Explore your Options
Private student loans are consumer loans made to
individuals to help pay for college. They are provided by
for-profi t and nonprofi t lending organizations and are
not backed by the federal government. Private student
loans are designed to supplement, not replace, other
fi nancial aid sources to fi ll funding gaps. Only borrow
what is needed to cover your education expenses.
Work with the fi nancial aid offi ce at your school to look
into sources of federal, state and/or school aid prior to
getting a private student loan. If you have already done
this and are still unable to cover your expenses, a private
student loan may be a good option. Generally, they are
less expensive than unsecured consumer credit (such
as credit cards). If you require a private student loan, do
not wait until your tuition bill is due to apply for one,
because you may receive less favorable terms
and conditions.
Most programs allow borrowers to delay payments
during school and offer hardship deferments during
repayment. These options often increase the total
amount you will pay, because interest charges will accrue
during deferment periods. Some private student loans
require a cosigner (a person who promises to become
legally responsible to pay your debt if you fail to do so).
If you are considering a variable rate loan, understand
that rate changes may not be in your favor and could
result in an increased monthly payment.
Read all material provided to you by your lender, and
ask about things you do not understand. Most private
student loans are made by responsible lenders – and all
are regulated by consumer credit laws. Get to know your
lender prior to borrowing, because your relationship
with them will be a long-term one. Visit the Better
Business Bureau at www.bbb.org, ask your fi nancial aid
offi cer and talk to others who have worked with the
lender so you can make an informed decision.
Understand your Obligation
You must repay your student loans – even if you do not
graduate or get a job in your chosen fi eld. Failure to
make scheduled payments could lead to default, which
would damage your credit rating and lead to other
serious consequences.
Before you borrow a private student loan, think about
whether you will be able to repay it. This loan will reduce
what you can spend in the future on a car, home, furniture
and other living expenses. Here are some things you can
do while you are in college to help save money:
Identify needs versus wants and make your
purchases accordingly.
Make a realistic budget and stick to it.
Take advantage of work-study opportunities or
get a part-time job.
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Uphold your Promise
Repaying your student loans is a serious legal
obligation, so you need to set aside enough money
to make your student loan payment on time and
in full each month. Your lender will depend on you
to uphold your promise to repay so that they can
make loans to other deserving students. By paying
your student loan on time, you will be acting as a
responsible borrower. You will also be successfully
managing your fi nances and establishing good credit.
Some loans offer a grace period when you graduate,
leave school or drop below part-time status. During
the grace period, you are not required to make
monthly payments. In most instances this will
increase the amount that you will pay on your loans
as interest charges are increasing on your loan(s),
so check with your lender. At the end of your grace
period, you must begin making monthly payments.
Contact your lender if you are unable to make
your monthly payments. You may qualify for other
repayment options, or be able to postpone or reduce
your payments by applying for a deferment or
forbearance. These should be used only in times of
extreme need and will increase the amount that is
eventually repaid on your loan.
RESEARCH REMEMBER REPAY
Can you Afford a Private
Student Loan?
Ask yourself whether a job in your
chosen fi eld will allow you to make
your monthly payments on your
student loans.
Use a student loan repayment
calculator, such as the one at
www.mapping-your-future.org, to
help you estimate the total amount
of interest you will pay, what your
monthly student loan payments will
be, and how long it will take to repay
your loans.
Pay your Interest
Consider making monthly interest
payments while in school. If you do not,
the interest will accrue and be added to
the amount you borrowed, costing you
more in the long run. A few dollars paid
each month on your private student loan
will save you money over time.
