Truity Credit Union Blog

What To Know Before Borrowing A Private Student Loan

6/1/2022

We know most of you have been down this path before, but it's always good to have a refresher on this information!

It's important to explore federal student loans before taking out a private student loan- there are differences in interest rates, repayment options, and other features.

When you’ve exhausted all scholarship or grant options and hit the federal borrowing limit, private student loans can help fill the gap. Not only can you use a loan to pay for tuition, you can also use it for school approved indirect costs, such as housing, books, supplies and transportation. Private student loans help pay for these expenses so you can focus on your studies and extracurricular activities.

Fixed vs Variable Rates

Fixed rates stay the same over time. This will make your monthly payments pretty predictable. Variable rates change based upon the loan index. Sometimes it goes down and sometimes it goes up.

Private Student Loan Benefits

Private Student Loan Benefits

Private student loans allow you to choose between a fixed or variable interest rate.
Private student loans offer different repayment plans—including options that allow you to make payments while in school.
Private student loans can be taken out by a student (often with a cosigner), parent, or creditworthy individual (like a guardian or other relative).

Flexible Loan Terms

Private student loans are usually flexible when it comes to repayment terms. It's important to note: picking a shorter term period will result in higher monthly payments, but lower interest overall.

When you borrow with Custom Choice, you have the option to pay your loan over 7, 10, or 15 years¹. This way, you can choose whichever repayment timeline works best for your budget!

Right now, the Custom Choice Loan^® is offering historically low rates; with variable rates ranging from 1.60% - 10.21% APR^2,3,4 and fixed rates ranging from 3.20% - 10.76% APR^2,3,4. Apply today and lock in these rates while they're still available!

Apply Now!

Benefits of a Custom Choice Loan^®

Auto Pay Discount

.25% Interest Rate Reduction⁴

Grad Reward

2% Principal Reduction on all loans by providing proof of graduation.⁵

No Extra or Hidden Fees

Including no late or prepayment fees

Cosigner Release Available⁶

Learn More

Before applying for a private student loan, Citizens and Cognition Financial recommend comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans.

The Custom Choice Loan® is made by Citizens (“Lender”). All loans are subject to individual approval and adherence to Lender’s underwriting guidelines. Program restrictions and other terms and conditions apply. LENDER AND COGNITION FINANCIAL CORPORATION EACH RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. TERMS, CONDITIONS AND RATES ARE SUBJECT TO CHANGE AT ANY TIME WITHOUT NOTICE.

1. The 15 year term and Flat Payment Repayment option (paying $25 per month during in-school deferment) are only available for loan amounts of $5,000 or more. Certain repayment terms and/or options may not be available depending on the applicant's debt-to-income ratio. Making interest only or flat interest payments during deferment will not reduce the principal balance of the loan. Payment examples (all assume a 14-month deferment period, a six-month grace period before entering repayment, no auto pay discount, and the Interest Only Repayment option): 7-year term: $10,000 loan, one disbursement, with a 7-year repayment term (84 months), and a 5.64% APR would result in a monthly principal and interest payment of $144.37. 10-year term: $10,000 loan, one disbursement, with a 10-year repayment term (120 months) and 5.73% APR would result in a monthly principal and interest payment of $109.67. 15-year term: $10,000 loan, one disbursement, with a 15-year repayment term (180 months) and a 5.91% APR would result in a monthly principal and interest payment of $83.90.

2. Interest rates and APRs (Annual Percentage Rates) depend upon (1) the student’s and cosigner’s (if applicable) credit histories, (2) the repayment option and repayment term selected, (3) the expected number of years in deferment, (4) the requested loan amount and (5) other information provided on the online loan application. If approved, applicants will be notified of the rate applicable to your loan. Rates and terms are effective as of 6/1/22. The variable interest rate for each calendar month is calculated by adding the 30-Day Average Secured Overnight Financing Rate ("SOFR") index, or a replacement index if the SOFR index is no longer available, plus a fixed margin assigned to each loan. The SOFR index is published on the website of the Federal Reserve Bank of New York. The current SOFR index is 0.62% as of 6/1/22. The variable interest rate will increase or decrease if the SOFR index changes or if a new index is chosen. The applicable index or margin for variable rate loans may change over time and result in a different APR than shown. The fixed rate assigned to a loan will never change except as required by law or if you request and qualify for the auto pay discount.

3. APRs assume a $10,000 loan with one disbursement. The high variable rate APR assumes a 15-year term with the Full Deferment option, a 19 month deferment period, and a six-month grace period before entering repayment. The high fixed rate APR assumes a 15-year term with the Full Deferment option, a 31 month deferment period, and a six-month grace period before entering repayment. The low APRs assume a 7-year term, and the Immediate Repayment option with payments beginning 30-60 days after the disbursement via auto pay. See footnote 4 for auto pay details.

4. Earn a 0.25% interest rate reduction for making automatic payments of principal and interest from a bank account (“auto pay discount”) by completing the direct debit form provided by the Servicer. The auto pay discount is in addition to other discounts. The auto pay discount will be applied after the Servicer validates your bank account information and will continue until (1) three automatic deductions are returned for insufficient funds during the life of the loan (after which the discount cannot be reinstated) or (2) automatic deduction of payments is canceled. The auto pay discount is not available when reduced payments are being made or when the loan is in a deferment or forbearance, even if payments are being made.

5. The principal reduction is based on the total dollar amount of all disbursements made, excluding any amounts that are reduced, cancelled, or returned. To receive this principal reduction, it must be requested from the Servicer, the student borrower must have earned a bachelor’s degree or higher and proof of such graduation must be provided to the Servicer. This reward is available once during the life of the loan, regardless of whether the student receives more than one degree.

6. A cosigner may be released from the loan upon request to the Servicer, provided that the student borrower has met credit and other criteria, and 36 consecutive monthly principal and interest payments have been received by the Servicer within 10 calendar days after their due date. Late payment(s), or the use of a deferment or forbearance will reset the number of consecutive principal and interest payments to zero. Use of an approved alternative repayment plan will disqualify the loan from being eligible for this benefit.