College hits people hard in the wallets, so it makes sense to look into all loan options, including a private student loan. While most loans have traditionally been federal in nature, the private loans are becoming more popular. They do have a higher interest rate, but consider it nonetheless.

Private versus Federal

A federal student loan comes in a wide range of options. Students can choose from Perkins loans, Stafford loans or PLUS loans. Students who need financial aid to pay for college can also receive money through federal grants or scholarships. Federal loans will usually have a fixed interest rate for students to pay back after they graduate. A federal student loan also offers a student who is having trouble finding a job, or is in financial strain, to defer payments for a period until they are able to pay off the debt. A final bonus to having a federal student loan is they can be consolidated into one loan.

Private student loans, on the other hand, are very different from federal loans. Private loans can’t be consolidated after a student graduates from college or graduate school, and there are no limits as to what the interest rate will be for a private loan. So a student who signs up for a private student loan at six percent can end up paying as much as 19 percent after they graduate. Private student loans can also check up on a student’s credit history and charge more if a student has poor credit records or no history at all.

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This entry was posted on Tuesday, July 17th, 2007 at 7:24 pm and is filed under Financial Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.