Private Loans for College

Loans to Consider if You Still Need Money

If your financial aid package isn't sufficient, private lenders can be found that offer student loans.

Some of the more prominent loan packages are:

• Signature Student Loans®
• LAWLOANS®
• MEDLOANS®
• MBA LOANS®
• Tuition Answer Loan ProgramSM
• Career Training Loan ProgramSM
• K-12 Family Education Loan ProgramSM

Since private loans are not federally subsidized, they will cost you more in interest and fees. Also you or your family credit history will become more important and the worse your credit score, the more interest you will pay.

If you have to borrow this way, shop around for the best deal. Try to avoid upfront fees and look for reasonable repayment terms.

Also, there will unlikely be any deferment of principal or interest while you're still in school. You might have to start repayment immediately.

If you're under age or have no credit history a co-signer will most likely be needed.

It's best to exhaust all other avenues of financing before getting involved with student loans.

According to Consumer Reports magazine, students are leaving college with a greater debt load than ever before, averaging $17,000 in 2002. At least the Federal student loan program has quite a bit of flexibility built into it as far as repayment goes, something private lenders might not provide.

2007 Update

If you watch TV, you will have seen that student loans are being advertised heavily. There are several reasons for that.

First of all, the US government has not raised the amount of money that it lends directly or guarantees for something like 15 years. During that time college tuition has soared.

Next, in the 2005 Bankruptcy Reform Act, the government extended the same protections to private student loan lenders that it had given itself and lenders of federally insured loans - they cannot be discharged in bankruptcy, even though there is no real public interest involved.

Third, private lenders have found this to be a very lucrative business and, of course, charge higher interest rates than you can get going the federally insured route.

The best course of action is to exhaust all federally guaranteed programs first. Then look into the PLUS program which is designed to allow parents to borrow for their children's education. While more expensive than guaranteed loans, they are still cheaper than private loans.

Consider private borrowing as a last resort. Look carefully and the terms and conditions offered. Try to get a fixed rate loan rather than a variable one and try to find the lowest rates.

Some experts recommend that you not borrow more for college than you can reasonably expect to make in your first year on the job.

And finally be very sure that you will complete your degree program once you have started borrowing or you will have saddled yourself with a lot of debt for nothing.

2011 Update

The Obama Administration has nationalized all student loan programs. So if you want a loan you'll have to deal with the government.

Whether this will continue after a change in governments is unknown at this point.