Private Loans for Students
In our opinion, prospective undergraduate students who require private student loans (in addition to the maximum allowable amount of federal loans) to afford a particular school should almost certainly attend a less costly college. No matter how enamored you are with a specific college, it is not worth saddling yourself with debilitating student loan payments after graduation.
Given the various repayment options for Federal Student Loans, borrowers who stay within the federal program (and graduate) typically have fewer problems repaying their loans – even after borrowing the maximum of $27,000 over four years.
On the other hand, students who pile on additional private student loans, which often have less flexible repayment options and uncapped variable interest rates, will likely to find total monthly student loan payments to be a significant burden.
Always borrow with eyes wide open. Use the loan repayment calculators and do the math.
Attending a less “prestigious” college that is affordable, commuting from home or starting with two years of community college before transferring to a four-year college are all better options than graduating from your “first-choice” college with an unreasonable amount of student loan debt.
Don’t begin adulthood by making the most foolish financial decision you will to make in your lifetime!
Private Loans for Parents or Cosigned by Parents
For certain families, private education loans may be worth considering.
Parents with above average credit scores may find that private education loans provide the least costly way to finance education costs. Recently, some private lenders have begun offering educational loans with lower interest rates then the federal PLUS loan and low or no origination fees.
In some cases the student is the borrower and the parent the cosigner in others the parent is the borrower.
But as stated above, we strongly discourage undergraduate students from borrowing in excess of the federal student loan maximums. It is one thing for parents to finance their contribution using a cosigned private student loan (instead of a PLUS) that they are committed to paying back, but quite a different thing to allow the student to make an irresponsible financial decision and borrow too much for an undergraduate degree.
Before committing to a private educational loan ask the following questions.
Simple Tuition provides information about many of the private education loan options.