Private Student Loans
A college degree is an investment in a promising future, but it isn’t free of charge. Once you’ve exhausted all the federal financial aid you’re eligible for, you may find that it just doesn’t cover everything. In this case, you may need to turn to a private student loan to fund the remaining costs. A private loan typically come with higher interest rates and charges, so you should comparison-shop and read all fine print carefully.
Your first step in the process of paying for school is filing a FAFSA to see what kind of federal assistance you are eligible for. Since federal grants do not have to be repaid and federal loans and work-study programs offer more flexibility and lower rates than most private student loans, you will want to make every effort to receive federal assistance first.
Before You Borrow
As always, before you make a commitment with the significant financial consequences of a private student loan, you want to be as informed as possible. Consider the following guidelines as you begin your research into private student loans:
- Know how much you need to borrow. Look at your own financial situation and figure out how much you will need to borrow in order to pay for school. Do not borrow more than you need since debt adds up quickly and can be overwhelming when not managed carefully and responsibly.
- Understand the private student loan process. Before taking out a loan, learn everything you can about the loan process, including interest rates and any fees you may be charged. Know what you are getting into before you get into it!
What to Look For in a Private Student Loan
A private student loan is an amount of money that you borrow from a private lender to pay for your education. In addition to the actual amount of the loan, there will be fees and interest for each loan, adding to the overall amount to be repaid. When hunting for the best private student loan, you will be comparing the many that are out there. Here are some tips to think about in your search:
- Low interest rates are not the only thing to focus on when choosing a loan. Some loans can have low interest rates but high fees and vice versa. Finding the right balance of fees and interest rates is key to finding the most affordable loan.
- Loans that have different repayment plans should not be compared to one another. Loans with longer repayment terms have lower Annual Percentage Rates but have an increased amount of interest since you will be paying it back over a longer period of time. Use the StudentAid’s Loan Analyzer Calculator to find and compare loans with similar repayment plans.
- A cosigner with good credit and a solid credit history of your own will give you the greatest opportunity to get the best loans with the best rates.
- Become familiar with the various terms associated with private student loans. The more informed you are, the better choices you will make and the lesser your financial burden in the long run. Click here and scroll to the bottom of the page for a list of definitions.
- You may not receive the full details regarding loan terms of certain loans until you submit an application since students with good credit will likely be offered lower rates and fees and and students with bad credit will likely be offered higher rates and fees.
- Work with a lender who has a good reputation and excellent customer service. This is a long-term relationship and significant commitment, so you want to work with the most reliable and helpful professionals around.