Private student loans provide a sound way for college students to fund their education.

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College students who need help funding their education will often turn to student loans as an important way to meet their financial needs. Federal Stafford loans have helped millions of students pay for college down through the years, a program that continues to meet the funding needs of families all across America today.

Inasmuch as Stafford loans are a lifesaver for many families, some families aren’t eligible for these types of loans. Fortunately, the private sector has stepped in by offering their own lending plans, what we call private student loans.  Commercial banks and other private financial institutions are the largest providers of these types of loans, hence the name.

A private student loan has several advantages and attributes including:

Loan limits are higher with a private student loan. In some cases, you can borrow as much as $45,000 annually to pay for your education. Limits are based on what your academic costs run.

Interest rates are competitive. Though loan rates for private student loans are higher than federal Stafford loans, interest rates on private loans are often quite lower than other consumer lending options. You can get an even lower rate if you have someone co-sign the loan. In this case the co-signer’s good credit is also considered when applying.

Loan disbursement funds go directly to you, not to the educational institution. This distribution method gives you some flexibility on how to spend your funds and can be used to cover related expenses including rent, food, new computer equipment, etc. Stafford loans are restrictive and won’t allow you to use these monies for some related school expenses.

Extended grace period. Many government loans will require you to make your first repayment some six months after you graduate. Similarly, private student loans work the same way, but certain lenders may allow you to wait a full year after graduation before repayment must begin.

Of course, if you choose to borrow money for school, you’ll want to only borrow the amount of money that you will need. For some first year students that can be difficult to predict, therefore if you choose to borrow more for the first year then you can be assured that you have sufficient funds for the entire academic year. Excess funds can always be applied to subsequent schooling, thereby reducing or eliminating the need for a follow up private student loan.

Finally, when it comes time to make regular payments, most students choose automatic deductions from their checking accounts to cover their monthly obligations. Your lending institution will supply all of the details you need when payments are due, providing a secure and sensible repayment plan that is right for you.

Tags: academic calendar, college education, college financing, college loans, private student loans, student lending, university

Co-signing a private student loan for your son or daughter makes financial sense, but you'll want to make known that the repayment of these loans is on their shoulders, not yours.

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Your adult offspring is getting ready to attend college this fall and you’re confident that she will succeed. After all, good grades, excellent study habits, and valuable extra-curricular work while in high school has gotten her this far.

With the good academic record have come several scholarships, a grant, and with the monies saved from her 529 college savings plan, almost enough money to cover costs for the coming academic year. Unfortunately, tuition is a bit higher than expected, dorm costs have increased, and declaring a dual Psychology/Sociology major means she’ll be needing to buy a lot of textbooks plus a new laptop and printer.

Quite suddenly you and your daughter are realizing that she is coming up short financially, not by a whole lot, but about two thousand dollars for the first academic year. You’ve looked at federal Stafford loans and found out your family isn’t eligible, but you know that your daughter can get a private student loan and at a competitive interest rate at that. One small question remains: should you co-sign her student loan?

Like so many families planning to send their grown children off to college in a matter of weeks, you may be scrambling to find the funds to pay for school. Add in more money for gas and food and things may be very tight come this fall.

Co-signing a private student loan might make sense for your family especially when the following applies:

Your child doesn’t have a sufficient credit history to obtain a loan on their own. Even if eligible, the interest rate could be very high come repayment time.

If you have excellent credit, the interest rate for the loan will likely be significantly lower with your name on the loan.

Of course, if you co-sign the private student loan there are some risks involved, namely:

If your child fails to repay the loan, then you’re responsible for making payments.

If you choose to co-sign the student loan, make sure that you have copies of the paperwork on hand. You need to know when the loan is due, to whom payments are made, and you need to get copies of quarterly statements to verify payment.

Although your son or daughter may be showing a lot of responsibility right now that doesn’t mean that they won’t make a bad decision or a mistake that could ding your credit. By co-signing a private student loan you can save your adult child hundreds even thousands of dollars in interest charges, but there are always risks involved. Make certain that your child understands their responsibilites to repay their loans, keeping a burden off of your shoulders.

Tags: college financing, college loans, private loans, private student loans, school loans, student lending, Student Loans