Private Student Loans Expand Your Options

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We’ve been following some wonderful trends lately when it comes to paying for college including the decision that some student loansschools have made to do away with student loans. Specifically, several high-priced colleges including Harvard and Yale are planning to tap their generous endowment funds and close or eliminate the gap between what their students must pay each year and what their families can afford. Tens of thousands of people are expected to benefit from this move annually, freeing up students from a significant chunk of debt post-college.

Although consumer watchdog groups are applauding this move, the reality for most students is that they will have to pay for at least part of their tuition costs as most smaller colleges and public universities simply do not have the funds to help students out. Even after grants, 529 funds, personal savings, scholarships and tuition breaks are considered, many families will find themselves needing to come up with thousands of dollars annually to pay for college.

Stafford Loans or Private Student Loans

Stafford loans, which is the federal-backed student loan program that has opened up educational opportunities for millions of students, is a popular way to cover college costs. However, strict eligibility requirements and a lack of flexibility when it comes to using these funds, are two major drawbacks to Stafford loans.

Private student loans are gaining in importance and are the source many families are turning to in order to pay for college and manage post-college debt. With private loans, undergraduate and graduate borrowers may borrow annually up to the lesser of the cost of attendance or $30,000 ($40,000 for certain schools where the cost of attendance has been determined to exceed $30,000). Continuing education students can also benefit, borrowing as much as $30,000 per academic year.

Private Student Loans: What You Need To Know

Like any debt obligation, a private student loan must be repaid. In addition, the interest rate for a private student loan will be somewhat higher than a Stafford loan.

Importantly, a private student loan offers the following:

No payments until graduation — just like Stafford loans, you do not start paying your private student loan back until after you graduate, typically six months after graduation.

You control the money — Stafford loan money is sent directly to your college, whereas private student loan money goes to you. Use these funds to cover your tuition costs, housing, books, purchase a laptop, or for whatever purposes you choose.

Get a better rate — with a co-signor, such as a parent, you could qualify for a better rate and save even more money.

College costs continue to climb at a rate much higher than the inflation rate, limiting the educational choice for middle-class families who have the most difficulty coming up with the funds to pay for school. With a private student loan, your choices expand significantly while giving you full control over your funds.

Further Reading:

About Private Student Loans

Student Loan Guides & Tips

Establish A College Budget

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Categories: Student Loans