Private student loans are available from private lenders for students whose cost of attendance has not been met with other financial aid. The Free Application for Federal Student Aid (FAFSA) is normally not required to apply for the alternative loans. Private loan programs differ from Federal Direct Loans in several important ways:
- Annual and total loan limits are higher
- Interest rates quoted to families are based on credit approval, which is not guaranteed
- Deferment, cancellation and repayment terms are offered at the lender's discretion
The terms and conditions for private loans differ among lenders and students are advised to carefully compare several loan programs before choosing a lender. Interest rates, fees, and other provisions are subject to changes the lender makes. Students are encouraged to carefully review loan program information and other details on the selected lender's website.
University of Iowa Policy on Private Student Loans
The University of Iowa recommends that families apply for need-based financial aid and/or federal loans by annually completing the FAFSA. We recommend that students exhaust their federal loans, including Parent PLUS loans, first because they may have lower, fixed interest rates, and more flexible repayment options. Federal student loans also offer deferment options, forgiveness programs, and income-based repayment plans that may not be available from all private lenders.
The University of Iowa is concerned about student debt levels and requires students to receive loan counseling with a Financial Aid Advisor prior to the private loan being processed. Significant debt can negatively impact post-graduate opportunities, including preferred career choices as well as academic pursuits such as graduate or professional studies. Advisors educate students about loan repayments strategies and ways to minimize loan debt while in college.
Obtaining a Private Student Loan
The Office of Student Financial Aid will certify a private loan from any lender selected by the student. The private loan process can take up to six weeks from application to disbursement. It is strongly recommended that students begin their private lender research a few months before their U-Bill is actually due for their intended enrollment term - fall, winter, spring, summer.
A common timeline of the private loan process:
- Complete the lender's online application, pay attention to the type of loan application for your specific program (undergraduate, graduate, medical, dental, etc.).
- Your co-signer should complete all application materials, usually called an addendum, and submit all requested documentation (i.e. current pay stub).
- The lender completes all underwriting and makes the credit decisions, not UI.
- Once approved, the loan application is sent to UI for school certification.
- UI students receive an email from OSFA indicating that loan counseling is required. The email includes instructions about scheduling the loan counseling meeting.
- Depending upon peak processing times, allow up to three weeks to meet with an Advisor to have your loan approved.
- Allow two weeks for the lender to send the funds to UI and for the Billing Office to apply them to your U-Bill. Private loan funds will not be refunded until classes start.
Selecting the best loan option for you and your family may be confusing, but the following tips may be helpful:
- Decide who will borrow the loan - the student or another family member. A student without a credit history will require a creditworthy co-signer to receive loan approval.
- Decide on a fixed or variable interest rate loan. Fixed rates are set for the life of the loan while variable rates change throughout, even while the student is still in school.
- Decide if payments will be made toward the interest and/or principal even while the student is still in school. Making payments towards the interest prevents the overall loan balance from increasing due to capitalization of interest.
- Decide what borrower benefits are important to you. Can the cosigner be released from repayment obligations when the loan is in repayment for a certain period of time? Is there an interest rate or principal reduction if certain requirements are met?
Preferred Lender List
The Office of Student Financial Aid assists students looking for private loans by providing a preferred lender list that students and parents can consider when choosing financing options. We recommend that you research your options carefully when considering private loans. All lenders on the preferred lender list were selected based on the following standards:
- The lender requires certification by the school, so that the loan can be accounted for in the student's financial aid package.
- The lender offers reasonable and competitive interest rates and fees.
- The amount borrowed does not exceed the cost of attendance minus other aid.
- The lender is affiliated with Education Loan Management (ELM) and ELMSELECT and agrees to underwrite and credit-approve loan applications before presenting the loan for certification on ELM.
- The lender disburses funds via electronic funds transfer (EFT) to the University of Iowa, rather than directly to the student.
- Provides consistent, timely, and accurate customer service to both University of Iowa staff and students. To that end, a representative is required to make at least one campus visit each academic year.
Please note that a lender may be dropped from the list if the above conditions are not maintained. If unethical or deceptive practices are perceived, or if origination, processing, or servicing concerns arise that cannot be resolved satisfactorily. The University of Iowa retains the right to maintain and alter it's preferred lender list at any time and to select lenders that consistently provide competitive products, along with responsible actions and policies that best serve our students.