Funding your Education with Financial Aid: Private Loans
by Brooke Heath
Continuing EdFed's series of articles on how to fund your education with financial aid, this article will offer you information on the basics of private loans. While private loans do fall into a separate category from federal loans, they are financial aid, nonetheless.
Private loans, aka alternative loans, are a great way to bridge the gap that can occur when you have exhausted all of your federal financial aid options, but still have need for further funding to compensate for schooling costs. These loans are funded by private financial institutions such as banks, schools, etc, and are a growing industry that is becoming a popular source of educational funding for students.
About Private Loans
In general, most private loans have the same qualities, but all of the following standards do not apply to every private loan. Because private institutions can set their own norms and criteria for their loans, it is advised that you shop around and compare loans and lenders prior to signing on the dotted line.
Private loans are credit-based loans, in which a credit check is run to determine your eligibility for the loan. If students have a poor credit history, or have yet to establish a credit history, they may need to have a credit worthy cosigner sign on the loan with them.
Though a positive option to credit cards and home equity loans, private loans are unsecured loans and borrowers should be aware that there are fees attached to these loans. They also have higher interest rates than federal loans.
However, there are many benefits to taking out private loans. One of the largest benefits is that private loans can be borrowed anytime that you have a need, as opposed to the deadlines that are necessary for federal loans. Also, private loans are fairly simple to apply for. There is less paperwork and no lengthy FAFSA forms involved.
Private loans generally have higher loan limits, so that students can borrow more. This can be a benefit and a detriment as borrowing more than needed can lead to unnecessary loan debt. You should only borrow the least amount necessary to cover the costs associated with your schooling.
Because they are not need-based, private loans are available to any students who want them. This is a positive option for students whose families make too much money to receive need-based federal financial aid, but not enough to pay for school without assistance.
Private loans are also disbursed more quickly and directly to the borrowers. This allows students to have quick and easy access to their money.
Students are not the only ones who can benefit from private loans; parents may borrow private loans for their students, but usually will have to begin repaying on the loan immediately after it is disbursed.
Finally, private loans can be a financial aid option for international students studying in the U.S. if they have an eligible U.S. resident cosign with them.
Eligibility for Private Loans
Eligibility requirements to borrow private loans vary with each lender. However, most lenders require that you are enrolled at least half-time in an eligible school to receive funding.
Consolidate your Private Loans with EdFed
To help borrowers save money on their private student loans, EdFed offers private student loan consolidations. By consolidating with EdFed, you could save thousands of dollars over the life of your loans! EdFed offers competitively low interest rates, as well as flexible repayment options and extended repayment terms. These benefits can actually help to lower your monthly payments by almost half!
To save you even more money, EdFed offers borrower benefits such as an immediate 0.25% interest rate reduction when you enroll in their automated debit payment program.
EdFed makes it quick and simple to apply for a private loan consolidation. All you need to do is simply call in, and one of EdFed's dedicated representatives will be able to determine your eligibility for a private loan consolidation within minutes. With a quick credit check, you will also be informed of your interest rate, consolidation loan limit, and the amount of the origination fee. In just a few minutes, you will be on your way to saving!
EdFed is dedicated to assisting students and graduates with achieving their educational goals as well as managing their student loans.
Check out other EdFed articles to learn about more financial aid options or to apply for a private student loan consolidation, click here. To find out if your credit is adequate to borrow a private loan visit these websites:
Article Title : Funding your Education with Financial Aid: Private Loans
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Education is one of the most basic right of any human, but with the increase in prices and the costs involved in education this has made these rights turn into a privilege which very few can enjoy. Any normal person today in the whole of United States has to take an education loan at one point of time to pay for their education fees.
If your monthly debt burden for your federal student loans collectively equals or exceeds 20% of your total monthly gross income, you likely will be eligible for forbearance on your consolidation loan.