Student’s loan is the most sought-after thing in the financial realm. Unlike other consumer credit, educational loan is a key investment that benefits in the future. Essentially, educational loans have become a primary source of borrowing credit in the light of increasing education prices.
Private student loans are in a way pretty complicated; hence it drills down to the understanding of federal loans first. To start with, one needs to consider certain crucial factors such as overall costs and free aid before applying one. The whole process of choosing the right student loan can be very tedious and overwhelming. This can be sorted out by getting a clear assessment of federal and private student loans and the difference between subsidized and unsubsidized federal student loans. Why take federal student loans in the first place?
Since college fees is very high, federal policies offer same interest rates for the same loans regardless of the credit rating. Federal loans such as Stafford loans, Perkins and PLUS loans are offered in both direct subsidized and direct unsubsidized manner to students and parents. Basically, a federal student loan is offered at lower interest rates with a flexible repayment term. Federal student loans can also qualify the student for the government to pay interest in case of financial need. Additionally, a portion of the loan can be also forgiven, provided the student takes up public service jobs. Needless to say, private loans turn out to be the only last resort for students to pay high education fees.
Though it is an irony to pay high interest on private student loans, federal loans have become stagnant in last recent years which leave no room to choose. Also, students opt for private one if they max out the federal Stafford loan. In any case, private student loans are an amalgamation of high interest rates compared to federal one, variable interest rates, annual loan limits, loan term making it more risky and vulnerable. However, since this is the last take, one needs to find out if there any grants or scholarships available. If however there is still shortage of funds, private student loans come to rescue.
So how does this work? The first and foremost step is to find the best lender that suits your purpose in terms of interest rates, fees and payment options. The fine print should be carefully scrutinised in order to compare different private student loans. The thumb rule is to borrow the right amount which includes only tuition and the related costs. A consigner is an added benefit in case you are a student or an undergraduate without any income or credit history. One may also choose to have a conversation with an education counselor to get a better understanding of private student loans, the overall process and how to go about it.
Now that you understand the basics of private student loans, you can be rest assured for the coverage of the educational costs. The only drawback could be the variable interest rates and the repayment term which are at the discretion of the lender making it tricky and cumbersome. One needs to also keep its credit score clean and low to make the approval process easy and hassle free. Private student loans are an advantage for very pricey institutions.
In a nutshell, private student loans offer high borrowing limit unlike federal one. On the flip side, the statute of limitations is applicable to private student loans in case of default. Private student loans have no subsidy feature which in turn creates accruing interest from the day one. By assessing the pros and cons of private student loans, one has to think straight and judge on the basis affordability and financial capacity to go ahead. Listed below are some of the financial institutions that offer private student loans that one may choose to consider:
- Citizens bank: Offers fixed and variable interest rates
- College AVE: Loans available from $200 up to school certified school of attendance
- Connext: Loan amount available up to $ 500,000
- iHELP: Loan available at variable rates
- DISCOVER: offers up to 100% of the overall school tuition, housing and books fees
- SallieMae: Available to full-time, half-time enrolled students
- Bank of North Dakota: Offers several repayment options
- Commerce Bank: Three payment options available with no origination fees
- CU Student Choice: 0.25 % rate reduction on auto pay
- Finance Authority of Maine: Offers 6 months grace period with no prepayment penalty
- NJCLASS: No administration fee charge on variable loan rate
- HESC: Offers auto pay and graduation interest rate benefit
- SunTrust: Offers graduation reward
- Wells Fargo
Whether its right or wrong to take private student loans is not a pressing point. The fact is to cover all the educational costs, if there is a shortage even after vetting out all possibilities. In principal, go for the one that offers fixed interest rate to keep your monthly payments low.