When a student applies for loans to aid with the cost of college education they aren’t just granted a loan for whatever amount they choose and then receive a check to do as they please with. Instead in the first instance the completed FAFSA form will be submitted to the college of the student’s choice. The amount approved for a federal loan will take into consideration the amount of family contribution and other financial aid received in the form of grants and scholarships.
The financial aid officer at the chosen college will then certify that the student may receive funds up to a certain level to cover the costs of tuition and other necessary expenses such as books and accommodation costs. The federal loan when it is granted will go directly to the college to pay for essential costs.
If the student still has a shortfall after being allocated a certain amount of aid and federal loans, then it may be necessary for the student to then apply for a private student loan. As with federal loans the college must certify that the student is in attendance and set a limit on the amount of funding the student will receive. The loaned amount is once again paid directly to the college with the remainder being dispersed to the student for such things as books and other educational expenses.
This is standard practice across the board and ensures that the student is only using student loans to finance their education rather than other things. It means the student does not receive a student loan and recklessly spend it before the tuition costs are paid.
It would be completely negligent of a lender to approve additional private student loans for things outside the remit of educational needs as the student would most likely be at risk of becoming too far indebted. Also the favourable conditions attached to student loans which mean that repayment of the principal amount of the loan is deferred until after college is not a standard feature of other loans.
Thus private student loans are not available without school certification and this is to the benefit of the student. If a student is seeking such a product alarm bells should ring, as it means that they have either used loans in an irresponsible fashion or they are trying to borrow to finance non educational related expenses.
There is nothing to stop a student applying for a conventional loan on top of their student loans with normal repayment terms applying. However no responsible lender would issue such a loan without proof of an income sufficient to meet the repayments, which is most likely an impossible scenario for the majority of students who have already obtained a private student loan which is subject to interest. Also few students have enough of a credit history of their own to be granted a loan without a responsible co-signer.
Many graduates are already struggling with their attempts to stay on top of student loan repayments but at least the condition of school certification being attached to the conditions of loans being granted stops unnecessary borrowing which could well prove impossible to cope with.