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For more information
or to apply for a private student loan, please click here.
About Private Loans
Private loans, also known as alternative loans, can be taken out as a supplement
to federal financial aid. Students who have used
up their Pell grant money and taken out the
maximum allotted amount in federal Perkins
and Stafford Loans may borrow
additional funds from a private lender. Private student loans may also be taken out by students
who were not awarded federal student financial aid for college.
Interest Rates
Private Loan rates rise and fall with the economy and vary from lender to lender.
Each student lender sets their own interest rate and chooses what kind of borrower
benefits their customers will receive. In contrast, federal loans taken out after
July 1, 2006 are fixed at rates determined by the government (currently 7.90%- 8.50%
for PLUS and 6.0-6.8% for Stafford Loans). The interest rates on private loans are
typically higher than those on federal loans, but lenders may choose to lower their
rates or increase borrower benefits if they choose to do so.
Borrowing Limits
The amount of money a student may borrow in private loans is usually greater than
the amount that may be borrowed in federal loans. The chosen lender will be able
to tell the student how much money they can borrow. For many private loans, the
borrowing limit will be the student’s cost of attendance minus their other financial
aid. Student federal loan limits are outlined in the award letter a student receives
after submitting a FAFSA. By contrast, for the 2008-2009 year, the maximum Stafford
Loan money a full-time dependent undergraduate student may borrow varies between
$5,500 and $7,500 annually depending on year in school. If a student’s parent is
eligible to receive a federal PLUS Loan, they may be able to borrow more federally.
Choosing a Student Lender
While students who attend schools participating in the Direct Loan Program borrow
directly from the government and will not need to select a student lender for their
Stafford loans, those who borrow from schools participating in the federally subsidized
FFEL Program and those who take out private loans will have to choose a lender.
While many students choose to take out private loans from their Stafford lender,
this is not the only option. Schools typically offer preferred lender lists that
recommend lenders to students, but it is best to supplement school advice with personal
research. Many student lenders are available, and they offer varying interest rates,
borrower benefits and repayment guidelines. Schools are required to process loans
from the student’s lender of choice without unreasonable delay, regardless of whether
the lender appears on the school preferred lender list.
Private vs. Federal Loan Repayment
- Private lenders often require that students begin making payments once the initial
disbursement has been issued. In cases where in-school forbearance is granted, interest
will generally accrue.
- Federal Stafford payments may be deferred until 6 months after graduation. Interest
does not accrue during this time.
- Parents who take out federal PLUS loans must make the first payment within 60 days
after the loan is fully disbursed, or on loans disbursed after July 1, 2008, within
6 months of the student graduating or dropping below half-time enrollment. Graduate
students who take out federal PLUS loans may defer their loans until graduation,
but interest will accrue during this period.
- Both federal and private loans usually have to be repaid regardless of situation,
including bankruptcy. However, federal loans can be discharged under certain rare
circumstances.
- Some federal loan forgiveness programs also exist for students who go into certain
professions after graduation and meet other requirements based on the program.
Apply
For more information
or to apply for a private student loan, please click here.