Take These Steps to Qualify for a Private Student Loan

Borrowers unfamiliar with private student loans can easily misread the loan contract’s terms and conditions, which leads to financial headaches later on.

Brian O'Connell

Published: 4/16/2026, 9:46:13 AM EDT

Take These Steps to Qualify for a Private Student Loan — Brown University students and community members take a moment at a makeshift memorial for the victims of a Dec. 13 shooting at the Van Winkle Gates outside Brown’s college campus in Providence, R.I., on Dec. 15, 2025. (Bing Guan/AFP via Getty Images)

With the U.S. college lending market in turmoil, a new study adds more fuel to the fire: 40 percent of Americans are likely to be rejected for a private student loan by traditional lenders based on credit and income underwriting requirements.

The data comes from Protect Borrowers and the Century Foundation, which tracked the lending practices of 34 private lenders.

The study pointed to one big difference-maker that places a greater financial burden on private lenders: last year’s budget reconciliation bill, better known as the “One Big Beautiful Bill Act” (OBBBA), which stripped $300 billion from traditionally federally backed higher education and financial aid programs.

“The bill is expected to further strain already struggling state budgets, which will likely result in even further cuts to state higher education systems and lead to even higher tuition costs,” the report noted. “These changes will force more students and families to turn to the private student loan market in order to pay for college, or abandon higher education altogether,” the study noted.

Best Ways to Land a Private Student Loan That’s Right For You

Families and students looking for solid student loans shouldn’t give up on federal loans, but they should expand their options to include private college lending. These tips should get you on the right path to college financing success.

Know the lay of the land

For starters, borrowers need to get realistic about the new college lending market and how it’s shifting.

“Federal student loan repayment is becoming gradually more stringent,” Raymond Tarpley, Jr, growth initiatives manager at the University of Maryland Global Campus Oversight, told NTD News.

Loan oversight has strengthened, repayment is more structured, and there’s more emphasis on accountability for outcomes and institutional performance. “Families are now taking a more critical eye towards return on investment,” Tarpley said. “Loans still exist, but the messaging has changed from 'how much can you borrow' to 'how responsibly can you pay it back,' making federal loans feel as if they’re not as flexible.”

On the upside, private lenders are tentatively dipping back into the market. “Banks and credit unions favor borrowers with good credit and well-defined degree paths,” Tarpley noted. “One of the most common mistakes is turning to private loans as a last resort. Rather, borrow in accordance with a long-term academic roadmap and negotiate terms on the front end as an investment for the long haul.”

Take the ‘soft’ route

Most private loan processing is done online with approval immediate.

“Families can use a ‘soft check’ process if they wish to shop around for the lowest rate and term,” Tom O’Hare, holistic college adviser at Get College Going. “Submitting a loan for full approval is generally when the hard credit check is performed, and the loan is accepted.”

Aim for a co-signer

The PBCF report noted that between 61 and 100 percent of loans originated by the lenders in this study require cosigners, and that applies to all types of private student loans.

While co-signers are required for most undergraduates, they are also beneficial for graduate and professional students. “Because most full-time students lack income, they’ll need a co-signer to qualify for a private loan and obtain the lowest available interest rate,” O’Hare said. “Underwriting approval is based on the strength of the co-signer's credit, creditworthiness, and debt-to-income.”

Pay early

Another tip to lower interest rates is to make a regular, scheduled payment while the student is in school. “Principal and interest or interest-only payments can reduce the rate and the interest added to the loan balance,” O’Hare added.

Pick a lender that meets your unique student loan needs

Private student loans can offer advantages that meet your unique loan needs, with interest rates as low as 2.99 percent.

For example, if you’re looking for flexible loan repayment terms, Ascent offers multiple payment terms, including a progressive repayment feature that allows students to start paying the loan back in lower amounts and increases gradually as the borrower gains more income in the working world.

Or, for a quick loan processing experience, ELFI offers borrowers a speedy prequalification and approval process, including direct access to the lender’s student loan advisory team. ELFI private loans also come with a year of student loan forbearance if the borrower’s funds run low.

Don’t Make These Private Student Loan Mistakes

Borrowers unfamiliar with private student loans can easily misread the loan contract’s terms and conditions, which leads to financial headaches later on.

For instance, failing to plan ahead to determine their eligibility for credit leaves them overwhelmed as the timeline to begin classes and move in tightens. “Families can investigate borrowing if needed during a student’s high school years and immediately after depositing,” O’Hare said.

Borrowers and parents may also not realize that they need to borrow funds for the full year, typically from September to May, to cover all educational costs, including hidden costs like parking fees. “Borrowing on a semester basis results in multiple hits on a credit report and multiple loans to track,” O’Hare added. “In addition, deferring loan payments while a student is in school, even as little as $25 a month or in the form of a periodic payment, can result in a large increase in the loan balance over a 4-year period.”

The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.