Private Education Loans
Private loans are offered through private agencies or lending institutions rather than the federal government. They are sometimes referred to as alternative loans. The student is the borrower and an application must be made independently through a lender.
Almost without exception, dependent, undergraduate students do not have sufficient credit to qualify for a private loan without a credit-worthy cosigner. Adding a cosigner will increase the chances of approval and may reduce the interest rate of the loan.
- If a parent has been denied for the Federal Direct PLUS Loan due to credit issues, that parent will not qualify as the cosigner for a private loan.
- Many private loan products now offer cosigner release options; upon consecutive, timely repayment, a student can later apply to have the cosigner removed or released from the loan application.
- Most private lenders allow students to defer payment while enrolled in school at least half-time, while others prefer if their borrowers pay toward the interest at minimum on a monthly basis. Students should research different loan products carefully before choosing a lender.
Private loans are not federally guaranteed and do not require that you file the Free Application for Federal Student Aid (FAFSA). The yearly amount borrowed cannot exceed the annual cost of attendance minus other financial aid and resources.
Who Can Borrow?
Students who are U.S. citizens, permanent U.S. residents, international students (with an eligible U.S. citizen or permanent-resident co-signer), and, in some cases, non-matriculated students may be eligible.
Before You Apply
- You may qualify for loans or other assistance under the Federal Title IV programs and the conditions under the Federal Title IV loan programs may be more favorable in long-term borrowing than those of private education loans.
- You should inquire about your Federal Direct Stafford Loan eligibility before considering these loans.
- Consider other payment options to keep your costs down and reduce your student loan debt.
- Remember to keep track of your loan debt and the amount you will have to repay when you graduate. The National Student Loan Data System (NSLDS) can help you organize your Federal loans (Stafford, PLUS, Perkins), but will not keep track of any borrowed private loans.
- Determine the total amount of education debt you and your family are willing to accumulate during your entire college enrollment and only borrow what you need. Repayment calculators can help you project estimated payment amounts before you make a decision.
- Review Choosing a Lender above.
Choosing a Private Loan Lender
If you choose to apply for a private loan, you will still have to select a lender. Often times, borrowers look to their college to provide information or recommendations on the many lenders offering educational loan products. Manhattan College does not benefit from lender choice in any way. All college employees subscribe to a Student Loan Code of Conduct. You are also encouraged to read the Federal Trade Commission's recommendations on how to avoid deceptive loan offers.
Students and families should research the varying rates and benefits offered by each lender carefully before selecting a private loan. We compiled a Private Loan Lender List to assist you in learning more about private lenders and their loan application guidelines, interest rates, maximum borrowing limits, and repayment plans. However, you are not limited to our suggestions and may choose any lender you wish; Financial Aid Administration will work with any lender.
Our office collects lender information through proactive requests for information (RFI). Lenders listed are selected on the basis of the following:
- Customer Service
- Processing experience
- Competitive loan terms
- Application fees
- Ease of application process
Contact a Financial Aid Administration representative for help in understanding your rights and responsibilities in regard to financial aid and borrowing educational loans.
What are the Interest Rates?
Interest rates for private loans may be VARIABLE, which means rates will fluctuate for the life of the loan, or FIXED. Interest will begin to accrue on the loan from the date of disbursement to Manhattan College.
Variable rates: Most private lenders use Prime Rate or 1-month or 3-month LIBOR rate (London Interbank Offered Rate) as a base interest rate. The private lender then calculates an individualized loan interest rate range that includes an add-on percentage based on the creditworthiness of the student borrower and cosigner.
- For example, if a private lender states that their loan interest rates range from Prime (3.25%) +2.0 to 9.0, a borrower applying for that loan might see their interest rate fluctuating between 5.25% to 12.25% over the life of the loan. The lender will determine your range following loan approval, but knowing the range before applying can help you make a decision.
Fixed rates: The interest rate you are given will not change over the life of the loan.
Questions to Ask Lenders before Applying
- How many years has the lender been working with student loans?
- Which financial institution funds/backs the lender’s student loan program?
- Does the lender ever sell their loans to a secondary market?
- Does the lender use their own servicing center or a third party to service their loans?
- What customer service hours are available?
- What online methods for application and repayment are available?
- Are there any repayment benefits (ways that some lenders reduce or eliminate fees or offer rewards/incentives for responsible repayment)?
- Which academic levels (graduate vs. undergraduate) are eligible to apply?
- Does the student need to be enrolled in a certain number of course credit hours to qualify?
- Is satisfactory academic progress required to borrow the loan?
- What is the amount of any origination or repayment fee percentage?
- What is the annual borrowing limit permitted (aggregate)?
- Is the interest determined on Prime Rate or LIBOR rate?
- Is cosigner release available? After how many consecutive, timely payments?
- Is loan cancellation available to the cosigner in the event of a student's untimely death or permanent disability?
- Is there a prepayment penalty?
- Are minimum payments expected while the student is enrolled?
- Will making scheduled minimum payments vs. deferring while in-school impact the loan's interest rate?
- What is the maximum repayment term?
- What is the loan's grace period?
- What are the repayment plan options?
- Other questions, as suggested by NYS HESC
All loan policies, procedures, and the lender list are reviewed regularly by administrators within the Financial Aid Administration office at Manhattan College.
Deciding Between Direct PLUS and Private Loans
Student loan choices can be dizzying, but knowing the similarities and differences can help narrow down the options. The Financial Aid Administration office cannot make this decision for you. We recommend that you make a list of the features you are seeking in a loan, and compare the pros and cons of each (PLUS vs. different private loans), according to your needs and preferences.
- Both loans are borrowed for educational purposes.
- Loan funds post directly to the student's account at Manhattan College.
- Each requires the borrower to be credit-approved.
- Both loans tend to have deferment and forbearance options in cases of temporary financial hardship.
- No prepayment penalties for submitting advance payment on interest or principal for either loan type.
- The maximum amount borrowed can cover up to the cost of attendance less financial aid awarded (all scholarships, grants, work study, etc).
- Neither loan is dischargeable by declaration of bankruptcy.
- PLUS loans are borrowed by parents (undergraduates) and graduate students. Private loans are borrowed by students - with a credit-worthy cosigner.
- The PLUS loan credit approval process is very quick (usually determined immediately following application completion); schools are notified by the government in 1-2 business days. Private loan applications typically take 1-2 weeks in comparison.
- PLUS loans are federal and standardized - you cannot choose the federal loan servicer assigned to you. Private loans are offered by private entities, such as lending institutions (banks) and credit unions. You apply directly with the private lender entity of your choice.
- For PLUS loans, the fixed interest rate, origination fee, repayment options, loan cancellation benefits, and loan features are standardized nationwide annually. All of the above and more will vary by lender for private loans.
- Private loans tend to offer varying grace periods following a student's separation or graduation from the College. PLUS loans become due when a student's enrollment falls below 6 credits per term; a grace period is not available.
- PLUS loans offer three options if a parent is denied: 1) accept a limited, additional unsubsidized Stafford loan, 2) add an endorser, 3) initiate a credit appeal. Private loans may take a "second look" but do not have as extensive of a review system in place.
- Private loans tend to offer a wider array of repayment benefits (ways to get the interest rate reduced), cosigner release, and other features not often found in federal loans. Actual loan features will vary by lender.
- PLUS loans have a loan cancellation benefit in the unfortunate case of a parent borrower's untimely passing or permanent disability. Loan cancellation benefits in private loans often exist, but will vary by lender. Read the fine print carefully.
Private Loans: Application Process
Manhattan College does not benefit from lender choice in any way. All college employees subscribe to a Student Loan Code of Conduct. You are also encouraged to read the Federal Trade Commission's recommendations on how to avoid deceptive loan offers.
- Make your loan applications for the FULL ACADEMIC YEAR: 2014-2015: August 2014 – May 2015. The first half of the loan will disburse to Manhattan College for the Fall term. The second half of the loan will disburse to Manhattan College for the Spring term. Interest will only accrue on the portion of the loan that has disbursed to the school.
- Consider ways to keep your costs down to reduce overall loan indebtedness. Try to limit your borrowing to the amount needed to cover the cost of tuition.
- If you borrow for the Cost of Attendance (includes the “extras” or indirect, expense allowances that we do not bill you for directly), please be mindful of the policies on refunding. Student Accounts & Bursar Services cannot start the refund process until AFTER the add/drop period is over (week 1 of classes). This means students cannot get an immediate refund to pay for books. They will need their books during the first week of classes, so please plan for this in advance.
- Keep track of your loan debt and amounts you will have to repay when you graduate. The National Student Loan Data System (NSLDS) can help you organize your federal loans (Stafford, PLUS, Perkins), but will not keep track of any borrowed private loans. You are encouraged to use educational loan repayment calculators to project an estimated monthly repayment amount per month.
- Keep all of the documents you receive about your student loan including MPNs, agreements, and disclosures together in a safe place. Staying organized and informed is the key to successful repayment.
Multiple Loan Approvals
You may ‘cross-shop’ between private loan lenders within the same 30-day window. Applying for a private loan will not impact parent PLUS loan eligibility during this time. Applying for multiple, credit-based loans or rate shopping with different lenders within a 30-day window will be viewed as one inquiry on your credit history report(s). Each loan type has its own application process, specific terms, eligibility requirements, and maximum borrowing limits.
If rate shopping, compare a private loan's interest rate to the PLUS loan, but consider other factors such as repayment terms and fees as some private loans also offer fixed rate options.
Once you’ve determined which loan type is the best option for you, you must cancel all other outstanding applications. Manhattan College will not be able to take action if multiple loan
applications are received.
Research lenders and the private loan products they offer. Use our Recommended Lender List to begin this process. You are not limited to our suggestions and may choose any lender you wish; Financial Aid Administration will work with any lender.
- The borrower and cosigner choose a lender and complete an application. Applying for the whole academic year is recommended; the loan will then disburse in two portions, half less any origination fees toward each semester (Fall/Spring) unless otherwise requested. The lender will make a credit decision to approve or deny the loan. If approved, the student and co-signer must then follow any steps and submit any documentation requested by the lender to formally accept the loan.
- A Self-Certification Form is usually completed electronically with your private lender of choice. You may download a separate copy online if needed. To complete Section II of this form: A) Please refer to your hard copy award letter (new students) or the appropriate Cost Worksheet to find your Cost of Attendance. B) Your total estimated amount of offered financial aid for this academic year can be found on your award letter, whether hard copy or on Self-Service. C) Calculate A minus B.
- Once all application steps are complete, the lender will send Manhattan College an electronic certification request within a few business days. Financial Aid Administration reviews all certification requests. Loans can only be certified up to a student's Cost of Attendance less other financial aid and loans. The private loan amount is determined by Financial Aid Administration and the loan is certified electronically by Manhattan College. Due to the high volume of loan certification requests received, individual certification requests may take up to two weeks to be reviewed and certified.
- The lender receives the certification and establishes a tentative date for the private loan funds to disburse to the student's account at Manhattan College. Please note: Most lenders also attach a rescindence period (up to 10 business days) to this estimated date, which provides students with a set period of time to cancel their request, even if a private loan is certified. Manhattan College will not receive the disbursed private loan funds until the rescindence period expires. Please plan accordingly and apply for your loan well in advance of any tuition payment deadlines.
- A financial aid administrator will outreach to the student's Manhattan College e-mail account in case any follow-up is needed. Students may also follow-up with their lender to check on the loan status. Disbursed loan funds are noted to the student's Self-Service account under Student > Account Summary.