Other Loans

Private/Alternative

Private Loans vs. Federal Loans

Private education loans may have significant disadvantages when compared with federal education loans. We encourage you to first borrow any federal loans for which you are eligible. Homeowners may also want to consider a home equity loan first.

To gain a better understanding of how federal and private loans may fit into your overall strategy for paying for college, you may want to go to the online Learning Center provided for Stanford students and families by the Association of Independent California Colleges and Universities (AICCU).

A Comparison of Federal and Private Education Loans

Federal Loans Private Loans

Co-Signer Required?

Perkins/Stafford: No
PLUS: Usually no

Usually yes

Credit Check Required?

Perkins/Stafford: No
PLUS: Yes (limited)

Yes

Deferment Options

Several options guaranteed by law

Depends on program

Grace Period

Perkins: 9 months
Stafford/PLUS: 6 months

Depends on program

Interest Rate

Fixed

Usually variable

Loan Fees

Perkins: No fees
Stafford: up to 1.5%
PLUS: up to 4%

Depends on program

Loan Forgiveness Options

Several options guaranteed by law for Perkins and Stafford

Generally none

Penalties for Early Repayment

None

Depends on program

Choosing a Private Loan

When choosing a private education loan, you should compare the loan terms offered by several programs in order to choose the best fit for your situation. You can learn about and compare private loan terms from multiple lenders side-by-side using the new California Private Loan Marketplace, also provided by the AICCU. Click on the "SHOP" icon to begin your comparison.

Another resource for finding active private education loan programs is FinAid.org. In addition, descriptions of various loan programs are available on the site of Student Lending Analytics.

Here are several points you should research 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 due?
  • How will I receive my loan funds?
  • When does repayment begin and is there a grace period?
  • What will my monthly payment be?
  • What will be the total cost if I use the full repayment period?
  • Are there penalties for early repayment? 
  • Are there deferment or forbearance options?
  • Is the loan program well-established?

Most private loan programs require our office to certify your eligibility before approving your loan. If you receive financial aid, you must notify our office of any private loans you borrow as it may affect your aid eligibility.