Q: If I will not be receiving enough money in federal student loans to cover my college expenses, is it better to take out a private student loan or use a credit card to make up the difference?
A: Before looking into private student loans, it is important to make certain that you have exhausted all of your federal financial aid options and free money options (scholarships and grants) for college. Scholarships and grants will provide you with money for college that will not have to be repaid, and federal student loans offer the lowest rates and best repayment options available.
When it comes to utilizing a credit card versus a private student loan, a private student loan will most likely provide the borrower with a lower interest rate (especially with a creditworthy cosigner, however keep in mind the interest rate will most always be variable), and a private student loan will not require the borrower to make payments while in school.
Any debt you acquire for college beyond federal financial aid should be reviewed very carefully. A good rule of thumb is to never acquire more debt for your total college education (private student loans and federal student loans included) then you plan to make your first year in the workforce after graduation.
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