Private student loans are offered through a variety of banks and other lenders. Students wanting private loans must apply separately from their financial aid application through an individual lender. The best rates on these loans are generally offered to borrowers with good credit and/or who have a cosigner with good credit.
When shopping for a private loan, look for a loan you can live with in both the short term and the long term. You may be repaying it for multiple years after graduation. Many loan providers will lend up to the amount of the student’s cost of attendance minus any financial aid received. Often there is a yearly and/or cumulative cap on the amount the student may borrow; sometimes this cap is set by the student’s school. Note that it takes two to four weeks to process private loans through our office.
Most lenders require half-time student enrollment. Our staff checks enrollment status when a loan is disbursed, not when the loan is certified. Many private education lenders also require student borrowers to have a loan cosigner.
In addition to increasing your chances of getting your loan approved, having a cosigner sometimes helps you get a lower interest rate and may reduce the approval time. Your cosigner need not be a relative, but should be someone with a steady income and a good credit history. Some lenders will release the cosigner from the loan if the student borrower has met certain requirements, such as making payments on time.
Under provisions of the Truth in Lending Act, private education loan lenders (including long-term U-loans and Health Professions Loans) must:
- Provide three separate loan disclosures to borrowers: one at the point of application, one when the loan is approved, and one before the loan is disbursed.
- Have a waiting period of three to seven business days between the time the borrower receives the final loan disclosure and the time the loan is disbursed.
- Receive a signed self-certification form from the student before disbursing the loan.
Your lender should provide you with these requirements. If you have questions, contact our office.
- Your lender should provide you with a copy of the required Private Education Loan Applicant Self-Certification Form. Complete and return it to your lender as soon as possible. If you do not receive the form from your lender, you may download it from our Forms page. Contact your lender for your application ID or other identifier that will help to match the form with your application. This form is required by provisions in the federal Truth in Lending Act.
- To complete the form, you will need to know your Cost of Attendance and your total financial aid offer. If you receive financial aid, this information can be found on your Financial Aid Notice in Wolverine Access. (For more about viewing your Financial Notice, see the Award Notification page.)
Cost of Attendance is at the top of your Financial Aid Notice and your total financial aid offer in the sections at the bottom (To get the total figure, you must tally the aid awarded in each section including Gift Aid, Work-Study, Loans, and Other).
If you are not receiving financial aid, find your cost of attendance using figures on the Cost of Attendance page.
If you are considering borrowing through a private lender, we encourage you to:
- Exhaust all other possible sources of financial aid first, including federal loans and Work-Study.
- Reduce your expenses and borrow only what you need.
- Ask questions and compare rates and terms offered by different lenders.
If you pursue a private loan, apply directly through the lender you select. Choose any lender and the university will certify your application.
Beware of suspicious or unsolicited loan offers
U-M students should avoid lenders that don't require U-M to certify their loan application and should be suspicious of unsolicited loan offers. The Michigan Student Financial Aid Association cautions students that "loan debt can accumulate quickly and result in a lifetime burden of high payments and credit denials for automobile purchases, credit cards, and home mortgages. Private loans also can reduce eligibility for more desirable federal, state, and college aid programs. To avoid these problems, read and understand the terms and conditions of all loans."
To browse a selection of approved lenders, please visit the University of Michigan's FASTChoice Private Education Loans site. If you are an international student, visit the University of Michigan's FASTChoice International Private Education Loans site.
The university adheres to a Code of Conduct for Student Loans that prohibits inducements or incentives by private lenders.
Typical loan payments are shown in the example below:
|Interest Rate||Undergraduate Students|
|Interest Rate||Graduate Students|
Notes: Undergraduate students: This APR example is based on borrowing a $6,000 undergraduate loan with a 38-month deferral period followed by a 240-month repayment period. The Prime Rate is assumed to be constant at 8.25%. Graduate students: This APR example is based on borrowing an $8,000 graduate loan with a 27-month deferral period followed by a 240-month repayment period. The Prime Rate is assumed to be constant at 8.25%. Interest rates indexed to the Prime Rate as published in The Wall Street Journal will vary. As of Feb. 16, 2015, the published Prime Rate was 3.25%. The APR will increase if the Prime Rate increases and would result in a higher monthly payments, an increase in the number of scheduled payments, or both.