What is a private student loan?

Private student loans originate with a bank, credit union or online lender — unlike federal student loans that are handled by the federal government.

You can use both federal and private loans to pay for school, but federal loans typically have more favorable terms, including lower interest rates, flexible repayment options and loan forgiveness. For those reasons, it’s best to prioritize federal student loans before private loans.

Private student loans can be a good option if:

• You have already completed the Free Application for Federal Student Aid, or FAFSA, to see if you’re eligible for federal grants and work-study programs.

• You have already borrowed the maximum in both subsidized and unsubsidized federal student loans.

• You or a co-signer have good credit (a credit score of 690 or above). Many private student loan borrowers apply with a co-signer to improve their chances of qualifying.

• You borrow only what you need and expect you can repay.

Student Loan Terms to Know

• Deferment: A period of authorized nonpayment that pauses student loan payments for up to three years. Deferment can be a good option if you have a federal subsidized and can’t afford to make payments now, but will be able to soon. If you need a longer-term fix, consider income-driven repayment instead.

• Delinquent: The status of a student loan after one or more missed payment. Loans enter default after a prolonged period of delinquency. While you will probably face late fees, you can avoid credit damage and default by quickly paying the past-due amount.

• Disbursement: The process of releasing loan funds to the borrower or directly to the school.

• Fixed interest: An interest rate that does not change during the life of a loan. All federal student loans have fixed interest rates, but private loans can offer fixed or variable interest rates. Fixed interest is the safer option because you don’t have to worry about your rate — and payment — increasing.

• Variable interest: Variable interest rates can change monthly or quarterly depending on the loan contract and come with rates caps as high as 25%. Variable interest loans are riskier than fixed interest loans but can save you money if the timing is right.

• Origination fee: The fee a borrower pays to offset a lender’s cost for issuing a student loan. All federal student loans have origination fees, while many private student loans don’t. Origination fees typically have a minimal effect on undergraduates with lower loan amounts, but can be costly for graduates and those with higher loan totals.

• Prepayment: Prepayment is when you pay off part or all of your loan before the scheduled due dates.

How much can I borrow for college?

Only borrow what you need and can expect to pay back. Start with federal loans, and take private loans if you need additional funds to pay for college.

The maximum in federal student loans you can borrow depends on your year in school, whether you’re a dependent or independent student and the type of loan. With private loans, the amount you borrow can’t exceed your school’s total cost of attendance, less other financial aid.

How do I choose a private student loan online?

• Compare loan offers: Check options from multiple lenders including banks, credit unions, online companies and state-based lenders to find the lowest interest rate.

• Decide on fixed or variable rate: Depending on the lender, you may be able to choose a fixed or a variable interest rate. A fixed rate stays the same throughout the life of a loan; a variable rate may start out lower than a fixed rate, but could increase or decrease over time depending on economic conditions.

• Choose a loan term: You may also have the option to choose your loan term. A short term gives you higher monthly payments, but also faster repayment and less total interest. A longer term allows you to pay less each month, but more interest over a longer period of time.

• Consider borrower protections: A private lender may offer deferment, forbearance or another temporary repayment adjustment if you can’t afford your payments.

Will I need a co-signer for a private student loan?

If you have no income and no credit or bad credit, you’ll need a co-signer to get a private student loan. Without bills in your name, such as a credit card, car loan or utility, it's hard to demonstrate that you can pay bills on time. Your co-signer will need a steady income and good credit scores. A co-signer is responsible for repaying the loan if you fail to make payments.

Some private lenders will let students apply without a co-signer. Instead of basing your loan offer on your credit, they look at your academic performance and earning potential to determine your ability to pay back the debt.

Paying for MBA school

An MBA is a meaningful financial investment, and understanding the full picture upfront helps you plan with confidence.

According to recent data, the average two-year cost across the top 25 U.S. MBA programs is roughly $230,000, with the top 10 averaging around $248,000. Programs like Columbia, Stanford, NYU Stern, UCLA Anderson, and Wharton carry total costs above $260,000.

The good news: costs vary widely, and there are real levers to manage them. Public in-state programs like Texas McCombs and Indiana Kelley can reduce total costs by roughly half, and online or part-time MBAs let you keep earning income while completing your degree.

Start with the FAFSA to access federal Direct Unsubsidized Loans, then take advantage of the unique funding sources available to MBA students:

• Merit scholarships and fellowships: top business schools award substantial merit aid, often covering 50% or more of tuition for competitive applicants

• Employer sponsorship: many large employers will fund part-time, executive, or even full-time MBAs in exchange for a return-of-service commitment

• Summer internship earnings: internships between Year 1 and Year 2 typically pay well and can meaningfully offset second-year costs

What's changing with federal loans for MBA students in July 2026

The One Big Beautiful Bill Act (OBBBA) introduces new federal borrowing rules starting July 1, 2026. Here's what MBA students should know to plan effectively:

Under the Department of Education's updated definition, "professional" programs are limited to 11 fields: chiropractic, clinical psychology, dentistry, law, medicine, optometry, osteopathic medicine, pharmacy, podiatry, theology, and veterinary medicine. MBA programs are classified as "graduate" programs, with the following federal loan limits for new borrowers starting July 1, 2026:

• Grad PLUS loans are being phased out for new borrowers

• Federal Direct Unsubsidized Loans are capped at $20,500 per year and $100,000 lifetime for graduate students

• An overall federal lifetime cap of $257,500 applies across all student loans combined (undergraduate plus graduate)

• A streamlined set of repayment options — new borrowers will choose between a tiered Standard plan and a new Repayment Assistance Plan (RAP)

What this means in practice: because top MBA programs typically cost $200,000 to $270,000 over two years, federal loans alone won't cover the full cost for most students. The good news is that MBA students have more funding tools available than students in many other graduate programs: scholarships, employer support, savings, summer internship income, and private loans can all work together to bridge the gap.

If you have federal loans disbursed before July 1, 2026, you may continue borrowing under the current rules for up to three more years or until program completion, whichever comes first, as long as you remain continuously enrolled in the same program.

When a private student loan can help

With federal borrowing capped at $100,000 lifetime for graduate students, private student loans are an increasingly common piece of the MBA financing puzzle.

A private loan may be a good fit if:

• Your federal loan limit doesn't cover your full cost of attendance after scholarships and other aid

• You have strong credit and an established income history that can earn you a competitive rate, sometimes without a co-signer

• You're attending a high-cost program and want to lock in your full funding before you start

• You want to compare rates against the federal Direct Unsubsidized rate, which has been in the 7–9% range in recent years

MBA students often qualify for favorable terms. Many candidates bring several years of work experience, established credit, and strong post-MBA earning potential, the median salary at top programs now exceeds $150,000. Lenders recognize that profile, which can translate into competitive rates and flexible repayment options.

A few things worth knowing before you borrow privately:

• Private loans don't qualify for federal income-driven repayment, PSLF, or other federal forgiveness programs

• If your employer offers tuition reimbursement, that's typically your most valuable funding source... use it first

• If you're heading into nonprofit or public sector work where PSLF could apply, maximize federal borrowing before turning to private

• For grads heading into traditional corporate roles, private rates are often very competitive and can save money over the life of the loan

A note for parents

While many MBA students are mid-career professionals financing their own education, parents sometimes help fund business school, particularly for younger applicants in 2+2 programs or deferred admission tracks.

If you're supporting your child's MBA, you generally have two private options:

• Co-signing a private student loan in your child's name. Keeps the debt on your child's credit, and many lenders offer co-signer release after a set period of on-time payments.

• Taking out a parent loan in your own name. Keeps the loan off your child's credit but makes you solely responsible for repayment.