Student Credit Finance

Student Credit Finance is located at www.studentcredit.org

Is it worth applying for a Private College Loan?

College graduates earn more than school graduates and certainly there is less unemployment, so, it is worth the effort in the long run to apply for a college loan, whether it is private or federal.  The answer can only be answered on a student by student, case by case basis.

A Private college student loan is a non-federal and credit based, and should only be used as additional funding after all other sources have been exhausted, including federal college loans. A note of caution—as with any loans, borrow only what is required; be conservative. Remember that you have to return the money borrowed with interest while still studying or when you start working.

Because a private college loan is definitely more expensive than a federal college student loan, make sure that you have used all other options (e.g. scholarships and free money, work-study, low cost federal college student loan, federal parent loan (PLUS Loan, etc.). A private loan can help cover all other education-related expenses not covered by federal loans, such as rent, text books, travel, supplies, school fees, laptop, etc. Additional advantage is that a private college loan can be applied anytime during the school year.

Eligibility
To be eligible for a private loan, most lenders need you to be a US citizen or permanent resident and attending a school that is lender eligible. You need to furnish your credit as well as your income and employment history because private student loans are credit based. A credit Score 730+ is what most applicants need for approval.

Please remember that as a majority of the students do not have a history of credit, it is easier to meet a private lender’s essential requirements by filling the forms with a creditworthy co-signer. A co-signer also helps in lowering the interest rate and loan fee.

Loan Amounts and Rates and Fees
Most private lenders provide 100 percent of the cost-of-attendance minus the funds already received from federal aid and loans. Cost-of-attendance has to be either certified by your school or some private lenders calculate their own figures with the information provided by your school.

The interest rates are paid monthly, quarterly, or yearly, depending on the private lender. Interest rates are also dependant on yours or your co-signer creditworthiness which will qualify you for lower margins, and hence lower interest rates.

Payment of fees, such as application (to apply for a private college loan), origination (fee charged by the lender to issue you your loan, usually added into your loan amount), and repayment charges (when the loan goes into repayment), depends on the various private lenders and your creditworthiness.

Repayment
Again, this depends on the private lenders. Some require you to begin immediately while others will allow you to begin repayment while still in school. Some private lenders allow you to make interest-only payment while still in school, which could be a saving of thousands in interest after you graduate.

Forbearance and deferment benefits vary by lender. These benefits allow you to postpone your loan payments in case you meet financial hardships.

Prepayment penalty is a fee only applied to those who pay off their loan early.

A strong reminder—apply for a private student loan only if all your other options are exhausted. Before you fill out an application for a private loan, surf The Department of Education’s website to studentaid.ed.gov or stop by finaid.org to search for grants and scholarships [again, hopefully]