2021 NerdWallet Best-of Awards Winner for Best Student Loan Refinancing Overall
2021 NerdWallet Best-Of Awards Winner

Frequently Asked Questions: Student Loan Refinancing & Private Student Loans

Explore FAQs by Topic

Student Loan Refinancing

Parent Loan Refinancing

Private Student Loans

Student Loan Refinancing Basics
Student Loan Refinancing Benefits
Interest Rates & Comparing Rates
Student Loan Refinancing With a Cosigner
Application Process
Credit Checks
Personal & Financial Information
Servicing Your Refinance Loan
Student Loan Refinancing for Married Couple
Free Student Loan Refinance Consultation
Student Loan Refinancing Basics
Student Loan Refinancing Benefits
Interest Rates & Comparing Rates
Student Loan Refinancing With a Cosigner
Application Process
Credit Checks
Personal & Financial Information
Servicing Your Refinance Loan
Student Loan Refinancing for Married Couple
Free Student Loan Refinance Consultation

Student Loan Refinancing Basics

Student loan refinancing is the process of taking one or multiple student loans and refinancing them into a new single loan that often include new terms — such as a lower interest rate, a new monthly payment, and a new repayment length.

Refinancing is a great solution for working graduates or those no longer enrolled in school who have high-interest rates on current outstanding student loans. Refinancing can lower your interest rate and shorten your term to help you get out of debt faster. Borrowers should be aware that by refinancing, they may lose certain benefits offered by federal student loan programs such as deferments, forbearance, income-based repayment plans, and Public Service Loan Forgiveness.

Our lenders refinance federal, private, and Parent PLUS student loans. When you refinance with one of our lenders, all your loans are consolidated into one easy monthly payment.

Use Purefy’s Compare Rates tool to see student loan refinance offers from multiple top lenders — all in one place with one fast form. Quickly compare your interest rate and monthly payment options, as well as your lifetime interest savings, with no impact on your credit score.

Each student loan refinance lender has basic eligibility requirements. For instance, different lenders have different citizenship requirements. While one may require both the borrower and cosigner to be U.S. Citizens, another may only require you to be a permanent resident. While comparing your refinance options, you can also compare basic requirements and see special program features for each lender.

After determining that you meet the basic eligibility requirements, you’ll want to consider if you’ll qualify for the interest rate you want. Although each lender has different methods for determining creditworthiness, below is what lenders typically look for in a student loan refinance applicant:

  • Credit Score
  • Income
  • Debt-to-income ratio
  • Employment history
  • Degree and school
  • Repayment history and negative public records

The loan limit varies from lender to lender, but most lenders require a minimum loan of $5,000–$10,000 and a maximum loan of $250,000–$500,000. Higher loan amounts may only be available to borrowers meeting certain criteria. You can check specific lenders’ loan limits here.

No, there are zero fees with a student loan refinance through Purefy. Our lenders never charge origination fees, application fees, or prepayment penalties, and we don’t think you should face any additional charges for trying to save money.

No, you must be out of school or no longer enrolled in school to be eligible to refinance with one of our lenders.

When you apply to refinance student loans, you can choose which of your federal student loans and private student loans to include. If some of your federal loans have great rates already, you don’t have to include those — you can decide to only refinance the ones with higher interest.

But keep in mind — your federal student loans come with valuable benefits that you will lose by refinancing including:

  • Access to income-driven repayment plans
  • The chance to enter into federal forbearance or deferment
  • The ability to qualify for loan forgiveness programs

It’s important to keep these in mind when considering whether to refinance your student loans.

If you don’t want to give up the federal benefits, but still want to take advantage of a student loan consolidation, your best option may be a federal Direct Consolidation Loan rather than refinancing. You apply for this student loan consolidation with the federal government, and all your federal student loans are combined into one new loan. Your interest rate will be based on the weighted average of your previous loans.

This is different from student loan refinancing, in which you can get a lower rate, if you qualify. Ultimately, a federal student loan consolidation will help simplify your finances, but is unlikely to save any money, compared to refinancing.

For those who can qualify for a lower rate, refinancing private student loans is typically a no-brainer to save money on interest costs. There are also many other situations when refinancing private loans can be beneficial. Here are all the details about when to refinance private student loans.

Student Loan Refinancing Benefits

The main reason that people refinance is to get a lower interest rate, a more favorable repayment term, or a combination of both.

If you have high interest federal student loans or private student loans, getting a lower rate through a student loan refinance will reduce the total interest you pay (all else being equal).

With more money in your pocket, you’ll have more available funds to take care of your other financial needs and life goals — or pay off your student loans even faster.

Not only would a lower rate save you money on interest costs, but it can also lower your monthly payment to make it more affordable.

Obtaining a lower interest rate can decrease your monthly payments, but so could refinancing to a longer repayment term.

By selecting a longer term, you can ensure that your monthly payment is as low as possible to provide some relief to your monthly budget. Plus, you’ll have more expendable cash for other necessary expenses.

When refinancing your student loans, you can also choose a quicker repayment term than the Standard Repayment Plan of 10 years.

By choosing a shorter term, you can pay off your loans sooner and get rid of them for good — while maximizing your savings on costly interest.

Another big benefit of refinancing student loans is that it consolidates your loan payments into one.

All your existing student loans that are refinanced will be consolidated into one new loan — with only one monthly payment and one loan servicer to worry about. If you hate the hassle of keeping track of multiple payments, potentially with multiple loan servicers, then student loan consolidation can be a smart way to simplify your finances.

Did you apply for a private student loan in college with a cosigner? If your credit is good enough, refinancing student loans solely in your own name releases your cosigner from their duties of being equally responsible for your monthly payments until the debt is paid in full.

Do you currently have a fixed interest rate with your student loans? Many private lenders offer both fixed and variable rates, which can be an attractive change for some borrowers.

Unlike a fixed rate, which stays the same for the entire life of the loan, variable rates fluctuate based on the current market rates.

Variable rates tend to start out lower than fixed rates, so it can be a smart decision to gain extra savings while your rate is reduced, if you’re planning to pay off your debt in the next couple of years.

With federal loans, you usually don’t get a say in who your student loan servicer is. By refinancing your loans, you’ll have the opportunity to choose a lender based on their service and benefits to make your life and money management a little easier.

Interest Rates & Comparing Rates

Most people who are looking for the best student loan refinance and consolidation solution will choose the company offering the best interest rate on their preferred repayment term.

Purefy’s Compare Rates tool is an easy way to compare lenders and find the best student loan refinance. You will be presented with real, pre-qualified rates from a selection of quality, vetted lenders — all based on your specific details, credit score, and borrower profile. There are no teaser rates to worry about, and checking rates on Purefy has no impact on your credit score.

This lets you make an informed decision by comparing rates, terms, and monthly payments all in one easy chart.

By finding a solution with a lower interest rate, more of your payment goes toward the loan principal rather than interest — allowing you to save a significant amount of money.

That said, there are other things to keep in mind. Besides the different eligibility criteria and loan limits each company has, many have unique benefits, some of which may be more valuable to you than simply choosing the best student loan rates.

Student loan refinancing is an effective way to manage your debt — helping you to save money, reduce your payment, and streamline your loans.

Refinancing is a smart choice for those with good credit, a stable income, and who don’t plan on using their federal loan benefits. By doing your homework and comparing your refinancing options, you can ensure you make the right decision for your financial needs.

And by using Purefy’s Compare Rates tool, you can quickly and easily view interest rates, terms, and more from the best lenders — all in one place.

Just share a few details about yourself and your student loan debt with one simple form. You’ll then be able to shop around — without needing to visit each lender’s website while filling out multiple cumbersome applications. Simply choose your best refinancing solution and apply.

This accounts for the interest rate risk. It’s always riskier for both parties to lock into a long-term rate without knowing if rates will increase or decrease in the future.

Interest is calculated as simple daily interest for student loans. This generally means that each day, the outstanding principal balance is multiplied by the interest rate and divided by 365 days to calculate that day’s interest amount. For example, if you have a $10,000 loan and the interest rate is 7%, one day’s interest will be: ($10,000 x 0.07) / 365 = $1.92.

Our lenders generally determine interest rates by your credit score and the type of degree you have. Your loan amount usually does not directly affect the rates offered. Your annual income is factored into DTI (debt-to-income) calculations which may impact your interest rate. If you apply with a cosigner or refinance with your spouse, our lenders use the higher credit score to calculate your interest rate and save you even more on your student loans. Remember, you can check your estimated rate offers using our Compare Rates tool at any time with no impact on your credit score.

Yes, a borrower may prepay the loan either partially or in full at any time without incurring any fees or penalties. So if you won the lottery and want to take care of your balance in one lump sum, fees won’t get in your way.

Ready to learn how to get the lowest student loan refinance rates? Here’s everything you need to know about student loan refinancing factors that impact your interest rate and what you can do to get the best deal.

Student Loan Refinancing With a Cosigner

Although you may have good credit yourself, applying with a cosigner who also has strong credit and income can ensure that you meet our lender’s credit criteria. This will increase the likelihood that you will pass our lender’s initial credit screening process and be offered a lower interest rate on your student loan refinance. You can check your rate with a cosigner before applying by estimating your cosigner’s credit score in our Compare Rates tool. Our lenders will use the higher of the two credit scores for qualification purposes so you can maximize your savings.

Please note that when an application has a cosigner, the borrower and the cosigner will both: a) jointly apply for credit; and, (b) be jointly liable for the requested loan. Each of our lenders has a different policy for a cosigner release. For instance, PenFed borrowers with a cosigner on their loan may request a “cosigner release” if one year (12 consecutive months) of on-time payments has been met, and a quick re-evaluation (note: this does not mean the borrower would have to re-apply) is completed on the borrower’s financial and credit profile.

Your loan’s cosigner is jointly responsible for the life of the loan. Make sure you choose your cosigner wisely — usually a family member or close friend — and can manage all the payments. If you miss a payment, it will damage your cosigner’s credit as well as your own.

Application Process

Once you have used Purefy’s Compare Rates tool and selected the loan you are interested in, click the apply button to be taken directly to that lender’s application. Most applications can be quickly completed in 15 minutes or less.

Schedule a free student loan refinance consultation with one of our award-winning experts, and we’ll give you a call at the designated time to go over your options in detail. You can also reach out to us and ask questions by email at [email protected] or by phone at 202-524-1115. We pride ourselves in putting you first and finding the best student loan solution for each unique situation.

Each of our lenders has a slightly different process — but in general, to expedite the processing of your loan documents and to keep them secure, it is best to upload them directly to your application.

We can typically facilitate this request for married couples, parents, and other unique situations. However, please call one of our student loan experts by phone at 202-524-1115 or email at [email protected] to discuss your options before proceeding with an application so we can find the best solution for you.

The initial credit review considers all the information you and your cosigner provide during the application process such as income, degree, and school — as well as the information obtained from your credit report. Once you pass the credit review, the next step is to provide documentation that supports the credit information.

It depends on the lender you choose, but your application will be saved for at least 30 days. But why wait when you can save money on your loan now? You can access your unfinished application by logging in to your account on your lender’s website.

If you’re refinancing with PenFed, log in here to check your status. Each of our other lenders has a checklist in the application to allow you to see where you are in the process and what is still needed.

Please visit the PenFed log in page. On the log in page, there is a link to reset your password or to obtain your username.

If refinancing with PenFed, there are 5 required during the underwriting process:

  • Income verification: A paystub or tax return
  • Photo ID: A Driver’s License, Passport, or state-issued ID card
  • Payoff Verification Statements from each existing servicer: A statement that projects the payoff amount 10, 15, or 30 days into the future
  • Graduation verification: A copy or photo of your diploma or transcripts
  • PenFed Membership Application: Included in your application after pre-approval

No need to break out the fax machine — smartphone pictures or screen shots will suffice.

In order to refinance with PenFed, you will need to become a PenFed member. But don’t worry — it’s easy to join, and there is no requirement for military service. You’ll fill out a membership form during the underwriting process after you are pre-approved. Once your membership is confirmed, you’ll have access to PenFed’s award-winning products and services. You do not need to be a member to apply to refinance your student loans — we only require membership after pre-approval.

A Payoff Verification Statement is a statement provided by lenders and servicers that verifies the amount it would take to completely pay off your loan at a certain day in the future (often 10, 15, or 30 days in advance). The amount takes into account the loan balance, interest, fees, and any accrued interest during the time that the statement is requested, and the future payoff date provided. This document is critical to the Purefy processing team during the underwriting process as it allows us to prepare an accurate payoff figure for your existing loans. In comparison, loan statements or monthly billing statements solely provide the loan balance at a certain time, and they do not account for accrued interest.

Credit Checks

A credit check serves two main purposes. First, it’s used to verify the identity of all people signing the application. Second, it’s used for qualification purposes and helps us offer you the best pricing we can, based on your credit history.

Here’s everything to know about refinancing student loans and its potential impact to your credit.

There are many things that contribute to your credit history. If you aren’t sure what your score is, you can check your credit score for free at CreditKarma. But if you have no credit history, you won’t be eligible for our program without a cosigner.

Refinancing with bad credit can still be possible by applying with a creditworthy cosigner. Here’s more detail on how to make it happen.

Here are 5 ways to improve your credit so you can save the most on your student loan refinance.

Personal & Financial Information

Our lenders will request your Social Security number once you move forward with an application. But your Social Security number is not needed to check your rates and see what you can save using our Compare Rates tool.

U.S. Citizen: A person who was born in the United States, including the lower 48 states, Alaska, Hawaii, Puerto Rico, Guam, and the U.S. Virgin Islands; or who became a citizen through naturalization; or who was born outside the United States to U.S. Citizen parents under qualifying circumstances (derivative citizenship) and who has not renounced U.S. citizenship.

Permanent Resident – Any person not a citizen of the United States who is residing in the U.S. under legally recognized and lawfully recorded permanent residence as an immigrant. Also known as “Permanent Resident Alien,” “Lawful Permanent Resident,” “Resident Alien Permit Holder,” and “Green Card Holder.”

At this time, only U.S. citizens and Permanent residents are eligible for Purefy loans through our lenders.

Your permanent address is the location that you consider to be your primary place of residence (like your parents’ or guardian’s address). Your mailing address is wherever you want to receive all your loan documents.

Servicing Your Refinance Loan

It depends on the lender you refinance with. But after your loan disburses, you can set up auto pay (if available) and your account to manage your loan going forward. On the day after your loan is disbursed, you will receive a notification from your lender with the steps to set up your online account and how to manage it.

It typically takes 3 to 14 business days for your old servicer(s) to receive the payoff funds, apply them to your account, and process the payoff. Please check your account with your old servicer(s) to ensure that the payoffs have been applied after this time frame. Contact Purefy if the balance is still outstanding after 14 business days and we will help you take care of it.

We recommend that you continue making regular payments with your existing loan servicer to avoid missing a payment while the disbursement goes through. Any over payment that our lenders make on your existing loan will be refunded directly to you by your existing servicer in the form of a paper check, sent to the address on your application. If your servicer sends us the refund, our lenders will apply the funds directly to the principal balance of your loan.

Each of our lenders has a slightly different policy, however all our lenders work with borrowers who are facing temporary financial hardship. If forbearance is the result decided upon, then interest would accrue during the forbearance period, but no payment would be due.

Defaulting on a loan is a very serious matter which could have an adverse impact on your personal credit score. Further, bankruptcy does not cancel the obligation to repay an education loan. If you are about to miss a loan payment, contact your lender immediately to work out a repayment schedule.

No, you can pay your loan off early regardless of your repayment terms without any penalty. You will only be charged the amount of interest that has accrued on the loan until the day the loan is paid off.

We only offer one type of repayment option: principal and interest payments. Any payment larger than the amount due made before the due date will be applied directly to the loan’s principal balance.

For a student loan refinance through PenFed, PenFed is also the loan servicer. You can contact a representative of the PenFed Member Services team at 800-247-5626 or visit their website.

If you refinance with PenFed, your first payment is due 30 days after the loan disburses.

Like other private lenders, our lenders do not offer a deferment period.

Student Loan Refinancing for Married Couple

There are many excellent reasons to refinance student loans together with a spouse — available through a PenFed Credit Union Spouse Loan. Learn more about its key benefits.

There are several perfect situations for married couples to refinance their loans together. Here’s when it can be a great idea.

A spousal loan refinance through PenFed is possible if only one person in the marriage has an income. Here are all the details.

Like most financial decisions, there are both benefits and drawbacks to consider when combining student loans together with a spouse. Here’s a full breakdown of the positives and negatives.

Free Student Loan Refinance Consultation

Looking to have all your refinancing questions answered? Schedule a student loan refinance consultation with an award-winning Student Loan Advisor at Purefy. Simply choose a time that works for you and we’ll give you a call to go over your unique situation in detail.

Speaking to an award-winning Student Loan Advisor at Purefy can provide support, guidance, and clarity through the refinancing process. Here’s when it may be a good idea before applying.

Here are 9 key questions to ask a refinancing expert before applying.

Parent Loan Refinancing Basics
Refinancing Federal Parent PLUS Loans
Comparing Refinancing Rates & Applying
Parent Loan Refinancing Basics
Refinancing Federal Parent PLUS Loans
Comparing Refinancing Rates & Applying

Parent Loan Refinancing Basics

Refinancing allows you to take out a loan from a private lender that covers the cost of your current debt. The new loan is completely different from your old ones — with a new repayment term, interest rate, and monthly payment. And, if you had multiple student loans before, refinancing gives you just one loan and one monthly payment going forward.

For parents who took out student loans — either federal Parent PLUS Loans or private loans — to help their children go to college, refinancing can be an easy way for qualified borrowers to reduce their interest rate and pay off their loans sooner. Here’s a full article on why many parents are choosing to refinance their student loans.

By refinancing your parent loans, you could:

  • Qualify for a lower interest rate to save money on interest costs over the life of your new refinanced loan
  • Shorten your repayment term to pay off your debt more quickly
  • Lengthen your repayment term to have a smaller, more management monthly payment
  • Merge all your loans into one new loan to have just one monthly payment to worry about

Some of our lenders, such as PenFed Credit Union, also allow parents to transfer their Parent PLUS and private student loans into their child’s name — which can be a great way to help your children take charge of their education and start building up a credit history.

If you took out federal Parent PLUS Loans or private parent loans to help your child attend college, you could refinance before they’re handed their diploma. This is how parents are refinancing student loan debt before their child walks the stage.

Refinancing Federal Parent PLUS Loans

Refinancing your Parent PLUS loans and lowering your current interest rate can be a very big deal for your finances — especially when considering Parent PLUS Loans typically have the highest interest rate of any federal student loan. Your student loan balance can quickly balloon with such a high rate, making refinancing Parent PLUS Loans a smart financial decision for many families.

Here’s our expert rundown on why refinancing can be a smart way to tackle Parent PLUS Loan debt.

All Parent PLUS loans get the same high, fixed interest rate regardless of your credit score. This rate is set every year by the federal government. For example, the rate for the 2018-2019 school year was 7.60%.

If you choose to refinance with a new provider and have good credit, you may find that you qualify for a substantially lower interest rate on multiple student loan options — saving you a large sum of money in the process of paying off your new loan.

Struggling to afford your current monthly payment? Refinancing can help with that, too.

When you refinance, you get a chance to choose a new loan repayment term and can opt for a longer term that reduces your payment each month. This flexibility lets you dial in your monthly payment exactly how you want it, so you can be more comfortable with the rest of your financial responsibilities.

Extending your repayment term can cause you to pay more in interest over time, but it may be worth it to get some extra breathing room each month to help with other necessary expenses.

Refinancing also serves as a Parent PLUS loan consolidation. If you have multiple loans (federal or private) they are all combined into one easy-to-manage loan, with just one monthly payment to your new provider.

While refinancing can be a powerful tool for managing your Parent PLUS loans, there are some drawbacks to consider.

When you refinance Parent PLUS loans, you lose federal student loan benefits such as:

  • Deferment or Forbearance
  • Income-Driven Repayment Plans
  • Public Service Loan Forgiveness Program

If these federal benefits are important to you, an alternative option to refinancing is consolidating Parent PLUS loans with the federal government through a Direct Consolidation Loan.

This program consolidates all your federal loans, and the new rate is based on the weighted average of your current loans. So, although you’ll only have one loan and monthly payment to manage, there’s little chance you will save money on interest costs compared to the savings possible through refinancing.

It’s also worth noting that federal Parent PLUS loan consolidation does not let you combine your federal loans with your private student loans. For that, you would need to refinance.

To be eligible for Parent PLUS Loan refinancing, you’ll need to meet the following criteria:

  • Have a strong credit history
  • Have at least one outstanding education loan
  • Have steady income

Qualified borrowers may be offered significantly better rates and terms than they currently have on their Parent PLUS Loans, based on their creditworthiness including credit score, income, debt-to-income ratio, and other factors. If you have bad credit, you may be able to qualify by adding a creditworthy cosigner to your application.

An excellent benefit of refinancing Parent PLUS loans is the ability to refinance them from your name to your child’s.

If you took out Parent PLUS Loans to help your child pay for school, those loans are entirely in your name which can be a serious burden. That means you’re solely responsible for them, and with high interest rates, the loans can be expensive and difficult to repay. Plus, having them on your credit report can affect your ability to qualify for other forms of loans, such as a mortgage.

If your child is doing well in their career and is earning enough money to take over the loans, you may be able to transfer the loans into their name through student loan refinancing.

By using this strategy, your child will then be responsible for the loan, and you would no longer be obligated to repay the debt — allowing you to focus on your other financial goals.

If your child has bad credit and doesn’t qualify on their own, you may also consider cosigning on a refinance loan with them. Some lenders, like PenFed Credit Union, offer both parent plus transfer capabilities as well as a cosigner release program, which could remove you from the loan after a certain period, after your child’s credit has improved.

Comparing Refinancing Rates & Applying

To get started with refinancing, use Purefy’s Compare Rates tool. You’ll quickly and easily compare your actual student loan options from a tightly vetted list of refinance companies — all with one simple form.

All our lenders have sterling reputations and offer loans with no origination fees or prepayment penalties. The rate comparison tool will show your rate and monthly payment options with absolute transparency, allowing you to make an informed decision that meets your financial needs.

Ready to easily find your top refinancing option? Using our Compare Rates tool, you can quickly tell which lenders are offering the best rate that is tailored to your financial profile — no teaser rates or “bait and switch” with Purefy.

You can use our sortable chart to see your best rates, and by entering your current loan details, you can compare monthly payments at the various term lengths on offer — whether you’re looking for a shorter or longer repayment term.

If you’re currently dealing with Parent PLUS Loans and a high interest rate, student loan refinancing can be a useful strategy to help you save money, reduce your monthly payment, or even to transfer them to your child.

We also have a team of personal loan advisors who are available to help you through the process. If you have any questions, you can contact us by phone at 202.524.1115 or by email at [email protected]

If you decide to refinance Parent PLUS Loans, use Purefy’s Compare Rates tool first to view offers from multiple lenders at once, with just one simple form, and find your best rate.

Once you have decided on your lender of choice for your Parent PLUS loan refinance, you will be taken to that lender’s application, which can generally be completed in less than 15 minutes.

You’ve gone through enough loan application processes to know what to expect, but one tip is to have your current loan statements handy when applying — the lender will want to know the details.

If you are pre-approved, you will need to submit documents to verify the information on your application including:

  • ID
  • Paystub
  • Loan statements
  • Other possible documentation, depending on the lender’s guidelines

If you have bad credit, you may be able to qualify for refinancing by adding a creditworthy cosigner to your application. A cosigner with strong credit and income can also help you get offered lower rates than you would on your own.

Private Student Loan Basics
Interest Rates & Comparing Private Student Loans
Private Student Loan Application Process
Applying for Private Student Loans With a Cosigner
Private Student Loans & Credit Checks
Parent PLUS Loans
Private Student Loan Basics
Interest Rates & Comparing Private Student Loans
Private Student Loan Application Process
Applying for Private Student Loans With a Cosigner
Private Student Loans & Credit Checks
Parent PLUS Loans

Private Student Loan Basics

Federal Student Loans: Federal student loans are issued by the U.S. Department of Education, and in most cases, offer lower rates (that are set by Congress) than rates offered by private lenders.

Federal loans also have great protections and benefits, such as forbearance, Income-Driven Repayment plans, and access to loan forgiveness programs. As such, they are the first choice when seeking the best loans for college.

You can apply for federal student loans using the Free Application for Federal Student Aid (FAFSA). After grants, scholarships, and other aid is awarded, the federal government will determine how much you can receive in federal loans. There are a few different types of federal student loans you may qualify for including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Take a look at our ultimate guide for federal student loans.

Private Student Loans: Private student loans, on the other hand, are offered by banks, credit unions, and other private institutions like online lenders. These lenders will run a credit check to determine your eligibility.

Private student loan interest rates vary and are determined primarily by your creditworthiness, as well as other factors like income or even the type of degree you are pursuing.

Because credit plays such a large role, most students will need a cosigner with an established credit history and a good credit score in order to qualify for a loan and obtain a manageable interest rate.

Although private loans don’t come with the same protections as federal student loans, many lenders offer attractive benefits and repayment options to borrowers. All in all, private loans can be another good solution for filling in necessary funding gaps so that you can afford college.

Check out our comprehensive article on when and how to apply for private student loans.

With private student loans, you may be able to choose between a fixed and variable rate, depending on the provider. Here’s how fixed rate and variable rate loans work so you can decide which would work better for you.

Fixed Rate: As the term suggests, a fixed interest rate will stay the same (or be “fixed”) for the entire length of the loan. This means that your monthly payment will also stay the same unless you’re on an alternative repayment plan such as a graduated repayment plan, which increases your payment over time.

Keep in mind that because the lender takes on more long-term risk with a fixed rate, it will usually be higher than the initial rate on a variable rate loan.

Variable Rate: Unlike fixed interest rates, variable rates fluctuate over the life of your loan. The interest rate will typically change on a monthly, quarterly, or annual basis. Variable rates are usually calculated based on the London Interbank Offered Rate, or LIBOR — a global market benchmark for many different types of loans and credit cards. If the LIBOR falls, so will the rate on your loan. But if the LIBOR increases, your interest rate — and monthly payment — will go up with it.

Since the lender is shifting some of the interest rate risk to you, variable interest rates typically start out lower than fixed interest rates. If the rate goes up, you’re the one who will end up paying for it with higher monthly payments.

These are types of federal student loans. You can learn all about them here.

The terms will vary by lender, but most loans do have a common set of features. The interest rate on a private student loan is determined by your credit risk and loan funds are sent directly to the school. Repayment typically begins shortly after leaving school, but interest almost always begins to accrue immediately after the loan is disbursed. Failure to meet the terms and conditions will damage the credit of both the borrower and cosigner.

Private student loans may be your best option if you’ve maxed out your federal student loan options and explored all other avenues for scholarships, grants, and other financial aid.

Unless you have a strong credit history, you should apply with a cosigner to increase your chances of getting approved and offered lower rates. It’s also important to remember that not all lenders provide loans to all schools. Purefy’s Compare Rates tool helps simplify this process by showing only the loan programs that are an option for the college of your choice.

Each situation is quite different, but in general, the process can take as little as 2 weeks if you are fully prepared with all the supporting documents. Still, we suggest you plan for around 30 days to be safe.

Interest Rates & Comparing Private Student Loans

The number one way to save money is to review and compare multiple private loan options before applying:

  • Fixed and variable interest rates — actual rate offers, not rate ranges
  • Terms for loan repayments
  • Eligibility requirements
  • Minimum income, credit, and cosigner requirements

You can learn about the different types of student loans — including both private and federal — with these handy comparison charts.

Check out our in-depth guide on student loan rates and how they’re calculated.

Purefy’s Compare Rates tool lets you compare private student loans to find your lowest interest rate and the right repayment terms for your unique financial situation. Get ready to save money while being more comfortable with your payment plan.

In most cases, finding the best interest rate with the term and repayment plan you want is the number one selection criteria when comparing private student loan options.

That said, you should also pay attention to the other benefits that the lenders provide. For instance, if you plan on pursuing a graduate or professional degree full time after graduating from a bachelor’s program, you will want to choose a lender that offers deferment while you continue your studies.

You’ll also want to think about the different repayment options that each lender offers. If you can afford to make interest payments while you are still in school, you can save a lot in interest costs.

Private Student Loan Application Process

Here’s your 11-step checklist for paying for college and the student loan process.

Yes — we encourage you to maximize grants, scholarships, and other free financial aid before taking student loans. Borrow responsibly and take out only what you need. Many people think they don’t qualify for Federal aid and fail to realize the opportunity by not applying for it. In addition, there are a few sources of aid such as unsubsidized Stafford loans that are available regardless of need. The FAFSA form is free and can help you understand how much additional financial support you’ll need from student loans after applying. Call the Federal Student Aid Information Center (FSAIC) at 1-800-4-FED-AID (1-800-433-3243) and ask for a free copy of The Student Guide: Financial Aid from the U.S. Department of Education. This toll-free hotline is run by the U.S. Department of Education and can answer questions about federal and state student aid programs and applications. You may also follow this link for additional information from FAFSA.

Once you have used our Compare Rates tool and decided on a lender, you will be taken to their application.

You can apply at any time, but keep in mind it can take up to 30-60 days for the funds to be disbursed to your school — so make sure you leave enough time to meet your tuition due dates.

The student loan application process itself will typically take less than 15 minutes to complete, and will consist mostly of personal information about yourself and your cosigner (if applicable). After you apply, you also will be asked for a few documents to certify the information listed on your application.

Use this checklist to help you prepare to complete the online application process:

  • Personal information (name, Social Security number, date of birth)
  • Address (mailing address and permanent address)
  • Phone number(s)
  • Email address
  • Employment information, if applicable (employer name, phone, annual income)
  • Personal reference (name, address, phone)
  • School information (name of school, grade level, expected graduation date)
  • Loan information (amount needed and when)
  • Income information (if applicable). On a cosigned loan, this is usually not required of the student but is required of the cosigner.

After you’ve completed the FAFSA for federal student loans, and secured your grants, scholarships, and other financial aid, your school’s financial aid office will provide you with a summary. You may find that there is a gap left in funding your education. Two common options to fill this gap are family college savings (if available), or private student loans.

Remember, if you do borrow, only borrow what you absolutely need. It’s easy to forget while you are busy with classwork and college social life, but every dollar you borrow for your education (and supporting yourself during your education) will be accumulating interest on a daily basis the entire time you are in school. So have fun while you’re in school — but don’t spend your private student loan money on it.

Applying for Private Student Loans With a Cosigner

A cosigner (frequently a parent or relative) is someone who agrees to sign onto your loan with you and has a strong enough credit score to help you qualify for a loan. Typically, the better your cosigner’s credit score, the lower your interest rate.

Your consigner would ultimately be responsible for making payments should you be unable to do so. Having a cosigner with excellent credit is a great way to ensure you get the best rate on your private loans for college.

One of the most difficult credit score factors for private student loan applicants is often the length of credit history — because most students (especially undergrad students) do not have much of a credit history. That is why most private student loan borrowers will need a cosigner.

Other than just qualifying you for a loan, a cosigner can also be very useful in getting you the lowest interest rate possible.

However, if you have established a little bit of a credit history and made your payments on time, you may find that you have a high enough credit score to qualify for a loan on your own.

With a decent credit score, many providers will offer loans to you without a cosigner, but you might not qualify for the lowest interest rates available. To get a better rate, make sure your credit score is in top-notch shape by taking all the necessary steps to boost your score as much as possible before applying.

If a cosigner isn’t possible and you’re struggling to improve your own credit score to qualify for a private student loan, take a look at other alternatives including:

Private Student Loans & Credit Checks

Yes — just like a mortgage or an auto loan, your credit will determine if you are approved and what interest rate you may qualify for. These loans are not guaranteed by the federal government and typically require the presence of a credit-worthy co-signer whose credit will also be checked.

Your credit score has a significant impact on the private student loan interest rates you can qualify for. But what is a credit score?

A credit score is a three-digit number that represents the overall strength of your credit history. It helps private student loan companies decide if you are creditworthy enough to lend money to.

The higher your credit score, the more likely you are to qualify for a loan and get the lowest interest rate available. The lower your credit score, the less likely you are to qualify for a loan. And if you do qualify, you may face a higher interest rate because of it. That means you’ll have higher monthly payments and end up paying more over the life of the loan compared to someone with a higher credit score.

What makes up your credit score is often the same set of criteria, including:

  • Payment history
  • Amounts owed (or credit utilization)
  • Length of credit history
  • Credit mix
  • New credit

Parent PLUS Loans

Parent PLUS Loans are student loans offered by the federal government to parents who want to borrow money to help pay for their child’s education. For a deep dive into Parent PLUS Loans, check out our ultimate guide.

Generally speaking, Parent PLUS Loans may be a better choice for those with lower credit scores or employees working in the public sector who could qualify for public service loan forgiveness. However, parents with strong credit and income may find much lower rates in the private loan market, especially after considering the fees associated with the federal Parent PLUS Loans. Read our full breakdown of Parent PLUS Loans vs. private student loans here.

Here’s essential advice for parents on Parent PLUS Loans and credit score.

Student Loan Essentials

Student loan refinancing is a smart strategy to pay off your debt with a lower rate. Ready to learn how to get the lowest student loan refinance rates?

Refinancing student loans isn’t for everyone. But for those who qualify for a student loan refinance, there’s no catch — and there’s actually a lot to like.

If you qualify for an interest rate reduction of just 1 percent, should you refinance your student loans? For most people, the answer is a profound yes.

If you’re wondering what the differences are between refinancing federal Parent PLUS Loans and private student loans, here’s everything you need to know.

Refinancing student loans isn’t for everyone. But for those who qualify for a student loan refinance, there’s no catch — and there’s actually a lot to like.

Learn how to apply for student loans with our step-by-step guide. It has everything you need to know about applying for different college loan options.

Still Have Questions?

Submit a question and our dedicated team of Student Loan Advisors will respond as quickly as possible.