Qualifying for a private student loan looks very different from qualifying for a federal student loan. Generally, private loans are more expensive and difficult to obtain than federal loans because federal student aid is administered by the U.S. Department of Education and private student aid is administered by private lenders such as banks and credit unions. 

Private lenders determine loan eligibility using criteria not set by law. But if you find yourself needing more financial help than the government is offering to give you, here’s what is required for private student loans.

General Requirements

Every lender is going to have slightly different general conditions for potential borrowers, but most lenders require the following.

You must be enrolled at least half-time.

The money you’re applying to borrow must be used solely for education expenses, so you need to prove that you are enrolled in a qualifying academic program. In some cases, you will never see the money you take out because it’ll be given directly to your college to cover boarding or tuition.

To qualify for a private student loan, you need to be a U.S. citizen or permanent resident alien. Certain lenders will only consider you if you are at least 18 years old and a high school graduate.

Credit Score

Outside of general qualifiers, the base eligibility determiner that private lenders use is your credit score. Yours will need to at least be in the high 600s for your application to be considered, but 700s will make you much more likely to get approved.

And in addition to having good credit, your credit history needs to be clean. You should not, for example, have defaulted loans, delinquencies, or a bankruptcy claim to your name.

Income

Another factor private lenders are going to look at is your net income. This is less about how much you make and more about how much you make in relation to your debt, or your debt-to-income ratio. If you are spending much more than you are taking in, that is not going to make you seem like a safe investment in the eyes of private lenders and you could get denied.

If You Don’t Meet These Criteria

If your credit score or income are not what they need to be (or you are younger than 18), you might need a cosigner to obtain a private student loan. 

Many young borrowers applying for private student loans haven’t yet had time to build up their credit and are not making substantial incomes. If this is true for you, you can still qualify if you use a cosigner. Cosigners share the responsibility for the loan with you by agreeing to pay the money back if you end up being unable to.

Some lenders will require a cosigner if you don’t meet eligibility conditions on your own in order to disburse the loan and others will give you the loan at an improved rate with a cosigner.

Before you borrow for college, exhaust other resources – scholarships, grants, employer tuition assistance and more. Federal loans are a better option than private loans because they come with many benefits, including an option for loan forgiveness, income-based repayment plans and generous deferment periods.