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 medical school

Medical school is the most expensive professional path in higher education.

According to AAMC data, the four-year cost of attendance for the class of 2026 averages around $268,000 to $298,000 at public medical schools and $364,000 to $408,000 at private medical schools. Total cost can approach or exceed $400,000 over four years when tuition, fees, and living expenses are factored in.

The median medical school graduate leaves with around $200,000 in education debt, and roughly a quarter of MD graduates carry $200,000 to $300,000 or more.

Start with the FAFSA to access federal Direct Unsubsidized Loans and any institutional scholarships your school offers. Several medical schools including NYU Grossman, Albert Einstein, Kaiser Permanente Bernard J. Tyson, and Cleveland Clinic Lerner offer full or substantial tuition-free programs and are worth exploring early in your application process.

Future physicians also have access to several specialty programs that can dramatically reduce debt:

• Health Professions Scholarship Program (HPSP) covers full tuition plus a stipend in exchange for military service

• National Health Service Corps (NHSC) scholarships and loan repayment for physicians who commit to working in primary care in underserved areas

• Public Service Loan Forgiveness (PSLF) remains available for physicians employed full-time at qualifying nonprofit hospitals, academic medical centers, and government facilities

Important: federal loan changes for medical students starting July 2026

The One Big Beautiful Bill Act (OBBBA) significantly changes how medical students can borrow from the federal government. If you're starting medical school in fall 2026 or later, the rules are dramatically different from what previous classes experienced:

• Grad PLUS loans are eliminated for new borrowers starting July 1, 2026. These previously let medical students borrow up to the full cost of attendance.

• New federal borrowing caps for professional students: $50,000 per year and $200,000 lifetime in Direct Unsubsidized Loans

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

• Income-driven repayment is being restructured new borrowers will choose between a tiered Standard plan and a new Repayment Assistance Plan (RAP)

The math is stark. The average four-year cost of medical school exceeds $300,000, but the new federal lifetime cap for professional students is $200,000. That leaves a six-figure gap most med students will need to close through scholarships, institutional aid, family resources, or private loans.

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

When a private student loan makes sense for medical students

With Grad PLUS gone for new borrowers and federal limits well below the cost of medical school, private student loans will play a critical role in financing an MD or DO for most students.

A private loan may be worth considering if:

• Your federal loan limit ($50,000/year, $200,000 lifetime) doesn't cover your full cost of attendance, which will be true at nearly every medical school

• You have strong credit, or a co-signer who does, and can qualify for a competitive rate

• You're attending a high-cost private medical school or living in an expensive metro area

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

Lenders often view medical students as low-risk borrowers because physicians have among the highest and most stable earning trajectories of any profession. That can translate into competitive rates for applicants with solid credit profiles.

Many private lenders also offer in-school deferment and reduced payments during residency, when first-year residents typically earn around $60,000, well below what's needed to make standard loan payments on six-figure balances.

A few things to weigh before borrowing privately: private loans don't qualify for PSLF, federal income-driven repayment, NHSC loan repayment, or military service forgiveness programs.

If you're planning a primary care career, working at an academic medical center, or considering military medicine, maximize federal borrowing and explore service-based programs first. If you're heading into a high-paying specialty and don't plan to pursue forgiveness, private rates may save you significantly over the life of the loan.

A note for parents

If you're helping your child pay for medical school, 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 allow 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 leaves you solely responsible for repayment.