Private Education Loans

Comparing Private Loans and Federal Loans

Private education loans may have significant disadvantages when compared with federal education loans. We strongly encourage students to first borrow any federal loans for which they are eligible. The chart below will help students in understanding the differences between federal and private loan funds.

Comparison Chart of Federal and Private Education Loans

Topic	Federal Loans	Private Loans
Credit Check Required?	Direct Loan: No PLUS/GradPLUS: Yes (limited)	Yes
Credit Score or Debt-to-Income Considered?	Direct Loan: No PLUS/GradPLUS: No	Yes
Co-Signer Required?	Direct Loan: No PLUS/GradPLUS: Usually no	Usually yes
Deferment Options	Several options	Depends on lender
Grace Period	Direct Loan: 6 months	Depends on lender
Interest Rate**	Undergraduate The interest rates for undergraduate subsidized and unsubsidized Direct Loans disbursed on or after July 1, 2017 through June 30, 2018 are fixed at 4.45%. The interest rates for undergraduate subsidized and unsubsidized Direct Loans disbursed on or after July 1, 2018 through June 30, 2019 are fixes at 5.045%. The interest rates for graduate unsubsidized Direct Loans disbursed on or after July 1, 2017 through June 30, 2018 are fixed at 6.00%. The interest rates for graduate unsubsidized Direct Loans disbursed on or after July 1, 2018 through June 30, 2019 are fixed at 6.595%. The interest rate for Direct PLUS Loans (Parent and Grad/Prof Student) disbursed on or after July 1, 2017 through June 30, 2018 is fixed at 7.00%, with interest beginning to accrue upon disbursement. The interest rate for Direct PLUS Loans (Parent and Grad/Prof Student) disbursed on or after July 1, 2018 through June 30, 2019 is fixed at 7.595%, with interest beginning to accrue upon disbursement. Both the subsidized and the unsubsidized Direct Loans first disbursed on or after October 1, 2016 and before October 1, 2017 have a 1.069% loan fee. Both the subsidized and the unsubsidized Direct Loans first disbursed on or after October 1, 2017 and before October 1, 2018 have a 1.066% loan fee. Federal Direct PLUS Loans (Parent and Grad/Prof Student) first disbursed on or after October 1, 2016 and before October 1, 2017 have a 4.276% loan fee. Federal Direct PLUS Loans (Parent and Grad/Prof Student) first disbursed on or after October 1, 2017 and before October 1, 2018 have a 4.264% loan fee.	Usually variable
Loan Fees	Both the subsidized and the unsubsidized Direct Loans first disbursed on or after October 1, 2016 and before October 1, 2017 have a 1.069% loan fee. Both the subsidized and the unsubsidized Direct Loans first disbursed on or after October 1, 2017 and before October 1, 2018 have a 1.066% loan fee. Federal Direct PLUS Loans (Parent and Grad/Prof Student) first disbursed on or after October 1, 2016 and before October 1, 2017 have a 4.276% loan fee. Federal Direct PLUS Loans (Parent and Grad/Prof Student) first disbursed on or after October 1, 2017 and before October 1, 2018 have a 4.264% loan fee.	Depends on lender
Flexible Repayment Options	Many options available	Generally none
Loan Forgiveness Options	Several options available	Generally none
Penalties for Early Repayment	None	Depends on lender

Choosing a Private Loan

When choosing a private education loan, students should compare the loan terms offered by several lenders in order to choose the best fit for their situation. When choosing a lender, borrowers should make sure that Walden University is a participating school in their loan program (www.elmselect.com).

Several points that should be researched when considering a private loan:

What is the interest rate; is it fixed or variable; is the rate capped?
What fees must be paid for this loan and when are they paid?
How will the student receive his or her loan funds?
When does repayment begin and is there a grace period?
What will the monthly payment be?
What will be the total cost if the student uses the full repayment period?
Are there penalties for early repayment?
Are there deferment, forbearance, or cancellation options?

Most private loan programs require the Office of Financial Aid to certify the student’s eligibility before approving the loan. If students receive financial aid, they must notify the Office of Financial Aid of any private loans they borrow, as it may affect their aid eligibility.

Truth in Lending Act

Under the Federal Truth in Lending Act (TILA), the lender must provide the following documents:

Private Education Loan Applicant Self-Certification Form: Students must complete this form and return it to the lender before receiving their first disbursement of loan funds.
Federal Direct Loan Disclosure Statement and Right-to-Cancel Period: After the student signs the promissory note, the Federal Direct Loan Disclosure Statement confirms the terms and conditions of the loan. At the time that this disclosure is delivered, the “right-to-cancel” period begins. During this period of 3–6 days, the student may cancel the loan by contacting the lender. The lender cannot release the first disbursement of the loan funds until the end of the right-to-cancel period.

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