Private Student Loan Requirements: How Do I Qualify and Get Approved for a Private Student Loan?

Private student loans are an excellent option for individuals who want to bridge the gap between college costs and federal aid they’ve received. These types of loans also harder to qualify for since private student loan requirements are more stringent than federal loan requirements.

Private student loans make up over 8% of the total outstanding student loans — or $138.57 billion in student loan debt. If you’re thinking about applying for a private loan to fund your education, you need to know what’s required.

Keep reading to learn more about private student loan requirements and what you can do to improve your chances of getting approved.

What are the requirements to qualify for a private student loan?

Qualifying for a private loan involves an entirely different process than applying for federal student aid. Private lenders take risks without the government’s backing, so they lessen the risk-factor by enforcing applicant requirements.

Private lenders want to know that you (or someone else backing you) are financially able to pay off the debt you are incurring from a private loan. Here’s a look at some of the requirements you’ll face when applying for a private student loan.

Educational requirements

Although it seems obvious, a requirement for a private loan is being a current or incoming college student. That doesn’t mean that you have to be a full-time student. Many, but not all, private lenders only require you to attend at least half-time.

Lenders also generally require that you’re enrolled in an approved school to qualify for a private loan. In most cases, they require that borrowers work toward a degree-granting program at a Title IV school. Title IV is a distinction given to schools that have access to federal student aid. Earning this distinction is essentially earning the Department of Education’s seal of approval.

Private lenders also want to know that you’re making progress toward your degree. They’re banking on you earning your degree and getting a job that’ll let you pay off your loan. Some lenders seek verification from your school that you’re making satisfactory academic progress (SAP) during school certification.

Individual requirements

Qualifying for a private student loan depends on factors like age, citizenship and where you reside. For example, to qualify for an undergraduate student loan through Earnest, you must be a resident of the District of Columbia, or any state except Nevada.

Your age plays a factor in whether you qualify for a private student loan. Some lenders have specific age requirements, while others have an “age of majority” requirement, based on your state of residence. The age of majority is the age at which a minor is considered an adult, which is 18 years of age for most states.

Private lenders typically require applicants to be a U.S. citizen or meet one of the other following citizenship requirements:

• Classification as a Permanent Resident
• An international student with a Visa

Permanent Residents and international students must provide proper documentation during the application process. In some cases, international students are only eligible for a private student loan through a consigner who’s a US citizen or Permanent Resident.

Financial requirements

Applicants must also meet lenders’ credit and income requirements to qualify for private student loans. Your credit score and credit history not only play a role in getting approved but also influence your loan rates and terms.

Lenders use tools, like credit checks, to determine your creditworthiness or your financial ability to repay your loan. Like with other loans, lending to students carries a risk, so lenders put credit requirements in place to protect themselves from borrowers who are at high risk of default.

Income is another financial factor that lenders review. Similar to your credit score, lenders look at your income as a way to determine the risk factor when lending to an individual.

When searching for a private student loan, you probably won’t find specific credit score and other financial requirements listed online. That’s because lending requirements are often proprietary and not meant for public viewing.

One exception is Earnest. The private lender lists the following financial requirements on its website:

• A minimum FICO score of 650
• At least three years of credit history
• An annual income of at least $35,000
• No bankruptcy on your credit report
• A history of on-time payments on a revolving or installment account that is reported to a credit bureau
• No accounts currently in collections

The good news is that some lenders let you prequalify and check rates before you officially apply for a loan. When you apply for a private student loan, lenders run a hard credit check, which can negatively affect your credit score, temporarily. During the prequalification process, though, they utilize a soft credit check, which doesn’t hurt your credit score.

Cosigners

The reality is that most college students won’t meet credit and income requirements — and not because of bad credit. Most students haven’t had sufficient time to establish a credit history or build up their credit score to meet private loan requirements.

Because of this, many private lenders either allow or require students to have a cosigner for loan applications. A cosigner is someone who’s on the hook financially if you can’t make your loan payments. Cosigners must meet any financial requirements set forth by a lender.

Typically, cosigners are someone you have an established relationship with, like a parent, grandparent, family friend, or mentor. Being a cosigner is a significant commitment and one not to take lightly if you’re applying for a private loan.

Some lenders offer a cosigner release, which releases a cosigner from any financial responsibility after the student meets specific benchmarks. This can include consistent on-time payments over a particular time period.

Always check lending requirements before applying for a private student loan. Take advantage of opportunities to check lender interest rates and prequalify when it's available.

The difference between federal and private student loan requirements

The process of qualifying for a federal loan is much different than private loans. First, federal loans have the backing of the U.S. government. Private lenders don’t have this guarantee, which is why private lenders have borrower eligibility requirements in place.

Federal student loans, in most cases, are need-based financial aid and don’t require a credit check. The exceptions to this are Grad PLUS and Parent PLUS Loans.

Students and parents fill out the Free Application for Federal Student Aid (FAFSA). Schools use the information from your FAFSA form to determine your eligibility and how much aid you should receive.

What if you don’t qualify for a private student loan?

If you’re having trouble qualifying for a private student loan, you’re not alone. Private lenders make it more challenging to qualify to protect themselves. There are some steps you can take to find more money for your college education.

1. Max out your federal loans

Regardless of your situation, it's smart to max out federal student aid first, before turning to other options. Most federal student loans are need-based and don’t have credit requirements.

Also, federal student loans come with extra protections like income-driven repayment plans, deferment options, and access to student loan forgiveness programs.

2. Apply for scholarships

Scholarships are financial aid awards for college expenses. The more scholarships you earn, the fewer student loans you’ll need to pay for college.

3. Find a cosigner with excellent credit

Many private lenders let you use a cosigner to help you qualify for loans, if your credit is ineligible. For most college students, this is your best option if you want to get a private student loan.

4. Improve your credit

You can start building your credit as a college student through responsible credit card use or an installment loan, like a car payment. As you make on-time payments, your credit score will improve, and your credit profile will grow.

Shop around for the best private loans

Private student loan requirements vary between different lenders. That’s why it's important to shop around for the best private student loans. Not only can you find the best interest rates, but you can also see the various lending requirements you’ll need when you apply.

If you need extra help finding the right path to fund your college education, book a pre-debt consult with a Student Loan Planner® consultant. We can help you determine the best student loan options for you and avoid costly student debt mistakes.