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Pros and Cons of Private Loans |
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Pros and Cons of Private Loans
Loan cancellations and loan forgiveness options are nonexistent with private lenders. Additionally, while many private lenders offer deferments (and sometimes forbearance at their own discretion), deferments aren't legally mandated, as is the case with federal loans if you meet certain requirements. Still, the ease with which private loans can be obtained is attractive to many students and families. In most cases, you just pick up the phone to call a lender, or fill out a simple application online, and you'll know within minutes whether you're approved for a private loan. Some private loans have maximum dollar limits while others let you borrow up to the total cost of your education. It's worthwhile, there- fore, to be judicious in obtaining these loans. Only borrow what you truly need.

Another point to consider: loan origination fees on private educational loans can be very steep. A loan origination fee is a charge a lender imposes for originating or processing a loan. Currently, loan origination fees range from 0 percent to 3 percent on federal loans. But loan origination fees on private loans can range from nothing to 10.5 percent or more, depending on the loan type, your credit, the repayment option you select, and whether or not you have a cosigner. For example, as of early 2007, the JPMorgan Chase Education One loan for undergraduates carries a 3.0 percent to 10.5 percent loan origination fee, which is added to and financed with your loan.

Even if you took out more costly private loans, with higher interest rates or more expensive fees, rest assured that you can still pay off your college debts. Clearly, the costs of obtaining federal and private loans and then paying them off over a number of years can quickly add up. If you have multiple loans outstanding, it can also be a taxing job to keep track of all your paperwork and maintain up-to-date information your college debts. Some people make this process more manageable by consolidating their student 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.

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