As a college student, you may be considering taking out a private student loan to help pay for your education. Private student loans can offer benefits like flexible repayment options and fill shortfalls in your education fund after you’ve taken out the maximum in federal student loans, scholarships and grants.
But before you decide to take out a private student loan, it’s important to understand how much money you can borrow and what factors affect your borrowing potential. This can help you make an informed decision about how to structure your college financing strategy.
Begin exploring your private student loan options here to see how much you could borrow.
How much can you borrow with private student loans?
There are several things that impact how much you can borrow with private student loans.
Maximum borrowing limit
The maximum amount you can borrow with a private student loan varies by lender, but it typically ranges between $75,000 and $100,000.
This can help you supplement federal loans, which limit you to anywhere from $5,500 to $20,500 per year, depending on factors such as your dependent status and year in school. If you have an existing relationship with a lender, they may be more willing to provide you with a higher loan limit.
Your credit score
Unlike federal student loans, which are need-based, private student loans are credit-based. Most lenders require a credit score in the good to excellent range. The higher your credit score, the more likely you are to qualify for a larger loan with a lower interest rate.
If your credit score is low, you may need a cosigner to qualify. A cosigner with a solid credit score can help you get a private student loan, potentially at a lower interest rate than you would get without them. However, the cosigner takes on the responsibility of repaying the loan if you can’t, so it’s important to ask someone who is willing and able to do so.
Find out how much you might be able to borrow here.
Cost of attendance
Your school’s cost of attendance can also impact how much you can borrow with a private student loan. This includes expenses such as tuition, fees, books, housing and meal plans.
Most lenders limit the loan amount you can borrow based on your estimated cost of attendance minus any other forms of financial aid you’ve received. So, if your school has a higher cost of attendance, you may be able to borrow more.
The bottom line
Taking out a private student loan can be a helpful way to finance your education, but it’s important to understand your borrowing potential and the factors that affect it. The lender’s maximum borrowing limit, your credit score and the cost of attendance all play a significant role. It’s important to consider all of these factors to ensure you’re making a decision that’s in your best financial interest.
In addition, while you may be able to borrow up to a certain amount in private student loans, be careful to borrow only what you need and exhaust all other financing options (like federal student loans and scholarships) first. Taking on too much student loan debt will affect your finances for years after graduation, so be smart about how you do it.