Private education loans, also known as alternative loans, are offered independently of the federal student loan program. A private loan is an option to consider after you’ve exhausted your more affordable federal and state lending options. You can usually borrow between $2,000 and $40,000 per year for tuition, room
and board, books, study abroad programs, a new laptop, and more.
Private loans are variable-rate commercial loans that require credit checks. So you’ll need a good credit history or a co-signer to be approved and receive a competitive rate. Because rates on private loans are variable and fluctuate according to market conditions, whatever interest rate you qualify for could change.
The repayment terms on a private education loan vary by lender. With some lenders, repayment begins immediately. Other lenders may allow borrowers to defer loan payments while they are still in school.
Remember to be realistic about your college financing. It could spell trouble if you borrow more to pay for school than you can reasonably repay after you graduate and start working. You can reduce your college expenses by choosing a school that gives you good financial aid or by attending community college and then transferring to a larger university.
Here is a quick snapshot:
Borrow up to $40,000 per year
Pay nothing until you finish school
Most students need a co-signer with good credit to qualify
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