offer two kinds of loan interest rates: fixed and variable. Fixed rates are unchanged throughout the loan term, making your monthly payments predictable. Variable rates, on the other hand, can fluctuate over time based on market trends. This could lead to either lower or higher monthly payments in the future.
Before choosing a private loan, it’s a good idea to compare offers from several lenders. While interest rates matter, it’s also important to look at other factors like fees, repayment flexibility, and available borrower protections.
Tips for Securing a Lower Interest Rate on Your Private Student Loan
If you’re not able to secure a low interest rate on a private student loan right now, you may be able to lower it later through refinancing. This process involves a private lender paying off your existing loan and replacing it with a new one that has better terms, such as a lower interest rate or different repayment schedule. You can apply for refinancing as many times as you need without penalties or extra charges. However, take note that lenders require a hard credit check for approval, and this inquiry will affect your credit score temporarily.
To be eligible, you typically need to meet certain income requirements and have a credit score in the upper 600s, or apply with a co-signer who meets these standards. Refinancing is available for both private and federal loans, but it’s important to be cautious when refinancing federal loans. Doing so means you’ll give up access to benefits like income-driven repayment plans, loan forgiveness programs, and other federal protections.
