Private Student Loans.

Private student loans are offered by private companies that extend loan offers to students for varying interest rates and terms.

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The path to college and higher education is getting more expensive every year.

If you do not qualify for federal grants or loans or need additional funds beyond what you were awarded you may be considering private student loans. These loans are substantially different from federal loans and grants or student aid awarded based on FAFSA. Before taking on private student loans make sure that you understand the loan obligations and how these loans work.

Private student loans are offered by private companies such as Sallie Mae, Wells Fargo and Discover. These lenders extend loan offers to students for varying interest rates and terms. It is important to comparison shop for the best overall loan. You will want to compare interest rates, fees and terms. When considering your private student loan options make sure you are comparing apples to apples. Two websites you can use to help compare private student loans are Credible and SimpleTuition.


Private student loans are
available for both students
and parents.

For example, Sallie Mae describes their loan offerings
at their website.

"For students: Private student loans like the Smart Option Student Loan® are taken out by the student with or without a cosigner. Both the student and the cosigner are responsible for the loan.

For parents: Loans like the Sallie Mae Parent LoanSM are taken out by parents or another creditworthy individual. The borrower is responsible for repaying the loan.

Our loans, as well as those of many other lenders, can be used to help cover up to 100% of a school’s certified Cost of Attendance (COA), less other financial aid received."

Depending on your situation and that of your parents, one or both of these loan options might work for financing your education.

Private lenders will have more stringent terms than federal loan providers.


Private lenders are not regulated by a government agency or limited by interest rate restrictions that apply to federal loans. Private student loan interest rates are determined solely by the company offering the loan. Repayment terms are also dictated by the lender and you are obligated to those terms when you sign the loan contract. This means you may have to begin repaying your private student loan while you are still in school. Depending on your loan terms you may also have a variable interest rate which can increase your loan payments.

You may need a co-signer to qualify
for a private student loan.

Most students have not had enough time to build up adequate credit or finances. Because of this it may be necessary to have a co-signer when applying for a private student loan. A private lender will want as much assurance as possible that you will repay your loan. Because students typically have little to no credit and do not generally have large financial resources, the lender may require a qualified co-signer.


Once you choose a private student loan you will need to sign a contract.

This contract is a legal obligation that you are responsible for adhering to and repaying your assigned debt. Make sure you read the contract and understand what you are signing. You should not sign anything you do not understand. Some private loans will have fees in addition to the interest that you will pay on the loan. Also, some private loans will have different repayment terms. Make sure you understand and accept the terms of the contract before signing.

Private student loans can be refinanced
or consolidated.

Much like credit card debt, if you find yourself having difficulty making your private loan payments you may be able to refinance or consolidate your debt. This process will vary on your individual situation and your lender(s). It is best to consult with a student loan debt expert for the best possible outcome for this process.

You will be required to pay back your private student loans without the benefit of forgiveness or forbearance programs.

image4-studentloan's article "about student loans" explains the negative consequences of defaulting on a private student loan stating, "Like federal loans, private student loans can't be dismissed in bankruptcy except in death or total-and-permanent disability. That means that even if the variable interest rate on your loan spirals out of control, you still have to pay it back -- or else you could face collections, wage garnishments and potential lawsuits." Private loans do not have forbearance or forgiveness programs. Private lenders can and will pursue all available options If you default on your loan. They can send you to collections which will negatively impact your credit, potentially garnish your wages, and even take you to court.

Navigating the financial path to higher education can be challenging. Private student loans offer a way to bridge the gap of needed money to get to college. Explore all your options and weigh your choices carefully. Don't take on more debt than you truly need and be certain you understand the payment terms and responsibilities of any loan you take out. If you find yourself uncertain of how to proceed consult a student loan expert to help you map out the best path for your educational needs.

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