High school seniors, you may think the hard part about your college decision-making is over. You’ve probably already applied to, been accepted and decided on a school. And you’ve probably completed your FAFSA and know what your financial aid award entails.
Whew. That’s a lot of work, and it probably took up most of your senior year.
However, there might still be one hurdle left to cross (aside from finals!). If your financial aid award doesn’t cover all your expenses, you’ll need to find more money.
We’ve said it before and we’ll say it again: When it comes to paying for college, be sure you look to your lowest-cost options first. That means get all the funding you can through grants and scholarships, which don’t have to be paid back.
Your next-best option is federal student loans. These loans offer a low, fixed interest rate, and offer some entitlements that help can protect you from default during repayment.
Then, if you have tapped out your options for federal loans and still need additional funds, consider a private student loan.
Private student loans are offered by banks and other private lenders, who set all the terms and conditions (the rules, basically) of the loan — like how much interest they’ll charge, and how long you have to pay it back.
In general, private student loans have higher interest rates than federal student loans. Many private student loans will offer a range of interest rates, based on the credit of the borrower (that’s you) and/or your cosigner. (A cosigner promises to be responsible for the loan if you’re not able to pay it back.) Better credit = a lower interest rate. It’s likely that in order to be approved for a private student loan, you’ll need a cosigner.
Private student loans all vary by lender, and there are often different loans available based on your situation (whether you’re an undergrad or grad student, etc.).
If you’re considering a private student loan, talk with your financial aid advisor about your options, and compare the different loans carefully. Here are some things you should find out about any private student loan you’re considering:
- What is the interest rate (also called Annual Percentage Rate or APR for short)?
- Do you need a cosigner?
- How much time do you have to pay off the loan?
- When do you have to start making payments?
- Are there any borrower rewards offered?
Remember: When it comes to student loans, federal or private, you should only borrow what you really need because you’re going to have to pay it back — with interest.
What questions do you have about private student loans? Ask us!