Private Loans
Private education loans are designed to provide you with additional assistance for educational costs. Private lenders are available to offer these types of services. When considering private student loans, it is extremely important from a personal finance standpoint that you have first exhausted all other financing options such as grants, scholarships, and all types of federal student loan options.
The following table shows that a federal student loan is a better option than a private student loan.
Federal Student Loans vs. Private Loans
|
Federal Student Loans
(loans from the government or guaranteed by the government) |
Private Student Loans
(nonfederal loans from a bank, credit union, or other financial institution) |
|---|---|
| You will not have to start repaying your federal student loans until you graduate, leave school, or change your enrollment statusAn indication of whether a student is a full-time or part-time student. Generally, students must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid. to less than half-timeDuring each term, 6-8 credit hours is considered half-time for undergraduate students. For graduate students, 5 hours is considered half-time.. | Many private student loans require payments while you are still in school. |
| The interest rate on Stafford LoansStafford Loans are federal loans that come in two forms, subsidized and unsubsidized. Subsidized loans are based on need; unsubsidized loans are not. The interest on the subsidized Stafford Loan is paid by the federal government while the student is in school and during the 6 month grace period. The Subsidized Stafford Loan was formerly known as the Guaranteed Student Loan (GSL). The Unsubsidized Stafford Loan may be used to pay the EFC. Undergraduates may borrow up to $23,000 ($2,625 during the freshman year, $3,500 during the sophomore year, and $5,500 during the third, fourth, and fifth years) and graduate students up to $65,500 including any undergraduate Stafford loans ($8,500 per year). These limits are for subsidized and unsubsidized loans combined. The difference between the subsidized loan amount and the limit may be borrowed by the student as an unsubsidized loan. Higher unsubsidized Stafford loan limits are available to independent students, dependent students whose parents were unable to obtain a PLUS Loan, and graduate/professional students. Undergraduates may borrow up to $46,000 ($6,625 during the freshman year, $7,500 during the sophomore year, and $10,500 during each subsequent year) and graduate students up to $138,500 including any undergraduate Stafford loans ($18,500 per year). These limits are for subsidized and unsubsidized loans combined. The amounts of any subsidized loans are still subject to the lower limits. is fixed, currently at 4.5 percent for subsidized loans for undergraduate students and 6.8 percent for unsubsidized loans for undergraduate and graduate students, and almost always lower than on a private loan—and much lower than on a credit card! | Private student loans can have variable interestIn a variable interest loan, the interest rate changes periodically. For example, the interest rate might be pegged to the cost of US Treasury Bills (for example, T-Bill rate plus 3.1%) and be updated monthly, quarterly, semi-annually, or annually. rates greater than 18 percent. |
| Students with greater financial needThe difference between the COA and the EFC is the student's financial need - the gap between the cost of attending the school and the student's resources. The financial aid package is based on the amount of financial need. The process of determining a student's need is known as need analysis. might qualify for a subsidized loan. The government pays the interest on subsidized loans while a borrowerThe person who receives a loan. is enrolled in school at least half-time and during certain other periods. | Private student loans are not subsidized. |
| You don't need to pass a credit check to get a federal student loan (except for PLUS LoansParent Loans for Undergraduate Students (PLUS) are federal loans available to parents of dependent undergraduate students to help finance the child's education. Parents may borrow up to the full cost of their children's education less the amount of any other financial aid received. PLUS Loans may be used to pay the EFC. There is a minimal credit check required for the PLUS loan, so a good credit history is required. Students are advised to check with their local bank to see if they participate in the PLUS loan program. If the application for a PLUS loan is turned down, the student may be eligible to borrow additional money under the Unsubsidized Stafford Loan program.). Federal student loans help you establish a good credit record. | Private student loans may require an established credit record. The cost of a private student loan depends on your credit score, which you may not yet have as a student. |
| You don't need a co-signer to get a federal | You may need a co-signer to get |
| Free help is available at 1-800-4-FED-AID. | You need to find out if there is free help. |
| Some interest is tax deductible. | Interest may not be tax deductible. |
| Loans can be consolidated into the Direct or FFEL Consolidation programs which have favorable repayment plans and other benefits. See www.loanconsolidation.ed.gov for more information for Direct Consolidation Loans. For FFEL Consolidation Loans contact your lender. | Private student loans can't be consolidated into a federal loan consolidation program. They can only be consolidated into a private bank loan, if available. |
Source: The table can be found on Your Federal Student Loans: Learn the Basics and Manage Your Debt from the website of the the U.S. Department of Education, Federal Student Aid.
Effective February 14, 2010, the Federal Reserve Board approved final rules on Regulation Z* (Truth in Lending Act) that revises the disclosure requirements for private education loans. Private education loans will not include some institutional loans such as tuition payment plans, most short-term institutional loans, or the Emergency Payment option.
Under the new laws, a lender offering private loans for postsecondary educational expenses must first provide a disclosure about loan terms and features at the time of application and must disclose information about federal student loan programs that may offer less costly alternatives. If the initial application reaches an approval status, a second loan disclosure statementLenders are required to provide the borrower with a disclosure statement before issuing a loan. The disclosure statement provides the borrower with information about the actual cost of the loan, including the interest rate, origination, insurance, and loan fees, and any other kinds of finance charges. must be provided to the student at that time. If a student accepts the loan terms provided in the second disclosure statement, a third final disclosure must be provided when the loan is consummated.
A lender must also provide the student with a 3 day rescission or “Right-to-Cancel” period after the final loan disclosure form is sent to the student. The Right-to-Cancel period means that once UNT has certified your loan and all disclosures are sent, there is a mandatory 3 business day waiting period before the lender may disburse loan funds to the school. Note: If a lender only offers a mailed Final Disclosure (not online), then they must wait 6 days to disburse the loan to the school (3 days for mail time and an additional 3 day rescission or “right-to-cancel” period).
* (PDF files require Adobe Acrobat Reader to be viewed. You can download Acrobat Reader from http://get.adobe.com/reader.)
An additional piece of the new private loan regulations requires an applicant to complete a Self-Certification form and return it to the lender before they may disburse the loan to the school. The Self-Certification form may be found on the lender’s website. Information regarding the total cost of attendance at University of North Texas is estimated below:
|
University of North Texas - 2011-2012 Cost of Attendance - Full Time |
||||
|
Full Time - Off Campus |
||||
|
|
Resident |
Non-Resident |
||
|
|
Undergraduate |
Graduate |
Undergraduate |
Graduate |
|
Tuition |
6,178 |
4,606 |
15,568 |
10,240 |
|
Fees |
2,558 |
1,656 |
2,558 |
1,656 |
|
Room & Board |
6,586 |
6,586 |
6,586 |
6,586 |
|
Books & Supplies |
1,050 |
1,050 |
1,050 |
1,050 |
|
Transportation |
2,150 |
2,150 |
2,150 |
2,150 |
|
Personal |
1,948 |
1,948 |
1,948 |
1,948 |
|
Total |
20,470 |
17,996 |
29,860 |
23,630 |
NOTE: The costs of attendance displayed are representative of the academic yearThe period during which school is in session, consisting of at least 30 weeks of instructional time. The school year typically runs from the beginning of September through the end of May at most colleges and universities. for full-time enrollment. These costs represent estimated costs for 2011-2012 and are subject to change based on Board approval for 2011-2012.
Important Private Loan Information
All Alternative or private loan applications should be initiated by the borrower via the respective lender's website.
The Process
- Apply online through the lender's website (you will receive the Application Disclosure Statement and complete the Self-Certification form). If your lender requests additional information, submit and send any additional information to your lender and not UNT.
- Once your credit is approved and your private loan promissory noteThe promissory note is the binding legal document that must be signed by the student borrower before loan funds are disbursed by the lender. The student should keep this document until the loan has been acknowledged by the lender as paid in full. has been received by your lender, your lender will then send UNT an electronic certification request. UNT will not be sent any information until both of these items are completed by your lender.
- UNT will award your private loan and submit the completed loan certification to your lender for funding. Monitor myUNT for award information.
- Once your private loan certification has been completed, you will be notified by UNT to complete Private Loan Counseling. Effective Fall 2011, private loan borrowers at UNT are required to complete Private Loan Counseling annually. You may complete your Private Loan Counseling by following the steps here. You must complete the counseling before UNT can release any of your private loan funding.
- Once your lender receives UNT's loan certification, you will be provided an Approval Disclosure Statement by the lender.
- Once you accept the Disclosure terms with the lender, you will receive a Final Disclosure Statement.
- The lender will send the private loan funds to UNT once the Right-to-Cancel waiting period has ended.
- Private loan funds will be released to your student account only if all loan eligibility requirements are met at the time of disbursementDisbursement is the release of loan funds to the school for delivery to the borrower. The payment will be made co-payable to the student and the school. Loan funds are first credited to the student's account for payment of tuition and fees. Any excess funds are then paid to the student in cash or by check for the purpose of paying for other educational expenses., including completion of your Private Loan Counseling.
Important Tips
Below are important points for completing the application and faster processing time.
- Use UNT's loan periods (one application per loan period)
- Fall/spring term: August-May
- Fall-only term: August-December
- Spring term: January-May
- Summer term: May-August
- Use E-sign if available. If you need to print, sign and submit/mail any private loan documents, be sure to send it to your lender and not UNT.
- The Free Application for Federal Student Aid (FAFSA)The FAFSA is used to apply for Pell Grants and all other aid. Complete your FAFSA via web at www.fafsa.gov . As the name suggests, no fee is charged to file a FAFSA. Follow the directions carefully to ensure proper and efficient processing. will allow you to apply for lower interest rate William D. Ford Federal Direct Stafford Loan (Direct Loan) Program loans. Student Financial AidMoney provided to the student and the family to help them pay for the student's education. Major forms of financial aid include gift aid (grants and scholarships) and self help aid (loans and work). and Scholarships (SFAS) encourages you to complete and apply for Direct loans first. If you will not be completing a FAFSA and do not wish to apply for Direct loans, please notify our office.
- If currently awarded aid to Cost of Attendance through the FAFSA, contact the SFAS office at (940) 565-2302.
- Keep your personal contact information (address and phone numbers) updated with the Registrar, so SFAS can easily contact you if needed.
- SFAS encourages you to research several lenders before applying in order to find the best loan for your circumstances as rates, fees, and repayment arrangements vary.
- Effective Fall 2011, private loan borrowers at UNT are required to complete Private Loan Counseling annually. This requirement is a step in UNT's Default Aversion Plan; our goal is to ensure that each borrower understands how to manage their loan debt and the commitment that comes with the acceptance of a private student loan. Above all, borrowers must realize that private student loans require repayment, at the lender's discretion. You may complete your Private Loan Counseling by following the steps here. You must complete the counseling before UNT can release any of your private loan funding.
- UNT certified loans for the following Private Loan Lenders during the previous year:
- Charter One
- Chase Select
- Citibank CitiAssist
- Discover
- Ed Financial
- PNC Bank
- Sallie Mae
- Texas Higher Education Coordinating Board
- Union Federal
- Wells Fargo
