Private Education Loans

Students may consider private education loans as additional funding sources after exhausting the opportunities available to them from federal aid programs.

Private education loans are education loans funded by a third-party lender (banks, credit unions, national lenders, etc.). Private education loans require a separate application, credit check, and often a creditworthy cosigner. Private education loans cannot be consolidated with federal student loans.

Private education loans cannot exceed the student’s estimated cost of attendance for the loan period minus all other financial aid (grants, scholarships, work-study funding, federal loans, etc.). The student’s estimated cost of attendance can be found in AccessPlus under the “Student” tab > Financial Aid > Financial Aid Offer or on our Cost of Attendance webpage.

Private education loans are different from Federal Direct loans in several important ways:

  • Annual and total loan limits are higher
  • Interest rates quoted to families are based on credit approval, which is not guaranteed
  • Deferment, cancellation, and repayment terms are offered at the lender’s discretion

The terms and conditions for private education loans differ among lenders, and students are advised to compare several loan programs before choosing a lender. Interest rates, fees, and other provisions are subject to changes the lender makes. Students are encouraged to review detailed loan program rates, fees, borrower benefits, and other details on the selected lender’s website.

The Office of Student Financial Aid provides student and parent borrowers with a preferred lender list as a starting point for obtaining a private education loan. There are many private education loan lenders to choose from. Borrowers are free to choose any private education loan product or lender, and the Office of Student Financial Aid will certify a private education loan application from any lender, if loan program criteria are met. 

Visit the Office of Student Financial Success for information about how to compare loan options.

Those looking for other private education loan lenders may want to check with their home state’s student assistance agency or their local lending institutions.

The private education loan process can take anywhere from 4 to 6 weeks from the day the borrower is approved for the loan until the loan is disbursed to the student’s U-Bill. It is strongly recommended that borrowers begin their private education loan research a few months before their U-Bill is due for the intended term.

  1. Borrower researches several private education loan products and lenders and chooses the best loan option for their situation
  2. Borrower completes the lender’s application process
    1. Most undergraduate students will require a creditworthy cosigner for loan approval
  3. The lender completes all underwriting and makes the credit lending decision
  4. If approved, the loan application is sent to ISU for certification within 3-5 business days
  5. ISU certifies the student’s private education loan application and returns the application to the lender within 3-5 days of receipt of loan application
    1. If issues or questions with the certification arise, ISU will email the student’s ISU email address to resolve any issues before certification
  6. Allow up to two weeks for the lender to send the funds for the loan to ISU and for the funds to be applied to the student’s U-Bill*
    1. Lending regulations require a waiting period called the “right to cancel,” so lenders may not disburse the funds to ISU for up to 10 business days after approving the loan application.

*Private education loan funds will not disburse until the Tuesday before a term starts at the earliest

*Funds may be on hold until the student completes Private Loan Counseling if borrowing for the first time at ISU

The Office of Student Financial Success, along with the Office of Student Financial Aid, requires all undergraduate private education loan borrowers to complete Private Loan Counseling (PLC) when borrowing their first private loan at ISU. Private education loans will not apply in full to the student’s U-Bill until they have completed Private Loan Counseling.

For one term loans, the entire loan will be placed on hold.

For fall/spring loans, the second disbursement (the Spring semester disbursement) will be placed on hold until after the student has completed their PLC requirement.

Learn more about the Private Loan Counseling requirement.

The requirement cannot be completed prior to ISU receiving the student’s loan application.

The maximum a student can borrow is the cost of attendance (COA) minus all other financial aid received, including Federal Direct Loans and Federal Work-Study funds  The student’s estimated cost of attendance can be found in AccessPlus under the “Student” tab > Financial Aid > Financial Aid Offer or on our Cost of Attendance webpage. To calculate your maximum eligibility, subtract your other aid options from your total COA. For example, if your total COA is $20,000 and you are receiving $10,000 in other forms of aid; grants, scholarships, federal student loans and work-study, you can request up to $10,000 in a private education loan.

Not all lenders will allow you to borrow for a past-due or prior term balance. Before you begin your application process, make sure the lender you have selected approves loan applications to cover a past-due or prior term balance. If you are obtaining a loan for a past-due balance, you will need to select the loan period to the academic term(s) related to the past-due balance.

The past due or prior term policies for ISU’s preferred lenders are:

Citizens Student Loans

Up to 365 days past the last date of enrollment as long as student is currently enrolled or has graduated

Discover Student Loans

Lender does not cover past-due balances

ISL Education Lending

Up to 180 days past the last date of enrollment as long as student successfully completed the prior term and did not withdraw

Sallie Mae

Up to 365 days past the last date of enrollment

When you apply for a private education loan, you will be required to enter a loan period, with start and end dates. Your loan period’s start and end dates are the months associated with the academic term(s) for which you are borrowing. Usually you will request a loan for the entire academic year or for the specific term within the academic year. Private education loans for the summer term must   always be applied for separately.

Loan periods cannot overlap academic years (such as a loan from Spring into Fall). If you have questions about term dates, refer to the Academic Calendar.

Most lenders require that you are enrolled at least half-time in a degree-seeking program in order to obtain a loan. There are some lenders who will provide loans for less than half-time enrollment or for non-degree seeking students. Make sure to ask whether your lender has these requirements.

When you borrow money for your education, you sign a promissory note legally obligating you to repay the loan according to the note’s stated terms and conditions. When the time comes for repayment (usually after your education is complete), meeting your student loan obligation helps you earn a good credit rating, which follows you throughout life.            

Lenders may offer different repayment options which may influence the loan’s interest rate. You may not be able to change repayment options after you apply for the loan. Make sure to understand your repayment choice when completing your application.

A variety of interest rates and fees are available from lending institutions. Instead of a fixed rate, that will not change over time such as 8 or 10 percent, private education loan programs may have interest rates that are variable, meaning the loan’s interest rates can change from month-to-month or quarter-to-quarter based on a fixed index plus a percentage determined by the lender. As these rates fluctuate with the market, the interest rates on the loans go up or down.

When reviewing interest rates, you should consider what level of income you can realistically expect in your proposed career after graduation.

There are different kinds of fees that a private education loan company may charge. Origination fees may be charged for the creation of the loan This fee may be assessed on the original principal. When looking at how much a loan program charges in fees, make sure that you add up both the fees charged initially at disbursement and any fees charged at the time you go into repayment. Always be sure to ask your chosen lender about such fees.

Private education loans are non-federal education loans that are available from banking institutions and other private entities.  The borrower of these loans can be a creditworthy student, student with creditworthy co-signer. Students typically use private education loans to bridge any gap between the total cost of attendance and traditional financial aid resources.

Before applying for a private loan, we recommend that you complete the Free Application for Federal Student Aid, if eligible, to ensure you are being considered for all federal, state, and institutional aid first. Private education loans play an important role in financing the costs of higher education. If you borrow responsibly and understand your obligation to repay the loan, you shouldn’t be afraid to use a private education loan to pay for your education. You should also consider what income you can realistically expect in your proposed career after graduation.

Federal regulations on private educations loans prohibit private education loans from exceeding a student’s cost of attendance, as determined by the school. The maximum a student can borrow is your cost of attendance (COA) minus all other financial aid received, including Federal Direct Loans and Federal Work-Study funds. Students who may need additional funds can submit a Cost of Attendance adjustment request for review. Cost of Attendance adjustments should be submitted prior to applying for a private education loan to ensure your loan is processed for the amount you need.

  • What is the interest rate?

  • Is it fixed or variable?

  • Is there a limit on how high the interest rate can rise for loans with variable interest rates?

  • Are there fees and if so, what are they? Do you have prepayment penalty fees?

  • When will my repayment begin?

  • What are my repayment options?

  • What will be the total costs of the loan (interest, principal, fees)?

  • Are there any discounts for automatic payments and/or on-time payments? Are there deferment/forbearance options during repayment?

  • Are there any cosigner release options?

Most private education loan lenders will require a credit-worthy cosigner for student borrowers, due to limited credit histories of students. Few lenders have no-cosigner loan options. Students are encouraged to check out our Preferred Lender List or contact the Office of Student Financial Success for further assistance.

  • Undergraduate private education loans for students can range from 1.03% to 11.23% for variable rates and 3.22% to 12.6% for fixed rates.
  • Graduate private education loans for students can range from 1.89% to 11.87% for variable rates and 3.99% to 12.59% for fixed rates.
  • Parent borrower private education loans can range from 1.97% to 12.99% for variable rates and 4.3% to 13.99% for fixed rates.