Uncertified vs Certified Student Loans

Understanding the difference between certified and uncertified student loans is important when deciding how to pay for college. This article dives into the difference.

You’ve probably begun looking for ways to pay for college and scratching your head at how complicated it may be. Sure, filling out the FAFSA itself can seem fairly straightforward, but what about all the other options out there? 

You have seen the term uncertified student loan (or non-certified student loan) come across in your research as one of your choices. The question now becomes, what does this mean and is it a good idea for you? And what is the difference between an uncertified and a certified student loan?

Don’t worry. We’ve got you covered.


What’s The Difference Between Uncertified Student Loans and Certified Student Loans?

A certified student loan is one that’s been verified by your college. As in, it’s been approved to go towards your tuition and related educational expenses. Your lender and your college will coordinate efforts for funding (including giving any money directly to you) instead of managing it all yourself. 

Certified student loans can be both federal and private ones — the funding process is completed through your college’s financial aid office. Your school will work to confirm your eligibility based on your registration and financial aid status, as well as your cost of attendance.  

On the other hand, an uncertified student loan is one from a private lender disbursed to you directly. 

Whereas certified loans are based on your cost of tuition and related educational expenses, uncertified ones aren’t. That means in addition to tuition and school fees, you can use the money towards other expenses such as housing and food. 

When it comes to either type of loan, lenders view them differently. Yes, you’ll need to go through a credit check, but uncertified loans tend to be riskier in the eyes of the lender. That’s because the lender can’t verify how much you really need for school — it’s easy to borrow way more than you need.

Since certified loans go directly to you — your college and lender trust that it’ll go towards education expenses — the inherent risk means that lenders may charge you a higher interest rate.

That being said, uncertified student loans are still a great choice, especially for those who need additional funding after exhausting other types of financial aid.


What Can I Pay For With An Uncertified Student Loan? 

Like we mentioned briefly above, you can use uncertified student loans for almost any purpose. These types of loans are administered by a private lending company and disbursed directly to the student. The main benefit is that not only will you be able to cover costs that other loans can’t, you can cover costs that some federal or certified loans won’t.

For example, uncertified student loans can go towards school supplies like pencils and notebooks, transportation like gas money, and off-campus housing. 

You can certainly use these types of loans to cover part of your tuition and related expenses, but you may want to consider other avenues first. It’s usually a better idea to find scholarships, grants, and federal loans first as these are the least expensive options. If you have savings, it’s not a bad idea to use that as well.


How Do I Qualify For An Uncertified Student Loan?

You’ll need to have good credit history in order to qualify for the best rates. If you’re someone who is just about to enter, having good credit may be challenging, assuming you have a credit history at all. 

Think about it: how many years have you had to build your credit history like adults who open credit cards and have years to prove their creditworthy borrowers? 

The good news is that there are many ways to build credit. There are also lenders out there who are willing to lend money to college students even on a limited credit history.

Otherwise, you can ask a co-signer who has a good credit history (like parents) to apply for an uncertified loan with you. Doing so proves to the lender there’s some who will guarantee the loan will be paid back, even if you can’t.  

Different lenders will have minimum qualifying requirements, so it’s a good idea to shop around. Check with banks, credit unions and even online lenders to find the best rates and terms for your (and your co-signer’s) financial situation.  

Advantages and Disadvantages of Uncertified Student Loans

Even though there are risks with uncertified student loans, there are plenty of benefits as well. 

Some advantages include:

  • Receiving loan proceeds directly to your account
  • Ability to qualify for those who aren’t eligible for federal student loans
  • Choosing how to spend loan proceeds, even if it’s not directly related to tuition
  • Repayment schedule can include a grace period (typically six months)

However, uncertified loans aren’t for everyone, especially if you’ve found other, less costly ways of covering education costs.  

Keep in mind the following downsides to taking out an uncertified student loan:

  • Receiving potentially higher interest rates compared to federal or certified student loans
  • Paying origination ees
  • More stringent requirements such as having a high credit score
  • Needing a co-signer to qualify for a student loan 

It’s really important to understand that a loan of any kind is a serious commitment. Taking out an uncertified student loan can impact your ability to receive other types of financial aid, especially if you have late or missed payments. 


Finding Uncertified Student Loans 

Taking out an uncertified student loan isn’t as easy as it was before since financial institutions don’t want to take on the risk associated with them. As you do your research, you may find that they’re harder to come by.

Still, there are ones out there — you might have to dig a bit deeper. In the meantime, you might want to have a conversation with your potential co-signer about how you plan on being a responsible borrower.

Whatever type of financial aid you end up taking advantage of, knowing the ins and outs of it (read the fine print!) will ensure you understand what you’re getting into and what to do when it comes time to pay it back. 


Juno can help you to find a student loan or refinance a loan at the most competitive possible rate. We get groups of buyers together and negotiate on their behalf with lenders to save them money on private student loans and private student loan refinance loans. 

Join Juno today to find out more about your options for affordable private student loans to help fund your degree.


Sarah Li Cain
Written By
Sarah Li Cain

Sarah Li Cain is a finance writer and a candidate for the Accredited Financial Counselor designation whose work has appeared in places like Bankrate, Business Insider, Financial Planning Association, Investopedia, Kiplinger, and Redbook. She’s the host of Beyond The Dollar, where she and her guests have deep and honest conversations about money affects their well-being.

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