Pros And Cons Of Private Student Loans

Private student loans can help many afford college, but they are different than federal loans

Shaun Plum
MoneyTips Contributor

Borrowing Student Loans

Pros And Cons Of Private Student Loans
June 28, 2016

There are a number of different types of federal student loans, grants, and programs such as work-study that can help students pay for college, but those who apply late may miss out on most of this financial aid. Fortunately, there is another option: private student loans. These loans often have deadlines after the federal grants and scholarships have been divvied up. Students who need a little more help or who missed most of the deadlines may want to apply for these loans.

While federal student loans make up over 90 percent of all student loans, those who have strong credit may find that private loans offer better interest rates or terms. However, it is important that students shop around and find the loan that offers them the best rates. Many simply apply for whatever private loans they find without shopping around, and the end result is that they pay much more in interest than they need to.

Another issue most students will have is that they do not have the credit history to get a private student loan. They will require a co-signer. This can help lower their interest rates if their co-signer has a strong credit history. While most loans are co-signed by the student's parents, Sallie Mae reports that their Smart Option loans are co-signed by someone else about 30 percent of the time and that the average credit score of their co-signers is 748.

If you are interested in a personal loan, visit our curated list of top lenders.

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