Private student loans can provide the remaining money you may need to pay for your college education year to year.
After you’ve completed your FAFSA on the web, which is a free government form that helps determine financial eligibility for grants and federal loans, you’ll need to wait and see what your financial aid package from your university will be.
You should use up all offered grants and federal loans before even considering private student loans. After you’ve received your financial aid package from your college or university, go over it and see how much more you’ll need to cover tuition, room and board, and even books. Some students choose to only use financial aid for tuition, paying for the other needs with parental help or part time work.
Once you have the amount that you still need to cover additional tuition and costs, you should look into private loans. Many companies offer private student loans such as AES, SallieMae,Citibank, and Chase. Many students go with the first two if only because the main business for them is student loan lending.
Why should you use private student loans only as a last resort for extra funds?
Higher interest: Federal student loans have a far lower interest rate in general then private student loans. Also some federal student loans such as subsidized student loans accrue no interest until your schooling is finished. You may get interest rates more then double those of federal loans with a private loan.
Fees: Many federal loans have little or no fees associated with them. Private student loans are a big business and part of that big business is charging fees for everything from disbursement (sending you or the school the check), to online account access, to processing fees.
Less repayment options: While most student loan issuers will be more then happy to work with students struggling to pay back their student loan debt, most private loans lack a key repayment feature. Federal student loans fall under federal loan consolidation regulations and can in some cases be forgiven, reduced, or consolidated with other federal loans to save money on interest payments.
All this considered, always fill out your FAFSA form at www.fafsa.ed.gov each and every year you plan to attend school. You have to reapply each year.
Wait until you know how much federal loan money you are eligible for. Also keep in mind that both federal and private university grants depend on filling out and submitting a FAFSA for each academic year. You may miss out on grants (that you don’t have to pay back) and be ineligible for lower interest federal loans if you don’t fill out your FAFSA yearly.
Private student loans are a great option for students who after they receive their yearly financial aid package still come up short and need money for college. They are still usually a far better option then using a bank loan or a credit card to pay off the remaining tuition and fees.
Those with good to excellent credit or a credit worthy co-signer are often eligible for lower interest rates and fees when applying for private student loans.
Paying for college may seem daunting but with your FAFSA filled out and private student loans to fill in the gaps, paying for college is doable.