What to Ask Lenders about Private Student Loans

While there are numerous federal, state and local grants for student loans, there are also private student loan lenders who offer financing for both undergraduate and graduate degrees. Grants are typically need or merit based, but private student loans are accessible to everyone through a basic student loan application. Like any loan, you need to be aware of the terms of your contract to ensure you are getting the best deal. Private lenders profit off of your loans and have incentives to put the best terms in place for them instead of for students.

When Do My Payments Start?

One of the biggest factors with your student loan is when you will have to start paying it back. You do not want to find out you owe your first big bill one week after graduating, even if you do not have a job yet. Many student loan companies offer what is commonly called a grace period. This is a certain amount of time, usually three to six months, for you to get a salary established before paying back your loans. Be sure to ask what happens to your interest rates during this grace period. Some interest rates will skyrocket immediately after the introductory period; other lenders will give you the period free of all interest on the loan. 

Are there Deferral Options?

There is no guarantee you will find employment and gain a salary immediately following your graduation or even after the grace period allotted by your lender. Tough job markets can lead to a year or more of unemployment or moderate employment for a student. Other undergraduate students will go on to graduate school and have to wait longer for a full-time salary. Many student loans offer deferral periods for these circumstances. Ask about deferral options and financial hardship options before signing a contract.

What if I Drop Out or Transfer?

It is important to remember you are signing up for a big commitment with a student loan at a time when your life is changing tremendously. You may discover your selected school is not right for you, or you may determine it is better to pursue an alternate track. In either case, you need to know what will happen with your student loan debt. If the loan is administered on a per-semester basis, you may have the flexibility to stop receiving the funds or receive funds in a lesser amount. If the loan is administered in a lump sum, you may want to repay the portion of the loan you will not be using immediately. Ask about penalties if this were to be the case.

Are Living Expenses Covered?

Unless you have money saved or are planning on working during school, your loan needs to cover some basic living expenses. The school should be able to give you student loan information about how much to ask for on your student loan application. These guidelines usually take into account the cost of housing, an eating plan and other average student expenses.


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