Certified or Non-certified Private Student Loan?
You have options when it comes to private college student loans. There are several different types of private student loans, all offering different loan terms and benefits.
Interest rates, fees and borrower benefits may vary slightly or significantly based on the type of loan you choose and your choice of lender. There is no one-size-fits-all college private student loan. Research your options carefully and pick the loan that best fits your individual needs.
Private Student Loans
Private student loans are credit-based education loans that are usually taken out in the student’s name. Interest rates, fees, and other loan attributes will vary based on the lender and the student loans selected, but are generally higher than the interest rates and fees associated with government loans. Although private student loan applicants are not required to fill out the FAFSA to qualify for most private student loans, it is still advised. Some schools may still require it and you may receive financial aid you may have missed out on by choosing not to submit the FAFSA.
Many lenders offer two types of college private student loans: certified and non-certified.
Certified Loan
A certified private student loan is a loan in which the school’s financial aid office confirms that a loan applicant meets applicable eligibility criteria, including enrollment period, course load and eligible financial aid amounts. The financial aid office certifies that the borrower is not borrowing in excess of the Total Cost of Education minus other federal student aid. Funds are usually disbursed directly to the school to be credited to the borrower’s account. Some lenders determine certified loan eligibility based solely on credit and some require additional qualifying factors. Some schools will also certify a small incidental loan amount to pay for those little extras (books, food, etc.) not covered by other student loans or sources of financial aid.
Non-certified Loans
A non-certified private student loan does not require a school official to certify or approve any aspect of the loan or the loan amount. Funds are disbursed directly to the borrower (or loan carrier) to use to pay for college tuition and other educational expenses. This type of private student loan grants the borrower access to the funds directly. The borrower usually will still have to provide proof of enrollment to be eligible to receive the private student loan funds. To be approved for a non-certified loan, most loan companies will require credit information as well as other factors such as employment history and amount of debt. In some cases, a cosigner is required by some lenders. Since non-certified private student loans are disbursed directly to the borrower without being certified through a financial aid office, they tend to carry higher interest rates and/or loan fees than certified loans due to an increased risk profile and increased underwriting costs.
No matter which type of private student loan you choose (Certified or Non-certified), always borrow from a responsible private student loan lender. This does mean doing your homework and reading the fine print. Make sure you get what best suites your financial needs. You will be glad you did.
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