What Is A Private Student Loan?

One option for financing your college education is the private student loan. This type of loan can be either the sole source of financing or can supplement federal loans for students. Most people go the second route, and use private loans only after all federal loan and grant opportunities have been exhausted. Examples of federal loans include the very common Stafford loan, the Perkins loan and the PLUS loan. Federal loans have many advantages which is why students should turn to them first when in financial need. Federal grants are also helpful as they are funds that are not repaid.

When you get a private loan, the interest is determined by the bank, credit union or lending institution that provides the loan. This rate is usually based on credit worthiness, and the risk the institution believes they are undertaking by providing the loan. The decision to grant a student a private loan is a difficult one for private lenders because the majority of young college students do not have a sufficient positive credit history or substantial income. It helps to shop around and compare interest rates from different lenders before applying. Also, your chances of approval are higher if you have a co-signer (such as a parent) with steady income and good credit.

There are many things to consider when shopping around for this type of loan. You will want to look at the interest rates through the entire term of the loan. Also, payment options are another factor. Private loans often require payments to begin immediately rather than after graduation as some federal loans do. Some private lenders may offer helpful incentives to students based on a favorable record of payments over time. And finally, make sure you know what the origination fee is, which is added to the total cost and is a fee charged for creating the loan for the borrower.

For the majority of students, the private student loan should only be pursued after all federal funding has run out. In order to obtain federal student loans, you must complete a FAFSA, which stands for Free Application for Federal Student Aid. This all-in-one form is used to qualify students for loans, grants and any other available federal programs, such as work-study. There may be additional applications and documents required by your college or university.






 

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Financial Aid News:

 

Student financial aid changes effective July 1
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By John Hechinger on May 15, 2012 Joshua Mandelman made $454000 in a single year as a student-loan debt collector -- more than twice the pay of the US secretary of education. His boss, Richard Boyle, chief executive officer of Educational Credit .
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Drowning in student loan debt? See what experts said in our live chat - Detroit Free Press

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KATHLEEN GALLIGAN/Detroit Free Press Are you drowning in student loan payments? Talk to experts about student loans, financial aid and scholarships during a live chat now. Drowning in student loan debt? See what experts said in our live chat Are you .

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Now, As You Strive to Pay Off Your Student Loans. - The Fiscal Times

The Fiscal Times
Now, As You Strive to Pay Off Your Student Loans.
The Fiscal Times
Obama EUR an alumnus of Columbia EUR used his time to campaign for the women's vote: He told students to EURœfight for your seat at the table. Better yet, fight for your seat at the head of the table.EUR Romney, meanwhile, just days after Obama had announced .
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