School Channel and direct-to-consumer are the two types of Private College Loans that are available for prospective private college loan recipients. School-channel loans offer borrowers lower interest rates but generally take longer to process. School channel private loans are approved by the school, which means the school signs off on the borrowing amount, and the funds are disbursed directly to the school. Direct-to-consumer private loans are not certified by the school, which means that schools don’t interact with a direct-to-consumer private loan at all. The student simply supplies enrollment verification to the lender, and the loan proceeds are disbursed directly to the student.
While direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds quicker than the School Channel private college loans. Direct-to-consumer private loans are the fastest growing segment of education finance and under legislative scrutiny due to the lack of school certification. Loan providers range from large education finance companies to specialty companies that focus exclusively on this niche.