Choosing Private Student Loans
We get asked all the time, “Where should I borrow if my federal loan isn’t enough?” With television advertising, marketing mailings, and the hundreds of websites about supplemental student loans, sorting through all of the data to make an informed decision is time-consuming and can be really confusing.
Here are a few top-of-mind guidelines for consideration in your private student loan research and selection process. But before any of this, remember: always borrow federal loans (like Stafford, Perkins, etc.) first!
Dig deep for alternatives to further borrowing
It will save you money in the long run to use private loans as the last source of funding. Have you taken into account savings, bonds that may be collecting dust in a safe somewhere, local and national scholarships, part-time work, or work study? Scrimping together a couple hundred more dollars today can save you a lot over the long term.
Undergrad parents: consider a PLUS loan
If you’re an undergraduate student or parent, the federal PLUS loan is a very attractive alternative to a private student loan. Rates are fixed and because it’s a federal loan repayment provisions are more lenient. In undergraduate situations, this is a loan in a parent’s name.
Grad students: consider a GradPLUS loan
The PLUS loan features a fixed rate and because it’s a federal loan repayment provisions are more lenient than private student loans. Note that undergraduate students cannot get a PLUS loan on their own.
Know your loan options
It’s important to shop around. Use sites like ours, see what your school recommends, see what other schools recommend, Google around. This is an important decision, so spend some time looking around before you commit. (Shameless plug: we’ve got info on many lenders at SimpleTuition)
Find a cosigner
Many of you are concerned about not receiving a loan because you do not have a cosigner. This is usually a hard and fast requirement. You may not be approved without one, especially if you are an undergraduate without a credit history. And, better rate / fee combinations are usually available only when applying with a creditworthy cosigner.
Confirm loan details with the lender
It’s important to confirm interest rates, fees and other loan attributes, such as borrower benefits, with a lender before you commit to the loan.
Pay attention to how and when the money is disbursed
Be sure to confirm whether you will receive the funds, or if they will go to the school directly. This is important because confusion over where the money has gone can delay settling your account.