Private Student Loans Are An Alternative To Federal Funding

Private student loans are used to fill the gap between what you were awarded in college financial aid and the total amount you need to cover all of your college expenses. They are credit based loans so please know they’re not free money for college and must be repaid. Private student loans are basically personal loans made with the assumption that your income will increase with more education. Private student loans are granted either to the parents or the students, and can be done through a variety of institutions as well as private loaners

Private student loans are directly payable to the students, not the college itself, so many students like the flexibility they offer. The problem with private student loans is that you do not get a locked-in interest rate, and the interest rate is usually very high. Private student loans typically have variable interest rates, with the interest rate pegged to an index, such as LIBOR or PRIME, plus a margin. In today’s interest rate environment, a Prime Rate loan may vary from 7.70 percent to 17.85 percent, while a Libor based loan may vary from 8.46 percent to 12.85 percent. Private student loans can cover the entire cost of your education and be a very efficient way to pay for your college education.

For undergraduates and graduate students, you can borrow up to the full cost of your expenses minus financial aid received, or $ 40,000, whichever is less annually. Private student loans are an additional source of financing your education and are often used to cover the difference between Federal student loans and all education expenses.

Private student loans are credit based loans, so if you do not have great credit then you might find that many private loans are unavailable to you. If this is the case, consider a co-signer. Private student loans are an alternative source of financial aid funding provided through financial institutions and can be used for any education-related expense, such as, tuition, books, housing, utilities, computers, food, and lab fees. Since private student loans are credit based, you should apply with a credit-worthy co borrower if possible, to obtain the best financing rate and terms.

One issue many students encounter with private student loans is paying back the money after graduation. The grace period from payments after graduation is not very long and private loans do not offer the opportunities for cancellation or loan forgiveness that are available on many federal loan programs. The financial institutions expect graduating students to join the work force almost immediately. If students encounter difficulty in paying back the loan there is an option of applying for student loan consolidation. Private student loan consolidation is an option for students with private student loans to consolidate and it might be the only way for many students to become debt free within a few years after graduation