Paying for college can be a difficult process for the family and the student. However, when basic federal loans are not enough, private student loans can be an option in order to cover the cost of higher education.
Federal Student Loan Options
Before a student decides to take out a private loan, the initial and recommended step is to apply for federal student loans. The student needs to file the FAFSA (Free Application for Federal Student Aid) to determine what type of federal financial assistance are available.
Students are also encouraged to apply for scholarships that coincide with his or her field of study. Many students make the horrible assumption that he or she will not qualify for financial aid of any sort, and make the hasty decision to take out a private student loan.
When considering a private loan as a financial option, all other avenues must be pursued and exhausted first. The family and student in question must understand that federal student loans have the lowest interest and provide a financial grace period of six to nine months.
While every option has an advantage, nothing can currently compete with the financial benefits of federal student loans. Private loans are certainly an option to cover extra cost…but they are certainly not regarded as the best and most promising loan option.
Facts Regarding Private Student Loans
Private student loans are based on a students credit score…not level of financial need. However, if an individual demonstrates the intention of using the money towards higher learning, that individual may receive a lower interest rate. If a student has bad credit, many credit unions and various banks offer educational loans to help an individual who is interested in the pursuit of higher education.
As always, it’s critical that an individual understand his or her financial situation. Never sign a loan than can’t be afforded. Stay ahead of the game by means of proper research and planning options.
Private Loan Repayment
Once a student takes out a loan, that individual will either be required to begin payment immediately or offered deferred or interest-only payments during his or her college career. Understand the options so the best plan can be made available based on specific need and the current financial situation.
Many private loans are incentive based and proper payment “conduct” can be rewarded in the form of interest rate and fee inference. If an individual shows the ability to make payments in a timely fashion, he or she can be rewarded with said benefits.
Co-Signor with Good Credit
In many cases the only way a student will qualify for a private loan is with a co-borrower or co-signor. If the student, parent(s), or guardian has poor credit, the qualification process can encounter a brick wall. If all of the immediate family options have been exhausted, find someone close to the family with a strong credit score. When a co-signor has healthy credit, the beneficiary of the loan will have a better interest rate.