Be smart about private student loans
Private student lending are meant as a way to bridge the gap between federal aid and the cost of attendance. Compare your funding options, and borrow only what you need: it’s important to be financially knowledgeable and responsible during this process.
How to Shop
- Compare Private Student Aid - While federal loans are regulated to have the same rates and fees, private loans come in all different shapes and sizes, so it’s important to compare and find the right fit for your needs.
- Look at the APR — The Annual Percentage Rate (“APR”) bakes in all the costs associated with the loan so you can compare one to another on an apples-to-apples basis. The interest rate alone is not an adequate point for comparison. For example, a loan with a high interest rate might look worse than a loan with a lower interest rate, but high fees on the lower-rate loan means that it might actually be more expensive. The APR would reflect this difference.
- Also compare the total cost of the loan, or “price” of the loan. Total cost is an estimate of the sum of the total payments you would be scheduled to make on a loan. Your need for $5k today, may cost you considerably more if paid back over the course of 10 years. APR expresses a similar point of comparison, but it’s often useful (and sobering) to see how much a loan might cost you over time. Remember – shorter repayment terms will usually cost less than those with longer repayment terms.
- Apply with a creditworthy cosigner - in the current credit crisis a cosigner will almost always be required for an application to get approved. And not just anyone will fit the bill – the cosigner must have strong credit (credit score of 700 or higher) and verifiable income.
- Only borrow what you need. Not a penny more.
Remember to start early on your college funding search this year and use SimpleTuition as part of that process!