Private Student Loans
When scholarships, grants and federal loans fall short of your needs, you may want to consider looking into private student loans. Although the interest rates of these education loans can be higher than those offered through federal student loans, they’re still a reasonable option when you need extra money, with interest rates starting around 5% and continuing upwards just over 10%. A private loan may also feature certain benefits not offered by federal student loans, such as online loan approval within a few minutes.
Unlike Perkins or Stafford Federal Loans, because Private Student Loans are not backed by the federal government, the bank will have to do a credit check. A co-signer may or may not be required. In any case, required or not, you should strongly consider using a co-signer for your private student loan, because this could give you a better chance at qualifying for the loan. Having a co-signer could also help lower the interest rate you’re given, which could dramatically lower the amount of interest you’ll end up paying back.
With these private loans, you’ll likely be able to borrow up to the full cost of your education, minus other forms of financial aid you’ve received. But bear in mind that more is not always better – you should only borrow what you 
personally know you’ll need to cover your expenses. That way, once you leave school, you’re not overburdened unnecessarily in the amount you’ll have to repay.
These private education loans vary a little in their repayment terms. Some private student loans, like federal loans, allow you to totally defer payments until a few months after you’ve left school. Other private loans may require you to make interest-only payments while in school, and for the first six months once you leave school, after which, you’ll begin making normal payments.
This is a wise choice: interest-only payments will be very small, yet by paying toward this interest while in school, you could save a huge amount of money by not allowing interest charges to build up on your education loan. Which route you take is entirely between you and your bank – you must decide which would benefit you the most, considering your personal situation.
Remember that this type of education loan should only be considered after you have exhausted your other options with scholarships, grants, and federal student loans. Although private student education loans are a good option, they will usually not offer interest rates that are as low as those offered by federal student loans. Also, the interest rates on private education loans are often variable.
Translated this means that, even though you may have a great low interest rate now, if the prime rate increases over time, you could find yourself paying back your education loan at a higher interest rate. And even a small increase in your interest rate could mean thousands of extra dollars to be repaid over the life of your student loan.
For more information about the various Private Student Loans available to you, please visit the links found on our Other Resources page.
Next: Education Loan Consolidation