Finding a Private Student Loan

There are generally two ways to find a private student loan, using information provided by your school or using information that you obtain yourself. While you can always use just one method, you should use both and compare all of the available loans. This way you can find the best price for your loan and find the best loan that meets your needs.

Information from your school

Most schools will publish information about private loans with tuition bills or with financial aid packages. These so-called "preferred lender lists" are in some disrepute because of conflicts of interest that arose in the way some schools chose lenders. Some schools accepted referral commissions from lenders in exchange for listing them in school mailings, creating a conflict of interest. This is now illegal. Despite this historical problem, you should pay special attention to any recommendation made by your school, because most schools actively shop for the best price in student loans. This is especially true if your school publishes comparative price charts for multiple lenders and/or explains how it picked the lenders it recommends. If your school has conducted a comparative shopping effort, you should take advantage of it.

Loans obtained on referral from the school usually involve lender cooperation with the school. The lender will ask the school to verify your enrollment and, in some cases, your financial need. This may limit the amount of money you can borrower to your Expected Family Contribution as computed under the FAFSA process.

Direct-to-Consumer (DTC) Marketing

If you Google "student loan," you will get listings of thousands of websites offering private student loans. These sites include banks, student loan marketing companies and other businesses that have partnered with student loan providers to reach consumers directly. These direct-to-consumer (DTC) loans are marketed on the Internet, by direct mail, by phone and even TV. DTC loans are generally processed and paid directly to the applicants, without school involvement. Because they are produced through paid marketing efforts (as opposed to shopping by the school), they generally cost more than loans referred through a school.

When you shop for a student loan on the web you will also find sites commonly known as "aggregators." Examples include www.simpletuition.com and www.lendingtree.com. These "aggregator" sites list dozens of loan sources and provide you with comparative shopping tools that allow you to sort the options by price and other criteria. They can be very useful. However, you should read the fine print on these websites. Many of these aggregators accept referral fees from some of the lenders on their list and will give preferential treatment to those "sponsors" in the way they show price comparisons and other features. A good plan is to select at least two aggregators, run comparisons on their systems and print out their results to compare side-by-side. After you have found the most attractive offers, you can go directly to the websites of the student loan providers making those offers. Don't rush into it. Never rush directly from an aggregator site to an on-line application form.