Private Education Loans​

You may have heard or seen advertisements that suggest you can borrow thousands of dollars to pay college expenses. These advertisements generally are promoting private student loans, also known as alternative loans. Although many students must borrow private loans to meet all of their college costs, there are more cost-effective ways of paying for college. As a result, you should use private loans only as a last resort, if all of your other sources of financing fail to cover your college costs.​

Tips for Borrowing Private Loans​

If, after exhausting all other financial resources, you find your funding still falls short of your college costs, you may have to take out private loans. Consider the following tips to get the best private loan deal.

Consider a Co-signer. Your lender may require a co-signer if you have no credit history or a poor credit rating. By using a co-signer, you may be eligible for lower interest rates and reduced loan fees.

Work With a Reputable Lender. Ask your financial aid office for recommendations.

Compare Interest Rates and Terms. Compare the Annual Percentage Rate, or APR, on various private loans. Understand how often your interest rate can change and what the maximum rate may be. Learn about any fees that will be charged on your loan. Consider:

  • How long you will have to repay the loan.
  • What repayment options are available.
  • Whether you are entitled to defer loan payments and under what circumstances.
  • When payments are considered late.
  • The penalties for making late payments.

Find out if your lender offers online access to your account and how responsive your lender is to your inquiries. Your school may offer a tool that permits you to compare rates and terms on both federal and private loans.

Plan Ahead. Consider what your monthly payments will be on both your private and federal student loans in relation to your starting salary after graduation. A good rule of thumb is that your combined monthly student loan payments should not exceed 8 to 10 percent of your gross monthly income. Otherwise, you may have to cut other items in your household budget to make your monthly loan payments.​