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Are private student loans very different from federal student loans?

It’s been a while since I finished high school. I hadn’t decided if I wanted to go to college but now I decided to pursue a career. I looked for information about student loans and I found those types of loans. I’d like to know the difference between private student loans vs federal student loans. I’m looking for information about the best private student loans. I have a part-time job but I’ll need to get some loans for college. Of course, my main interest is in low interest student loans.

Theresa Perry

in Student Loans

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Ralph Lopez on May 17, 2018

Going to college can be quite expensive and, therefore, a loan for college is an option that students can consider in order to afford the financial cost of their education, which in some cases can be significantly high. Although the types of student loan that you mention can both be useful for students that want to get into college and need financial aid, the differences between them are important (https://mygreatlakes.org/educate/knowledge-center/student-loan-options.html).

First, there are the federal student loans. The funds for this type of loan come from the government. They have the advantage of being low interest loans for students and their repayment options are flexible.

If you opt to apply for a federal student loan, you will receive information about the Stafford loan. Most people choose this type of loan because its interest rates are fixed. There are two types of Stafford loan: subsidized and unsubsidized. Subsidized loans benefit from a government subsidy for a determined time, while if you select unsubsidized loans you will need to pay the interest that accrues on your loan.

Then, there is the private student loan. Its funds come from a school or a bank. Something very important to point out is that interest rates of private loans are higher and their repayment options are less flexible than federal loans.

In order to get a private loan you must have a good credit score. Private loan lenders will perform a credit check to decide if they accept your loan application. If you have a good credit score, your interest will be lower. But if your credit score is low, the lender may request that you have a cosigner and if for any reason after getting your loan you don't make your payments, your cosigner will be asked to do it. Furthermore, it can be mandatory for some private loans that you make payments while you are still in college.

The terms of a private student loan are not fixed; they vary by lender. You should read carefully the documentation and ask all the questions that you need to understand the interest rates, the fees and the repayment terms before you take out the loan.

It is advisable to consider applying for a scholarship, a grant or a federal loan before applying for a private loan. Due to its disadvantages, even the best private loans for students should be your last option. 

Ronald Miller2 years ago

A loan is always a loan! A big trap to catch people to make money. It can be a legal business but it’s still a trap. It’s clear that a student will put in the first place his studies and won’t have time enough to work to pay all of his dues while going to college. But take a look at those interest rates. How can somebody pay that back? The next month after his graduation, the student won’t have to go to classes anymore but he’ll have to keep paying off his student loans. He won’t spend his salary as he may wish to do it because he’ll have the burden on his back of having to repay those loans. I could afford to go to college thanks to my parents savings and a scholarship I got for keeping high grades. Loans for college weren’t an option for me! 


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