Most parents would welcome the opportunity to take their kids to college without taking out going into debt. With the rising costs of education, it is almost impossible for an average income family to fund college education without some form of financial support, Federal and private loans are the main options you have to finance a college education. Thus, it is imperative to understand the key differences between these types of loans.
The main difference between federal and private student loans is clear. Ideally, the government issues federal loans whereas private lenders like schools, state agencies, or a credit union often advance private student loans. In the case of federal loans, defaulting the loan comes with harsher penalties. Notwithstanding, the loan cannot be discharged when filing for bankruptcy. Of the two student loan options, most people are turning to private student loans and here is why.
Your financial needs are excessively high
Some students find themselves in unavoidable financial predicaments. It could be that their family members are either unwilling or unable to help, they do not qualify for more aid, or when they have hit the federal limits. If you too are facing such challenges, most private student loans lenders will be willing to finance the full study costs of attendance minus the aid you receive.
Private student loan lenders allow students to apply along with a cosigner. A cosigner also improves your chances of having your application approved. If the cosigner has a good credit rating, he or she might help the student qualify for better interest rates. Since most lenders allow for online application, it is possible to submit an application and get feedback the same day.
Better terms of repayment
Unlike federal loans, which have limited repayments terms, private student loans offer different repayment options. For instance, most lenders offer both fixed and variable rate options. This implies that you can choose a plan that fits your risk tolerance. Moreover, different lenders also extend different borrower befits and flexible loan terms on student loans. Both parents and students appreciate encouraging payments during in-school period and even the option to defer payments.
The insights shared here tend to suggest that private student loans are better than federal loans, which is somehow true. It is advisable to exhaust all your financial aid options before looking at the options offered. The most important thing you can do is to pick the option you are convinced works for you and your situation.