Private Student Loans

Student studyingCollege is expensive, and the costs seem to keep going up. Students are exploring more and more ways to fund these ballooning costs for their higher education. Student loan debt now tops $1 trillion, according to Forbes.

When seeking financial aid, your first step should be to exhaust all forms of scholarship and grant money you may be eligible for. This is essentially free money that you don’t have to pay back. Your next option should be federal financial aid. The U.S. Department of Education offers both grants and loans with low and fixed interest rates with flexible repayment plans. You will need to fill out a Free Application for Federal Student Aid (FAFSA) in order to determine how much aid you may qualify for through government funding. Browse our site for more information on federal financial aid.

Only as a last resort should you take out a private student loan. Private student loans are offered through financial institutions and organizations, and often don’t have the same flexibility or favorable terms as a federal loan. Unfortunately, many times grants, scholarships, and federal loans are just not enough to cover the costs of college, and you will need private student loans to bridge the gap. In addition, federal funding is not available for non-U.S. citizens, while private funding may be. In the 2011-2012 academic year, as many as 6 percent of all undergraduate students took out private education loans while private loan volume reached $6.2 billion in 2012-2013, as published by the Institute for College Access and Success.

Loan Disbursement Information

Generally speaking, loans are disbursed directly to the school and used to pay education-related expenses. This means that the loan will cover your tuition and fees and then, if there is any money left over, it will be disbursed to you to cover any other outstanding educational expenses. Depending on the type of loan offered by your lender, after tuition and school fees are covered, you can use a private student loan to pay for:

Loans are generally based on the total cost of attendance at a school, which is not limited to just the cost of enrollment. When applying for a private student loan, you should only borrow however much you actually need which may be less than the amount offered to you. It can be very easy to get into debt quickly and difficult to dig yourself out.



Repayment OptionsWhile some private loans will allow you to defer payments until after graduation, dropping below half-time status, or leaving school, many will require you to pay as you go, or at least pay the interest while you are still in school. Some loans offer a grace period, or time after graduation before your loan repayment period starts, but not all private loans do. Federal student loans have income-dependent repayment plans, as well as deferment and even forgiveness options that are not offered by private loans. Failure to make your payments on time can negatively affect your credit score as well.

Many lenders have flexible options for you to pay your bills in several accessible ways such as:

  • One-time electronic payments
  • Automatic debit or ACH payments
  • Mail-in payments
  • Payments over the phone

Your lender will be able to set you up on a repayment plan that works for you. A loan servicer, or the company that you pay your bills to and who is responsible for the administrative support of your loan, is able to work with you to find a viable and manageable repayment option. If you are having trouble making your payments, contact your loan servicer as soon as possible. It is also your responsibility to make sure your loan servicer has your current contact information and to make sure you are aware of when your repayment period starts.

Private loans may be a realistic option for you if your other sources of aid don’t cover what you need to achieve your educational goals. You should be sure to contact your financial aid office at your school to determine what is the best option for you and your circumstances as to avoid getting into a financial situation that you cannot easily recover from.

SimpleTuition is a great resource for information on the different types of financial aid out there. Continue browsing our site for more information.

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Types of Student Loans