Private Educational Loan Funding Sources
Private Educational Loans are offered by private lenders to assist student borrowers with educational and living expenses. Private Educational Loans are not guaranteed by the Federal government. The borrower (either student or parent) may borrow such a loan through various participants such as banks, credit unions, or savings and loan associations. Private Educational loans will be included in your financial aid award and cannot exceed your Cost of Attendance.
We strongly encourage all students to first submit the Free Application for Federal Student Aid (FAFSA) each year. If no other financial resources are available to bridge the financial gap, you should consider private educational loan options only after exhausting all federal, state, and institutional financial resources. Please read this helpful infographic, Comparing Federal and Private Student Loans, for more information.
There are many different types of Private Educational Loans for different types of borrowers. Private Educational Loans are not need-based; rather, they are based on creditworthiness. Most students will need a creditworthy co-signer such as a parent or other relative in order to obtain a private loan. Terms and conditions applicable to these loans vary greatly. Factors such as interest rate, APR, length or repayment, loan minimum and maximum, and fees should be carefully considered when researching and choosing a private loan.
Private educational loans frequently have higher interest rates over the life of the loan as well as less favorable repayment terms than federal educational loans, making them more costly. It is important to keep written records of all forms, applications, and correspondence with your lender, especially regarding discounts and special incentives, for the entire life of your loan(s).You should research all other funding options available before determining if a Private Educational Loan is the right funding source for you.
Basic Questions to Ask when Choosing a Private Loan
- 1. What is the loan’s interest rate?
- The interest rate and fees are based on your credit score and the credit score of your cosigner, if one.
- 2. Is the interest rate fixed or variable?
- A fixed interest rate does not change. Variable interest rates change over the life of the loan. Normally, as the rate varies, the monthly payment amount also changes.
- 3. When can the interest rate change?
- Variable interest rates are tied to a common market index. As the index goes up and down, your interest rate (and monthly payment) goes up and down, too. The change can occur monthly, quarterly or annually. Example: if the interest rate on your chosen loan is indexed to the Prime Rate, it changes monthly.
- 4. Is there a cap on the interest rate?
- A cap on the interest rate prevents the variable interest rate from going above a certain level. Most private educational loans do not have interest rate caps.
- 5. What fees are associated with this loan?
- Fees typically fall into two categories. Origination fees are fees charged by lenders to process your loan and are paid at the beginning of the loan period. Fees are either subtracted from the amount you are borrowing or added to your principal. Late charges are fees paid when a payment is not made within a period after which it is due. The fees charged by some lenders can significantly increase the cost of the loan. A loan with a relatively low interest rate but high fees can ultimately cost more than a loan with a somewhat higher interest rate and no fees. A good rule of thumb is that 3% to 4% in fees is about the same as a 1% higher interest rate.
- 6. What is the annual percentage rate (APR)?
- The APR is the total cost of a loan including the interest rate and any fees.
- 7. Are any discounts or Co-signer Release benefits offered?
- Many lenders offer benefits and discounts when repayment begins, or during the repayment term. We recommend that you research the lenders' websites, and discuss any discounts offered by your chosen lender, as there may be differences between each lender. Co-signer Release is a benefit that allows a student borrower the choice to remove a co-signer from the loan after a time period that the lender sets. After the co-signer is released the student borrower is the only person responsible for the loan. Learn more about this benefit and tips for negotiating the Co-signer Release Benefit with lenders here.
- 8. Do I pay interest and principal while I’m in school?
- Some loans do not require you to pay principal or interest while you are a full-time student or during grace periods. However, some lenders will require you to begin making minimum interest payments after the first disbursement of your loan. Remember, the interest that accumulates on your loan is added to the amount you must repay. The sooner you begin to make payments on your loan, the lower your overall total payments will be. Ask if your lender if your loan requires minimum payments while you are in school or during your grace period.
- 9. When will I be required to start making payments?
- Most lenders offer a six month grace period once you graduate, leave school, or your enrollment status drops below half-time (whichever comes first) before you start repaying your loan.
- 10. Do I pay a penalty if I repay the loan early?
- Some lenders charge a fee for early repayment; be aware if your loan will charge you a penalty.
- 11. What is the total amount I will repay?
- The total amount to be repaid is the sum of the principal amount borrowed, interest accrued and any fees assessed over the life of the loan.
- 12. How much will my monthly payment be?
- Your monthly payment amount will depend on the total amount to be repaid and what repayment option you select.
- 13. How long do I have to repay the loan?
- Depending on the total amount borrowed, repayment terms for private educational loans typically range from 10 - 25 years. Usually, the higher the loan amount, the longer the term.
- 14. What if I have trouble repaying the loan?
- Some lenders may permit you to defer payments if you are having financial difficulties. Ask your lender if this option is available.
Choosing a Private Lender
Students may choose any lender who offers Private Educational loans. It is important that you carefully review your expenses before deciding if you need to utilize a private loan and the amount needed. Although the basic terms of the loan may be the same, lenders offer a variety of services to students and their families. Please note that private loan program terms are subject to change. We encourage students and their families to review and compare loan benefits between lenders and verify the current terms of any loan you are considering with the lender directly before you commit to borrow.
Private Loan Disclosures
Federal regulations require all private education loan lenders to send 3 disclosure notices to borrowers and co-signers to ensure borrowers are properly informed regarding the terms and costs of the loan. This process will lengthen the time it takes from applying for a loan until the funds are delivered to Columbia College Chicago. The Truth in Lending Act (TILA) requires students to fill out a Self-Certification of Private Loans form. Most lenders will provide this to borrowers. Your Cost of Attendance and Total Aid will be shown on your financial aid award on Oasis, under the Student Financial Services tab, Financial Aid Awards. Click the link below to obtain a form if you do not have the form provided by your lender.
2015-16 Loan Term Dates
Fall/Spring (recommended): September 8, 2015 to May 14, 2016
Fall only: September 8, 2015 to December 19, 2015
Spring only: January 25, 2016 to May 14, 2016
Summer only: May 23, 2015 to August 13, 2016
2016-17 Loan Term Dates
Fall/Spring (recommended): September 6, 2016 to May 13, 2017
Fall only: September 6, 2016 to December 17, 2016
Spring only: January 23, 2017 to May 13, 2017
Summer only: May 30, 2016 to August 19, 2017
- Processing time will take from 20 to 30 days from application to disbursement due to Truth in Lending regulations.
- Fall/Spring loans are disbursed half in each semester.
- Plan your annual financial needs and complete the loan process by August 1.