Private student loan (United States)

private student loansPrivate Alternative Loansprivate education loansprivate student loan
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans, Perkins loans and PLUS loans.wikipedia
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Sallie Mae

SLM CorporationStudent Loan Marketing AssociationSLM Corp
The biggest student loan lender, Sallie Mae, was formerly a government-sponsored entity, which became private between 1997-2004.
It then became private and started offering private student loans, although at one point it had a contract to service federal loans.

Higher education in the United States

higher educationcollegeheightened cash monitoring
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans, Perkins loans and PLUS loans.

Stafford Loan

Stafford LoansStaffordeducation loans
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans, Perkins loans and PLUS loans.

Federal Perkins Loan

Perkins LoanPerkinsPerkins loans
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans, Perkins loans and PLUS loans.

PLUS Loan

Parent PLUS LoanFederal PLUS LoanParent Loan for Undergraduate Students
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans, Perkins loans and PLUS loans.

Financial institution

financial institutionsbanking institutionfinance company
Interest rates and loan terms are set by the financial institution that underwrites the loan, typically based on the perceived risk that the borrower may be delinquent or in default of payments of the loan. A number of financial institutions offer private student loans, including banks like Wells Fargo, and specialized companies.

Credit risk

creditworthinesscounterparty riskdefault risk
Interest rates and loan terms are set by the financial institution that underwrites the loan, typically based on the perceived risk that the borrower may be delinquent or in default of payments of the loan.

Counterparty

counterpartiesborrowerCounterpart
Interest rates and loan terms are set by the financial institution that underwrites the loan, typically based on the perceived risk that the borrower may be delinquent or in default of payments of the loan.

Default (finance)

defaultdefaulteddefaults
Interest rates and loan terms are set by the financial institution that underwrites the loan, typically based on the perceived risk that the borrower may be delinquent or in default of payments of the loan.

Underwriting

underwriterunderwritersunderwrite
The underwriting decision is complicated by the fact that students often do not have a credit history that would indicate creditworthiness.

Student

studentscollege studentpupils
The underwriting decision is complicated by the fact that students often do not have a credit history that would indicate creditworthiness.

Credit score in the United States

FICO scoreFICOcredit score
The underwriting decision is complicated by the fact that students often do not have a credit history that would indicate creditworthiness.

Interest rate

interest ratesdiscount rateinterest
As a result, interest rates may vary considerably across lenders, and some loans have variable interest rates.

Personal bankruptcy

act of bankruptcybankruptcybankruptcy himself
Unlike other consumer loans, Congress made student loans, both federal and private, exempt from discharge (cancellation) in the event of a personal bankruptcy, except when repaying the student loan would represent an undue hardship on the borrower and the borrower's dependents.

Securitization

securitisationsecuritizedsecuritizing
Similar to the way in which mortgages were securitized and sold off by lenders to investors, student loans were also sold off to investors, thereby eliminating the risk of loss for the actual lender.

Investor

financierinvestorsfinanciers
Similar to the way in which mortgages were securitized and sold off by lenders to investors, student loans were also sold off to investors, thereby eliminating the risk of loss for the actual lender.

Subprime lending

subprimesubprime mortgagesub-prime
Just as little documentation was needed to take out a subprime mortgage loan, even less was needed to take out a subprime or "non-traditional" student loan.

Andrew Cuomo

Andrew M. CuomoGovernor Andrew CuomoGovernor Cuomo
In 2007, the then-Attorney General of New York State, Andrew Cuomo, led an investigation into lending practices and anti-competitive relationships between student lenders and universities.

Kickback (bribery)

kickbackskickbackkickback scheme
Some of these "preferred lenders" allegedly rewarded university financial aid staff with "kickbacks."

Consumer Financial Protection Bureau

Bureau of Consumer Financial ProtectionCFPBUnited States Consumer Financial Protection Bureau
A 2014 report from Consumer Financial Protection Bureau (CFPB), shows a rising problem with these types of loans.

Wells Fargo

Wells Fargo BankWells Fargo & CompanyWells Fargo & Co.
A number of financial institutions offer private student loans, including banks like Wells Fargo, and specialized companies.

Peer-to-peer lending

person-to-person lendingpeer to peer lendingpeer-to-peer
After the economic collapse of 2008, a number of peer-to-peer lending and alternative lending platforms emerged to help students find private student loans.

LendKey

For example, U.S. online marketplace lending platform LendKey allows consumers to book loans directly from community lenders like credit unions and community banks.

Federal Family Education Loan Program

FFELPFederal Family Education Loan (FFEL) ProgramFederal Family Education Loan (FFEL)
The Federal Family Education Loan (FFEL) Program was a system of private student loans which were subsidized and guaranteed by the United States federal government.