Recent Content

  1. 2 years 10 months ago
    Written by Colin
  2. 2 years 10 months ago
    Written by Colin
  3. 3 years 1 month ago
    Written by Nicole
  4. 3 years 3 months ago
    Written by Nicole
  5. 3 years 3 months ago
    Written by Nicole
  6. 3 years 4 months ago
    Written by Colin

Beyond the Stafford: Private Student Loans

Alternative and private student loans can help cover tuition, room and board, books, supplies, and other higher education-related expenses. As opposed to federal subsidized and unsubsidized student loans, alternative and private loans are not provided by the federal government. These loans are offered by many banks, credit unions, and other institutions and are not federally funded. But, it's important to note that the interest rates of private loans are NOT fixed, so be sure you've uncovered all other financial aid in the form of government-sponsored grants and loans, as well as scholarships before you decide to take out a private loan.

What does a private student loan cover?

Alternative and private student loans offer students a way to cover tuition and expenses that are not met by other forms of financial aid. In many cases, students can pay for the full cost of their tuition with a private loan.

How much will I be charged in interest for a private student loan?

The interest rate, which is unfixed, is usually a combination of the Prime or Index rate, within a certain margin. This rate will fluctuate over the course of the loan, therefore you will likely pay more interest on these loans than you would with a fixed-rate federal loan. These loans must be paid back with all interest. So, it's a good idea to look into all other financial aid options before you choose to apply for a private or alternative loan.

Who is eligible for private student loans?

U.S. citizens and permanent residents who are enrolled at least half time in a four- or five-year degree program are eligible for private and alternative loans. In most cases, qualifying for the loan will depend on your credit and your co-signer's credit.

Do I need a co-signer for a private student loan?

Most alternative and private loans will require a co-signer who will be responsible for repayment of the loan in the event that you default on the loan payments. This co-signer's credit will be considered along with your credit in determining whether you qualify for the loan.

How do I repay a private student loan?

Most banks and loan-granting institutions will offer you several options for repaying your student loans. These include:

  • Paying accrued interest while still enrolled in college, for up to four consecutive years. You will be required to begin repaying the principle and interest by 45 days after you graduate, withdraw from college, or (in some cases) drop below half-time enrollment
  • Immediately repaying principle and interest within 45 days after the loan is disbursed. This means that you will be making loan payments on the principle and interest while still enrolled in college
  • Completely deferring payments until you graduate. For up to four years, you will owe no payments on the principle or interest of the loan. In most cases you will be required to begin repaying the loan six months after you graduate, withdraw from school, or drop below half-time enrollment. Usually interest accrues throughout the time the loan is deferred and then added to the loan balance when you begin repayment.

How do I get started with private student loans?

It's important to shop around to see where you can get the loan amount you need, and to see if there are any interest rate incentives offered by your own bank or a local credit union. Check with your bank or credit union first, and then use one of many online loan search tools. Depending on your credit, many offers you receive will likely be comparable, but it's a good idea to check at least a handful of sources before applying with a bank. Make sure you read all loan documentation in detail, get answers to any and all questions before signing the loan, and be absolutely certain that you understand your loan repayment responsibilities.

CollegeEducation411 Newsletter SignUp

* indicates required
Are you a student or parent?
Email Format

Connect With Us