Private Student Loans

What Are Private Student Loans

Private student loans are privately funded education loans offered by a private lender, bank, or other private financial institution. College students can use private student loans to cover educational expenses that are not covered by their federal student loans and free money options for college (i.e. scholarships, grants, etc...). Most financial aid experts recommend that students exhaust all of their federal financial aid options (including federal student loans) and “free money options” before applying for private student loans, since private student loans often come with higher interest rates and less flexible repayment options (compared to federal student loans).

Why Are Private Student Loans More Expensive Than Federal Student Loans

Private student loans are typically more expensive than federal student loans for a few reasons. First, federal student loans are able to offer fixed interest rates that are generally lower than the variable rates offered by most private student loans. Second, federal student loans are based upon a borrowers financial need, while private student loans are based upon a borrowers credit profile. Borrowers without good credit, or borrowers with little credit history will likely have trouble qualifying for a private student loan at a good interest rate, if they can even qualify for the loan at all.

Who Needs Private Student Loans

Many college students need to apply for private student loans, because federal student loans often do not cover the full amount of a students college education expenses. Private student loans are needed by both graduate and undergraduate college students. Students should always exhaust all other college financial aid options before applying for a private student loan.

Are There Different Types Of Private Student Loans

There are different types of private student loans, and private student loans can vary with each lender. For example, some private student loan lenders will offer non-school-certified private student loans, and/or different private student loans depending on the college student's level of study. It's important that before applying for private student loans, you determine your needs, and then compare your options. There are many private student loan lenders out there, so be sure and find the one that can best fit your needs.

What Are The Interest Rates On Private Student Loans

The interest rates for private student loans will typically be variable interest rates, that depend on the loan type, lender, and the borrowers credit score. Generally the higher your FICO score, the better off you are in terms of private student loans and their corresponding interest rates.

Am I Eligible For Private Student Loans

Private student loans are largely based on the borrowers credit score. Individuals with bad credit or little credit history may have a difficult time qualifying for private student loans without the help of a creditworthy cosigner. Even if you (the college student) have good credit, and qualify for a private student loan on your own, some private student loan lenders may offer a lower interest rate for applying with a creditworthy cosigner.

Where Do I Get Private Student Loans

You can get private student loans from your school or from private financial institutions. For a list of private student loan leaders click here.

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