Private/Alternative Loans
Private education loans, often referred to as alternative loans or outside loans, are commonly advertised on television and radio as attractive options for paying college costs. However, private loans may have significant disadvantages when compared with federal education loans. We strongly encourage you to use all available federal loan programs before using private loans.
Private Student Loans:
Credit based loans for higher education generally require a 2-year credit history and/or a co-signer. Typically, dependent undergraduate students do not have a sufficient credit history to borrow without a co-signer, but many families find that the terms and conditions of private loans are favorable for co-signers.
Features of federal and private education loans are outlined below:
|
Federal Stafford Loans |
Federal PLUS Loans |
Private Loans |
|
|
Required Credit Checks |
No |
Yes |
Yes |
|
Loan Fees |
Low or no fees |
Low fees |
Depends on program |
|
Interest Rate |
Fixed |
Fixed |
Usually variable, some are capped |
|
Requires Co-Signer |
No |
Usually no |
Usually yes |
|
Deferment Options |
Several options guaranteed by law |
Several options guaranteed by law |
Depends on program |
|
Loan Forgiveness Options |
Several options offered by the state and federal government |
|
Generally none |
|
Penalties for Early Repayment |
None |
None |
Generally no |
Selecting a lender:
If you decide to use a private loan to supplement your federal loans, we encourage you to compare several programs to fin the one that fits your situation best. We encourage you to carefully review your options before choosing a lender.
Here is a link that may help you start your search on information about Private Student Loans and an Online Lender Comparison Tool
