Private Student Loans: Certified vs Non-Certified

A non certified private student loan will come to you instead of being deposited directly with your college or university. Non certified loans can be issued in any amount up to your loan limit with the private lender. Certified private loans, on the other hand, must be validated by the college, meaning you can only borrow what you need on a term-by-term, or year-by-year basis. Certified student loans are best in most scenarios.

Certifying a Student Loan

The first step in getting a certified loan is simply getting a loan. You will have to apply with the private lender of your choice, and that lender will approve you up to a certain limit. Then, you will connect this account with one at your college's finance office. You will have an account with the college and one with the lender. Each term, you will enroll in classes, pay what you can, and use the loan sum to make up the difference. The college may even automatically deduct the extra expense from your loan account. The funds will never be delivered to you. In addition to the ease of processing this type of loan, you may find lower interest payments on loans certified by a college.

Opting for Non Certified Loans

Some students will elect non certified loans. In this case, you will never go through the process of connecting your loan account and your account at the college or university you attend. Instead, the lender will deposit funds with you directly, and you will then deposit them with the school. You can request the given loan sum you need from the private lender on a term basis or even up front on the loan. You will have to do a little more work in this option to make sure your college gets paid on time.

Expense of Non Certified Loans

In addition to doing more work yourself, you will face additional expense on a non certified loan. Some of this expense can be due to higher rates. However, most of this expense is owing to the fact you may take larger debts than you need to take. This is a common mistake, and you can find yourself requesting extra funds each semester or year beyond what you actually will use to pay the college. The money goes straight into your pocket, but it does not come without a fee. You will owe the money back, plus interest, in the near future. 

Advantages of Non Certified Loans

Some students will use non certified loans as part of a strategy to help afford a comfortable lifestyle while they attend college. Instead of working for every dollar you spend concurrently with your studying, you can allow the lender to provide you some cash for living expenses. These expenses can include textbooks and room and board, but they can also include trips and entertainment expenses. How you handle this debt is up to you. However, most financial advisers recommend keeping this to a minimum and electing certified loans wherever possible.


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