What Is Considered a Private Student Loan?

Private student loans are loans from banks, credit unions, and online lenders that you can use to pay for college, graduate, or professional school. You can also take out a private student loan to refinance existing private or federal educational debt. 

Private student loans accounted for 14% of the $102.6 billion in total education loans in the 2024-25 academic year, according to the CollegeBoard’s 2025 Trends in College Pricing and Student Aid report.

Read on to learn what’s considered a private student loan and when it can make sense to get one. 

Current private student loan rates

What is a private student loan?

A private student loan is a loan used to pay for school that's offered by a private lender instead of by the Department of Education. They’re available through financial institutions, including banks, credit unions, and online lenders. 

Private education loans are installment loans, and your credit score and credit history directly influence the loan’s interest rate and repayment terms. In some cases, private  loans offer lower student loan rates than federal loans, but they also offer fewer borrower protections. 

What loans are considered private student loans?

All student loans not issued by the government are considered private. Here are some examples of private student loans:

• Undergraduate private loans
• Graduate and professional private loans
• Vocational school and career training loans
• International student loans
• Residency and relocation loans
• Bar exam loans
• Parent private loans
• Student loan refinance loans

How private student loans differ from federal loans

Private and federal student loans both help students pay higher education costs. However, as the table below shows, there are major differences between them.

Who should consider a private student loan?

If you're borrowing for school, always prioritize federal student loans because they offer stronger protections. However, if you reach your federal borrowing limits or don't qualify for federal student loans, private student loans are a good backup option to cover school costs. 

Will you qualify for a good rate?

You’ll either need proof of income and strong credit or a qualified cosigner to be eligible for most private student loans, and borrowers with solid financial credentials will qualify for loans with better terms

“Credit and creditworthiness significantly affect interest rates,” explains Thomas (Tom) O’Hare, founder of Get College Going and a Partner at Pivotal College Years. “Typically, a lender offers a range of rates, rewarding those with stronger credit and charging higher interest rates to those at higher risk.”

Are private student loans affordable?

The key consideration when looking for a private student loan is the total amount it’s going to cost you, and whether you’ll be able to afford the monthly payments. Nancy Goodman, founder and director of College Money Matters, a nonprofit organization,  recommends comparing your loan costs with future earnings, while keeping in mind that total costs can be harder to calculate with variable-rate student loans.  

“Most guidelines say your monthly student debt payments should be less than 10% of your income,” says Goodman. “Check out jobs you are most likely to be trying for and check the starting salaries (not median salaries). Make sure your payments make sense compared to your income.”

You can use our student loan repayment calculator to see monthly payment costs and total interest charges. 

Risks and benefits of private student loans

Private student loans can be a double-edged sword because they make college accessible if you can't otherwise afford it, but they can also affect your future finances. Be sure to consider the pros and cons before deciding if they're right for you.

Benefits

• Competitive interest rates may be available if you have strong credit.
• You can customize loan terms, including your repayment timeline, and whether your loan has a fixed or variable rate.
• Borrowing limits may be higher than federal student loans.
• International students with a qualified U.S. cosigner can borrow.

Disadvantages

• You must meet credit and income requirements to get approved.
• Undergraduate and international students usually need a cosigner.
• Unlike federal student loans, private loans don't offer income-driven repayment plans, forgiveness options, or other federal borrower benefits like generous forbearance and deferment options.

“Private education loans, at their core, are a consumer loan. No different from a mortgage, car loan, or other consumer financing vehicles,” says Thomas (Tom) O’Hare, founder of Get College Going, which provides college coaching and counseling services. 

How to tell if your student loan is private

If you're not sure if you took out private vs. federal student loans, there are a few ways to determine what type of loan you have. 

• Use StudentAid.gov: This is your go-to dashboard for your federal student loans, and it lists all the past and current loans in your name. If a loan isn’t shown on your account, it’s likely a non-federal student loan.
• Check loan statements: Review your monthly student loan bill or statement. The lender’s name should be listed. If it's a bank, credit union, or online lender, your loan is private.
• Ask your loan servicer: Loan servicers manage your loan payments and handle borrower questions. They can confirm whether your loan is a private vs. federal student loan.