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Private Educational Loans

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General Information

Private Educational Loans are loans not guaranteed by the Federal government. The borrower (either student or parent) may borrow such a loan through various participants such as banks, credit unions, or savings and loan associations. There are many different types of private educational loans for different types of borrowers.

These loans are not need based; rather, they are based on creditworthiness. Most students will need a creditworthy co-signer such as a parent or other relative in order to obtain a private educational loan. Terms and conditions applicable to these loans vary greatly. Factors such as interest rate, APR, length or repayment, loan minimum and maximum, and fees should be carefully considered when researching and choosing a private educational loan.

One feature of many private educational loans is the ability to completely postpone (defer) repayment until you graduate from college. Private educational loans almost always offer lower interest rates than credit cards do.

While we encourage students and families to pursue Federal financial aid before considering private educational loans, there are many student/family situations where a private educational loan is viewed as a preferred alternative. Sometimes parents want their student to be responsible for his/her education. In other cases, the convenience of not needing Federal forms to borrow funds is also a consideration. Whatever your situation may be, borrow only what you need, and compare your options before you borrow.

The Process

The private educational loan process is a family-initiated process in which the family (student or parent) contacts the specific lender in order to borrow the loan. Boston College has put together a comprehensive list of lenders for your convenience (best viewed in Firefox). Once you have been approved for the private educational loan of your choice, the selected lender will send Boston College a certification request, which will be completed by the Office of Student Services. This information is submitted online, the application is approved, and funds will be disbursed to the Boston College student’s account. The annual maximum amount that a private educational loan can be certified for is the student’s cost of attendance minus all financial aid received. Some private educational loan lenders may have annual or aggregate loan limits as well.

Boston College does not endorse any of the lenders listed and cannot recommend specific lenders. In addition to the lenders listed here, you can also choose to use a loan provider that does not appear on this list.

Disbursement

Funds are disbursed in two equal disbursements, Fall and Spring, in the form of a check made out to the student and Boston College. Once endorsed, the check will be deposited to the student account.

Refunds

Should any disbursement create a credit balance, you may request a refund through www.bc.edu/myservices, by phone, or in writing. Please note that refunds cannot be issued before the first day of classes for any semester.

Repayment

Repayment of student private educational loans begins six months after you graduate or if the student falls below half-time (6 credits) enrollment at Boston College. Interest accrual begins at disbursement and may be paid as it accrues or it may be capitalized with the principal.

Repayment of parent private educational loans begins immediately after the full disbursement of the loan. Some lenders offer deferment options. 

Private Educational Loan Self-Certification Form Information

Effective February 14, 2010, lenders of private educational loans are required to collect a completed and signed Self-Certification Form prior to disbursing the loan proceeds. This applies to any private educational loans that are not at least partially disbursed prior to the effective date. Private educational loans include all non federal loans, as well as certain loans issued by Boston College directly. Individual lenders have implemented their own procedures to comply with this new regulation, so you should contact your lender directly if you have specific questions about the process for submitting this form.

Regulation Z (Truth in Lending) Information for Students

On July 30, 2009, the Federal Reserve approved final amendments to Regulation Z (Truth in Lending) that revise the disclosure requirements for private educational loans. The amendments implement provisions of the Higher Education Opportunity Act (HEOA) enacted in August 2008. Under the amendments, creditors that extend private educational loans must provide disclosures about loan terms and features on or with the loan application, and must also disclose information about Federal student loan programs that may offer less-costly alternatives. Additional disclosures must be provided when the loan is approved and when the loan is consummated. The rules became effective on September 14, 2009, and lenders were required to be in compliance on February 14, 2010.

Definitions

Interest Rate

The cost of borrowing money, usually expressed as a percentage, paid to the lender.

Why am I charged interest?

  • Borrowers pay interest for the privilege of borrowing.
  • Lenders charge borrowers fees and interest for the use of their money.
  • Interest is charged because the lender is taking a risk lending money to a borrower.

Fixed Interest Rate

An interest rate that remains the same for a set period of time, regardless of the changing underlying interest rate index.

Advantages of a Fixed Interest Rate

  • Borrower will know what all future monthly payments will be.
  • Monthly payments will never change.
  • Borrower can calculate how long it will take to pay off all the interest and principal.
Disadvantages of a Fixed Interest Rate
  • Might have a higher monthly payment than with other interest rate loans.
  • This is due to the fact that lenders are making borrowers pay for this luxury.
  • Interest rate will never go down even if underlying interest rate index goes down.

Variable Interest Rate

An interest rate that moves up and down based on the changes of an underlying interest rate index.

Advantages of a Variable Interest Rate

  • Offer the most attractive interest rates at the beginning of the loan.
  • A borrower’s interest rate can go down if the underlying interest rate index goes down.
  • Might be a cap on the interest rate.
Disadvantages of a Variable Interest Rate
  • Monthly payments will fluctuate as interest rate fluctuates.
  • Might not be a cap on the interest rate (Massachusetts capped at 18%).
  • Interest rate and monthly payments will be adjusted monthly, semi-annually, annually, etc.