THE WORLD OF PRIVATE LOANS
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The World of Private Loans

Not all private student loans are created the same. Compare the details of different loan products to ensure you apply for the best loan for you.

Private Loans

Private student loans can play an important role in financing your education, but you want to apply for the one that is best for you. Look at how much a loan will cost you over time, as well as the options you'll have when it comes time for repayment.

Click on each term to learn more about the things to consider when choosing a private loan.

Interest rates can vary greatly, and can be influenced by your credit history. Lenders usually offer a choice between fixed interest rates (i.e., the interest rate never changes) or variable interest rates (i.e., interest rates may change over time). High interest rates cost more in the long run.

Some loans offer grace periods after graduation, during which no payments need to be made. Many loans offer options on how long you can take to repay the loan. A longer repayment period means lower monthly payments, but can cost you more interest.

There may be options for temporarily suspending loan payments, such as forbearances or deferments. These options provide a safety net in case you someday have trouble making payments.

Sometimes lenders will charge fees when you borrow money. When fees are high enough, they can offset the benefit of a low interest rate.

Student or Parent

Whether it's better for the student or the parent to borrow a private loan is a decision that needs to be based on your personal situation.

Keep in mind that most private student loans require a credit check, so parents with good credit may find it easier to get loans and may be offered lower interest rates than students with limited or no credit histories. On the other hand, students can often get private student loans if they have cosigners that agree to take on the responsibility of loan repayment in the event that the student doesn't make payments. Borrowing private student loans responsibly is one way for students to begin building their own solid credit histories.

Fees

In addition to the interest you are charged for a loan, lenders may also charge you various fees at different times. These fees should be taken into consideration along with the interest rate when determining the actual cost of a loan.

up-front fees

Up-front fees, such as origination fees, are charged immediately when the loan is made.

For example, say the lender charges a 1.5% origination fee. If you have a $10,000 loan, this 1.5% fee (equal to $150) is subtracted from the amount of the loan. This means you'll actually receive $9,850 but will have to repay the original $10,000 amount plus all accrued interest.

back-end fees

Back-end fees, such as repayment fees, are charged just prior to when you begin repayment.

For example, say the lender charges a 3% repayment fee. If you have a $10,000 loan, this 3% fee (equal to $300) is added to the principal balance of the loan before you begin repayment. This means you'll be repaying $10,300 plus all accrued interest.

The Choice is Yours

Can I apply for any private loan I want?

Correct!

Many lenders offer several different private student loans, and you are free to apply for any one you like. Schools may provide information about specific lenders and loans they think are likely to meet your needs. You may find this information helpful, but you aren't obligated to apply for those loans.
Incorrect

Actually, the choice is entirely yours. Schools may provide information about specific lenders and loans they think are likely to meet your needs, and while this may be helpful, you aren't obligated to apply for those loans.

Many lenders offer several different private student loans, so be sure to carefully evaluate your options and find a loan with which you are comfortable.

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