Higher education can open doors for young people, leading to higher earning potential and better job opportunities. But getting a college education is more expensive than ever before, leaving millions of graduates saddled with more debt than they can repay.
This is why it is so important to have an open discussion with your prospective college student about how their education will be financed. Most students know to apply for federal financial aid and scholarships, but college tuition fees are likely to exceed these amounts, causing many Americans to take out private student loans to make up for the difference.
According to new reportage from Sally Mae… The report also says that private loans can “fill the gap” in college funding if borrowed responsibly and at a competitive interest rate.
Keep reading to learn more about Borrowing Private Student Loans to Pay for College Tuition and visit Credible to compare rates on multiple private student loan lenders once.
Private Student Loans Make Education Affordable When Federal Aid Is Not Enough
Almost 70% of families completed Free Federal Student Aid App (FAFSA)Sally Mae found, but many of them have applied for additional funding. Even after requesting additional funds in the form of grants, scholarships and direct unsubsidized loans from the federal budget, additional funding may be required.
When federal aid does not cover college tuition costs, families usually turn to private student loans or federal loans. Direct PLUS Loans and Parent PLUS Loans…
PLUS credits are designed to help students and their families cover the additional costs remaining after applying for traditional federal direct loans. The main advantage of PLUS loans is that they have the protection of other federal loans such as income-dependent repayment plans (ICR) and the patience of economic adversity.
But PLUS loans are only available to parents and graduate students or professional students, so they are not suitable for undergraduate students who need additional funding to pay for college tuition. PLUS loans also have the highest interest rate of any federal student loan at 6.28%. for loans issued before July 1, 2022and commissions are high at 4.228%.
Private student loans, on the other hand, are issued by private lenders. Private loans can be made at competitively low interest rates, which depend on the creditworthiness, the amount of the loan and the length of the loan. The average interest rate on a 10-year, fixed-rate loan was 5.75% for the week of July 20, 2021. according to Credible… For 5-year variable rate loans, the average was 2.67%. Also, some private student loans have no issuance fees at all.
The main disadvantage of private student loans is that they are not eligible for federal protections such as deferral and student loan forgiveness… Variable rate loans carry the additional risk that your interest rate will increase over time. But since they can offer better interest rates than PLUS loans, private loans are a smart choice for families who are confident in their ability to pay.
Responsible private student loans with competitive rates help undergraduate and graduate students bridge the gap between the cost of higher education and the amount funded by financial aid, federal loans, and student and family resources.
Since interest rates on a private student loan vary based on a number of factors, it is important to choose the lowest rate for your unique situation. You might consider working on building your credit rating before applying, or even enlisting the help of a creditworthy job seeker to get a lower interest rate. Some private lenders allow you to set up automatic charges from your bank account to get a discount on automatic payments.
You can compare the interest rates on student loans from real online lenders in the table below and on the Credible marketplace… Checking your rate is free and does not affect your credit score.
Estimate Your Private Student Loan Monthly Payment
Private student loans allow you to cover college tuition fees in excess of what is offered by federal student aid. But before taking out private student loans to cover college-related expenses, make sure you can keep the monthly payment within your budget.
Your monthly payments are easy to estimate with student loan calculator – you just need to enter the estimated interest rate, loan amount and loan term. You can see the approximate student loan interest rate without affecting your credit rating on Credible so that your calculations are as accurate as possible.
If you are not satisfied with the settlement payment of the loan, try switching to a longer term loan. If you prefer pay less interest over the term of the loan, consider a shorter maturity. You can also choose fixed or variable rate loans to see how this will affect your monthly payment and the total interest paid. Private student loans have more flexible repayment options than federal student loans, allowing you to choose financing terms that suit your needs.
Still not sure if private student loans are the best way for you to finance your education? Contact a knowledgeable loan officer at Credible, which can answer your questions about private student loans and refinancing student loan…
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