Are Private Student Loans Government Issued?

A private student loan is not issued by the government, it is a bank loan used to supplement or replace a government loan. Financial institutions issue private student loans. They determine the rate of interest and underwrite the loan standards, based on a high risk default in regards to the student, who often do not have any credit history.

The cost of higher education has risen exponentially in the past decade, forcing student to apply for private loans in order to complete their studies. Similar to government loans, these private loans offer payment deferral options, but unlike government loans, private lenders will apply fees which can end up costing the student as much as 50% of the amount borrowed.

In the past, private student loans were approved as unsecured, but today most financial institutions will require some type of collateral to secure the loan