Private Student Loans: What I Wish I Knew | Earnest

What I Wish I Knew Before Taking Private Student Loans: A 10-Year Perspective

By Ellie Chatman | Published on March 2, 2026

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With so much information available on federal student loans, private student loans¹ can sometimes seem like their mysterious younger sibling. Many borrowers feel in the dark — and not just about the details, but about the big picture: Are private loans worth taking out? Can you really use them to cover your entire cost of college? Are there any hidden surprises?

To help demystify private student loans, we put together this handy guide. Here’s a quick primer about how they work and who they’re good for — plus, a real borrower’s perspective* ten years after taking on (and paying off) her private student loans.

*Individuals portrayed as Earnest clients are actual clients and were compensated for their participation. Results may vary.

What are private student loans?

Private student loans are education loans you take out from a private lender — i.e., a bank, credit union, or other financial institution that’s not affiliated with the federal government. (Federal loans, in contrast, always come from the US Department of Education.)

Unlike with federal loans, you don’t have to fill out the Free Application for Federal Student Aid (FAFSA) to apply for private loans, and they’re not awarded based on financial need. Instead, you’ll fill out a private loan application on your lender’s website. If you’re approved, the lender will send the funds directly to your school to cover tuition and fees. Any leftover cash will come to you to cover other expenses. After you graduate, you’ll pay off your private loans in monthly installments, the same way you would with a federal loan.

When are private student loans a good idea?

Private student loans can be a good option for students who don’t get their funding needs met through federal financial aid alone. If you’ve already taken out all the federal loans you qualify for — and can’t find any more money through grants or scholarships — private loans can help fill in the gaps.

Private student loans also tend to be best for borrowers who have good credit scores, or who have a trusted parent or other adult who can act as a cosigner. Because private lenders don’t have the backing of the federal government, they rely on your credit (or your cosigner’s credit) to decide whether you’re a trustworthy borrower. Check your lender’s eligibility requirements to see what kind of credit score you’ll need to qualify.

What I wish I knew before taking out private student loans

So, are private loans a good fit for you? And if they are, what can you expect? Learn straight from the source: Ellie Chatman took out federal student loans more than a decade ago. After graduating from college, she refinanced those loans, swapping them for a private student loan from Earnest. Over the next few years, she paid off all her debt — and later got a gig with Earnest as a senior copywriter. Here are ten things she wishes she’d known at the start of the process.

1. Student loan forgiveness is out of reach for most borrowers.

The harsh reality is that only a small percentage of federal student loan borrowers qualify for loan forgiveness. The rest have to get out of debt the old-fashioned way: one loan payment at a time. As much as some administrations might talk about canceling student loan debt, that isn’t likely to happen any time soon, either. Most borrowers are better off making peace with that fact. “Don’t wait on a maybe,” Ellie says. “Instead, understand that you have the power to change your own circumstances.” Keep in mind that refinancing federal loans² will turn them private, forfeiting protections like federal deferment and loan forgiveness. However, says Ellie, “You may end up saving more by refinancing than you would have with a federal repayment plan, depending on how quickly you pay off your loans³.”

2. Your choice of lender matters.

While there’s only one federal student loan lender (the US Department of Education), there are tons of private student loan lenders and refinance lenders. Each one offers different interest rates, different levels of customer service, and different hardship protections. Be sure to do your research and read reviews before you commit. After all, you’ll likely be with this lender for a decade or more. Prioritize superior customer service, low fees, and payment flexibility.

3. To get out of debt, you have to make more than the minimum payment.

If you just pay the minimum each month, interest will continue to accrue on your loans, inflating the total amount you owe. If you’re serious about getting out of debt, the minimum won’t cut it. “You have to switch mindsets,” Ellie says: instead of paying the minimum amount required, try to pay the maximum amount you can afford. The more you throw at your loans each month, the faster they’ll disappear — and the less you’ll pay in total interest over time.

4. This is a long-term journey.

Your student loan repayment journey begins as soon as your post-graduation grace period is over. After that, you’re in it for the long haul. It takes the average student loan borrower 20 years to pay off their total loan amount. So, settle in, and accept loan payments as part of your new reality. “The best thing to do is set it and forget it,” Ellie says. If your lender offers Auto Pay, enroll as soon as you can. (Bonus: some private lenders, like Earnest, also offer a 0.25% interest rate discount just for signing up⁴.)  “Check your progress a couple of times a year,” Ellie recommends, but try not to lose sleep over it.

5. Getting out of debt requires some sacrifices.

Paying off student loans — federal or private — isn’t easy. “To do it, you have to re-prioritize your financial goals,” says Ellie. “Personally, my top priority was paying them off as fast as possible.” That meant she had to make cuts elsewhere in her life. Take a look at your monthly budget to see where your money is going. Are there any luxuries you can give up or trips you can postpone to ensure you hit your financial goals?

6. Lifestyle creep is real.

The more money you make, the more tempting it is to get lax with your budget. Impulse credit card purchases, spontaneous outings, and bougie food and cosmetics habits can catch up to you fast. If you’ve gotten a promotion recently, try to stay ahead of lifestyle creep by sitting down with your budget and getting clear about your spending and saving goals. The more firm you are about your motivation for saving, the easier it will be to hold yourself to a level of financial discipline. Too late? Try a savings challenge to recalibrate your spending baseline. A few popular ones:

7. You don’t have to put the rest of your goals on hold.

Yes, student loan repayment can require some sacrifices. But that doesn’t mean you have to put the rest of your financial health on the back burner. Saving for retirement should still be front of mind. If your company offers an employee match — and you can afford to contribute to a 401K or IRA after making your regular loan payments — be sure to take advantage. “You don’t have to wait until your loans are paid off to start investing,” Ellie says. After all, the more you put toward retirement now, the more time it will have to grow.

8. Refinancing can make a huge difference.

For Ellie, refinancing proved the secret sauce to early loan payoff. She was able to refinance her loans to a lower rate, which dramatically reduced her total loan cost. That made it possible to pay down her debt faster. ”Keep an eye on interest rates,” Ellie recommends. “If you’ve already refinanced, consider refinancing again to take advantage of better terms.”

9. Making extra payments requires some strategizing

Different private lenders handle extra payments differently. As Ellie started throwing more money at her loans, she learned that her extra payments were more effective if she made them immediately after her regular payment finished processing. That way, the extra payment went straight toward her principal balance, rather than toward the next month’s payment. Talk to your loan servicer to see what their policies are.

10. There’s no feeling like debt freedom.

Early loan payoff isn’t easy, but it’s absolutely worth it, no matter what kind of loans you have, says Ellie. “There’s a huge sense of accomplishment when you pay them off, and you gain a lot of financial confidence through the process.”

See how much you could save with a private loan from Earnest

Private loans are a game-changing source of funding for thousands of college students. Unlike federal loans, they’re not distributed based on financial need, and you can use them to cover the entire cost of college. Private loans are also the only way to refinance your existing student debt. If you qualify for a lower interest rate through refinancing, you could save money over the life of your loans.

Think private student loans might be a good fit for your needs? Consider borrowing with Earnest. We let each student choose a custom payoff timeline that works for their schedule. We never charge fees of any kind, and we let borrowers skip a payment once a year without penalty. Learn more and check your rate today at earnest.com.

About the Author

Ellie Chatman

Ellie Chatman is the Senior Copywriter at Earnest. She’s not only part of the team–she refinanced her own student loans with Earnest. Her firsthand experience fuels her desire to educate and empower others. Ellie’s goal is to help students and grads understand all their options so they can set themselves up for a successful future.

Disclaimer

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if you're struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.gov/.

2 Please note that you will lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan.

3 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

4 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.