A private education loan is a non-federal loan made by a private financial institution, such as a bank, credit union, or state-affiliated agency, to cover educational expenses. Unlike federal loans, which are guaranteed by the U.S. government and do not primarily rely on a borrower's credit history, private loans are issued based on creditworthiness and often require a strong credit history or a qualified cosigner.
Step 1 – Consider Federal Loan Options First
We encourage students and families to consider federal student loan options before pursuing a private loan. Federal loans offer substantial benefits and protections private loans may not, including fixed interest rates, income-driven repayment plans, forbearance options, and access to federal forgiveness programs.
learn more about federal vs. private loans
Action Item: Aid applicants must accept, reduce or decline any federal loan offered in Student Center each academic year before Cornell will certify a private education loan request.
Step 2 – Identify Your Preferred Lender and Apply
Cornell University is committed to ensuring you receive unbiased information about your student loan options. Cornell recommends using ELM Select – a lender-neutral comparison tool with information about private loans used by Cornell students historically. ELM Select offers comparison tools and helpful financial fundamentals resources to help you select an option that best meets your needs.
Key Factors to Consider
When reviewing private loan options, pay close attention to the following:
- Interest Rates: Compare both fixed and variable rates. Variable rates may start lower but can increase over time, potentially becoming much more expensive than fixed rates.
- Repayment Terms: Look at in-school payment requirements, deferment options, and the maximum repayment term (e.g., 10 or 15 years).
- Cosigner Requirements: Most private loans require a creditworthy cosigner (often a parent or trusted adult) to secure the lowest interest rates available. Be prepared to compare rates with and without a cosigner and understand the terms for cosigner release if you plan to assume sole responsibility later.
- Fees: Check for any origination fees, application fees, or prepayment penalties.
Questions to Ask When Considering a Private Loan
- What is the interest rate? Is it fixed or variable, and how is it determined?
- How often is the interest rate adjusted?
- How much are the origination fees, and how are they charged?
- Will I have to pay interest while enrolled in school?
- When does the interest start to accrue, and will it be capitalized?
- What are the minimum and maximum loan limits?
- Under what circumstances would a co-signer be required?
- When does repayment start, and is there a grace period before repayment begins?
- What is the monthly minimum payment?
- What is the maximum repayment period?
- Am I allowed to pay the interest while I’m in school?
- Are there any loan repayment benefits or reductions? If so, will they remain if a future payment is late?
- Is the loan eligible for consolidation?
- Can I defer repayment of the loan if I go to graduate school?
- Do you apply any penalties or charges for prepayments or early payoff?
- How are the loan proceeds disbursed?
- Must I establish financial need for the loan?
- Do you sell your loans? If so, do the benefits go with them?
- Under what conditions would I qualify for cancellation, discharge, or forgiveness of the loan?
- Does the lender provide a toll-free phone number or website to ask questions as they arise?
Step 3 – Approval, Certification, and Funding
Applying for and receiving a private loan is a three-step process: A) you apply to the lender, B) the lender asks Cornell to certify your eligibility, and C) the lender sends funds to Cornell for disbursement.
Critical Timeline Advisory: obtaining private loan funding can be a lengthy process. Please start this process as early as possible – 60 to 90 days prior to your Bursar bill due date – to ensure funds are available on-time.
- Estimate your need: First, check your financial aid offer to determine how much you may wish to borrow. Never borrow more than you absolutely need.
- Complete the lender’s application: Apply directly via your preferred lender's website (links are available via Cornell’s historical lending list). Processing your application typically involves a credit check and the lender may require a cosigner, either to approve or to access the best interest rates.
- Complete a Self-Certification Form: Federal regulations require students to complete a Private Education Loan Applicant Self-Certification Form before loan funds can be disbursed. Your lender will provide this form to you.
Once you have been approved by your lender, they will contact Cornell electronically to request certification. Cornell's certification typically involves two primary checks:
- Enrollment Verification: We confirm your enrollment status (e.g., full-time, half-time).
- Eligibility and Amount: We confirm that the requested loan amount does not exceed the difference between your estimated cost of attendance and the total amount of all other financial aid you will receive (including other loans and work-study).
Note: Cornell does not approve or deny certification requests based on your creditworthiness; that decision is made solely by the lender. Our role is strictly to certify the maximum allowable amount based on your estimated cost of attendance.
After certification, your lender will finalize the loan. Funds are typically transmitted to Cornell for disbursement to your Bursar account on a pre-determined schedule (typically 5 to 10 days prior to the start of each semester). Any resulting credit balance will be processed by the Bursar's Office according to standard refund procedures.
Cornell’s Student Loan Code of Conduct
In accordance with federal regulations, Cornell University maintains a Student Loan Code of Conduct to prohibit conflicts of interest concerning private education loans.
This document confirms our commitment to fair and transparent lending practices, ensuring our staff does not accept gifts, financial benefits, or any form of compensation from lenders. We encourage all borrowers to review this document to understand the ethical guidelines governing our relationship with lenders.