When Should You Apply for a Private Student Loan?

Sara Lindberg Updated on June 28, 2019

Worried about how to pay for college? Not sure if—or when—you should apply for private student loans? Here's the three-step plan you need to implement:

  1. Apply for financial aid 
  2. Get all the "free money" you can through grants and scholarships
  3. Look into private student loans to fund any remaining tuition gaps

Let's dig into details a little bit. 

1. Apply for financial aid

If you haven't already filled out your Federal Application for Student Aid (FAFSA), let's quickly review why it should be your first order of business. Once your FAFSA has been processed and approved, the school you plan on attending will send you an award letter with the amount of money they can offer. 

This award letter may include items such as grants, federal subsidized or unsubsidized student loans, and work-study opportunities.

Grants, such as the Pell Grant, are your best form of aid since you don’t have to pay the money back. 

Federal subsidized and unsubsidized loans are next on the list. These loans are offered by the U.S. Department of Education and often come with low interest rates. Plus, if you score a subsidized student loan, the government pays the interest on the loan while you’re in school. 

If you have time to work and you’re offered a work-study position, the income you receive from your on-campus job can help cover your college costs. 

2. Explore all sources of free money

Another source of free money comes from scholarships. Whether you’re still in high school, you’ve recently graduated, or you're already in college, scholarships are available to all types of students. 

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If you’re willing to put in the time, the return on your investment can be pretty impressive. For more information on scholarships, check out the Nitro scholarship search engine.

3. Apply for private student loans

Federal student aid and scholarships may sound like enough to cover the cost of college, but far too often, the amount you are eligible for doesn’t cover your total costs. 

And that’s where private student loans can help. 

Private student loans are offered by banks and independent lending institutions, which have their own requirements for approval and loan terms. 

If you’re wondering when you should apply for a private student loan, we’ve got answers. 

How long does it take to get approved for a private student loan?

Many private lenders will give you a conditional loan approval within minutes when you apply online. However, some may take up to several weeks if they require additional financial information from you.

Applying with a credit-worthy cosigner can help ensure your approval and help qualify you for lower interest rates. 

After you're approved, the lender will generally handle paying your funds directly to your school. Often, this happens right before the start of the semester. In any case, it's wise to apply as soon as possible so you can start school on time.

Do you have to pay back private student loans while you're still in school?

Being a college student means two things: you’re going to be studying a lot and you’ll probably be broke. The good news is, there are many private student loans that offer a grace period in your repayment, which typically lasts six months after you finish school.

With that being said, some lenders do require payments immediately after the funds have been disbursed. Make sure you read over the terms and ask questions before signing on with a lender. 

Keep in mind that if you're able to make payments while you're in school, you should. Even if they're only partial payments or just enough to cover the interest, you'll save yourself thousands of dollars in accrued interest after you graduate. Your future self will thank you. 

What are the best private loans?

If you’ve decided to apply for a private student loan, the next thing to do is find a lender that fits your needs. There are tons of loans out there. Some good, and some, not so good. 

But the key to finding the best private student loan is research. 

Some things to consider include:

  • Is the lender credible? 
  • Will they release a cosigner after a certain number of on-time payments?
  • Do they have a variety of repayment plans? 
  • Are the fixed and variable interest rates competitive?
  • Are there any fees to apply?
  • How much can you borrow?
  • When do you have to start paying back your loan?
  • What do the customer reviews say about the lender?

If you’re unsure about where to start, check out our picks for The Best Private Student Loans of 2019.

Published in: How to Pay for College

About the Author
Sara Lindberg

Sara Lindberg, B.S., M.Ed., is a freelance writer specializing in business, finance, health, and wellness. She holds a Bachelor's of Science degree in Exercise Science and a Master's Degree in Counseling. When she’s not writing, Sara can be found at the gym lifting weights, running the back roads to train for her next half-marathon, and spending time with her husband and two children. Read more by Sara Lindberg

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