Skip to Main Content

Section 5: Financial Aid:
Private Education Loans

Comparing Private Education Loans and Federal Loans

Private education loans may have significant disadvantages when compared with federal education loans. We strongly encourage students to first borrow any federal loans for which they are eligible. The chart below will help students in understanding the differences between federal and private education loan funds.

Comparison Chart of Federal and Private Education Loans
Topic Federal Loans Private Loans
Credit Check Required? Direct Loan: No
Parent PLUS/Grad PLUS: Yes (limited)		 Yes
Credit Score or Debt-to-Income Considered? Direct Loan: No
Parent PLUS/Grad PLUS: No 		 Yes
Co-Signer Required? Direct Loan: No
Parent PLUS/Grad PLUS: Depends on Credit Check Result		 Depends on Credit Check Result
Deferment Options Several options   Depends on Lender
Grace Period Direct Loan: 6 months Depends on Lender
Interest Rates*

Undergraduate Subsidized and Unsubsidized Direct Loans:

  • Disbursed on or after July 1, 2021, and before July 1, 2022, are fixed at 3.73%
  • Disbursed on or after July 1, 2022, and before July 1, 2023, are fixed at 4.99%

Graduate Unsubsidized Direct Loans:

  • Disbursed on or after July 1, 2021, and before July 1, 2022, are fixed at 5.28%
  • Disbursed on or after July 1, 2022, and before July 1, 2023, are fixed at 6.54%

Direct PLUS Loans (Parent and Graduate/Professional):

  • Disbursed on or after July 1, 2021, and before July 1, 2022, are fixed at 6.28%
  • Disbursed on or after July 1, 2022, and before July 1, 2023, are fixed at 7.54%
 Usually Variable 
Loan Fees*

Subsidized and Unsubsidized Direct Loans:

  • Disbursed on or after October 1, 2020, and before October 1, 2023, is 1.057%

Direct PLUS Loans (Parent and Graduate/Professional):

  • Disbursed on or after October 1, 2020, and before October 1, 2023, is 4.228%
 Depends on Lender  
Flexible Repayment Options Many options available Generally None
Loan Forgiveness Options Several options available Generally None
Penalties for Early Repayment None Depends on Lender  

*Rates adjust annually

Choosing a Private Education Loan

When choosing a private education loan, students should compare the loan terms offered by several lenders in order to choose the best fit for their situation. When choosing a lender, borrowers should make sure that Walden University is a participating school in their loan program. Visit ELMSelect to learn more about private loan eligibility requirements.

Several points that should be researched when considering a private education loan:

  • What is the interest rate; is it fixed or variable? Is the rate capped? 
  • What fees must be paid for this loan and when are they paid? 
  • How will the student receive the loan funds? 
  • When does repayment begin and is there a grace period? 
  • What will student’s monthly payment be? 
  • What will be the total cost if the student uses the full repayment period? 
  • Are there penalties for early repayment? 
  • Are there deferment, forbearance, or cancellation options?

Most private education loan programs require the Office of Financial Aid to certify the student’s eligibility before approving the loan. If students receive financial aid, they must notify the Office of Financial Aid of any private education loans they borrow, as it may affect their aid eligibility.

Truth in Lending Act

Under the Federal Truth in Lending Act (TILA), the lender must provide the following documents:

  • Private Education Loan Applicant Self-Certification Form: Students must complete this form and return it to the lender before receiving their first disbursement of loan funds.

  • Private Education Loan Right-to-Cancel Period: After the student signs the promissory note, the private lender will deliver a disclosure statement to confirm the terms and conditions of the private education loan. At the time that this disclosure is delivered, the “right-to-cancel” period begins. The student may cancel a private education loan, without penalty, until midnight of the third business day following the date on which the student receives the disclosure. The student may cancel the loan by contacting the lender. The lender cannot release the first disbursement of the loan funds until the end of the right-to-cancel period.