Finance and Credit Professional

There is a difference between private student loans and Federal student loans in that the latter are guaranteed by the Federal Government. They offer many attractive terms like low rates of interest, deferred repayment, subsidized interest payment as well as longer payment terms. On the other hand, private student loans are offered by banks, credit unions as well as other lenders, and are based not on financial need, but on creditworthiness as well as ability to repay of the borrower.

Supplementing the Federal Loan Program

The private student loan may act as a supplement to federal loan programs and may be used for many different educational purposes such as tuition, books, living expenses as well as computers. Rates of interest as well as payment terms will differ from lender to lender as well as being based on the creditworthiness of the borrower.

Sometimes, it is also possible for a co-signer to receive a private loan, though it is not necessary, especially if the student has a satisfactory credit history, is employed full time and is a US citizen or permanent resident. In case the student does not meet minimum eligibility requirements he or she may apply for a private student loan with a co-applicant who does meet those requirements.

The rates of interest for a private student loan can differ according to the particular purpose of the loan, and for private loans for undergraduates; the rate of interest would be LIBOR plus 4.65 per cent. With college costs steadily escalating and the number of students waiting for federal loans also increasing, there is little wonder that private student loans are becoming the fastest growing source of funds for U.S. college education.

Many families find in the private student loan, a convenient as well as simple way of securing the money required to cover college education costs. Applying for a private student loan is very streamlined and the whole process can be over in as few as fifteen minutes. Alternative or private student loans usually get their funding from private financial institutions and are not subject to federal guidelines. The money so borrowed can be used to cover tuition costs as well as many other education-related expenses. Private student loans can often be used to supplement the federal student loans, especially when federal student loan funds cannot meet the full cost of education.

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