Private Student Loans and Other College Funding Options.
December 27th, 2007
Private student loans have gotten a bad rap lately. Legislators have focused on some extreme cases of borrowers who have gotten in over their heads, but for the most part, private student loans can come through where Federal student loans and grants leave off.
Federal grants and scholarships are always the best route to go when financing your college education. Grants and Scholarships are completely free money that you don’t ever have to repay. If you’re eligible for grants and scholarships, best advice is get as many of them as you can.
Federal student loans are also desirable, but federal loans are still loans. You will have to pay back the money borrowed once you graduate, unless you meet the requirements for student loan forgiveness, which is hard. Federal student loans are good though, better if they’re subsidized, but not a bad deal in the long run and should always be the next option after you’ve exhausted your grant and scholarship opportunities. The disadvantage of federal student loans is that federal loans have lifetime lending caps. Once you’ve borrowed the maximum, you’re done with federal aid. Until recently, the lending caps haven’t been adjusted in a very long time, so if you must borrow your way through school, you will run out of funding (especially, with the continuous increases in college tuition every year).
In addition, Federal student loans only cover “eligible expenses.” They can’t be used for living expenses, so again, if you’re borrowing your way through college, you can’t exclusively depend on federal student loans.
However, once your federal aid is used up, you should then look into a private student loan. Private student loans may help bridge the gap between federal aid options and what your college education actually costs. Private college loans don’t operate like Federal student loans do. There are no caps on interest rates, but then again, the caps on lending is a lot higher than federal aid. This should definitely cover any additional expenses you face in college.
The best approach to financing your college education will come from balancing your “financial aid portfolio” with grants, scholarships and federal student loans. Use private student loans to make up the difference. If you search cautiously, you will find private student loans that offer great borrower benefits and good terms. Private lenders are also free to offer programs that you won’t find with lenders in the Federal student loan programs.
Based on this, don’t write off private lenders because of horror stories you may have heard or read about. Balance your financial aid, and use private student loans to cover what your federal aid package can’t.
Entry Filed under: Uncategorized