The Annual Percentage Rates (APR), loan terms, loan amounts, origination fees and other terms provided in this website are estimated based on information you provided, data offered by partners, and publicly available information. All information is presented without warranty, and the estimated APR, terms and other features are not binding in any way. Lenders offer a range of APRs depending on your credit history, income, and other factors. Only borrowers with excellent credit qualify for the lowest rates. Your actual APR will depend on your credit score, loan amount, term, income, and credit history. All loans must be reviewed and approved by the lenders.
For many students federal student loans represent the bulk or even the entirety of the financial aid they receive. But federal student loans are often not enough to cover the entire financial burden of undergraduate or graduate education. Private student loans can make up the difference. However, unlike federal student loans, private student loans require credit checks. Borrowers who cannot present good credit and steady income will likely be required to produce a creditworthy co-signer – or be turned down. Private student loans also include other features that can become potential drawbacks for borrowers.
Loan Types and Borrowing Terms
Like other commercial loans, private student loans can be ether fixed rate or variable rate. For borrowers able to borrow at a low interest rate, it makes sense to lock in a fixed rate loan. On the other hand, borrowers who are forced to borrow at an initially high rate could obtain substantial savings if and when interest rates fall at a later date by opting for variable rate student loans. Consolidation student loans allow borrowers to combine several loans into a single loan with one monthly payment.
Ideally, private student loans should allow students to defer payments while they are attending classes. Variable rate student loans should include an interest rate cap for the maximum that lenders can charge, and rate reductions. Finally, student loans from most reputable lenders do not include application, origination or early termination fees.
- Fixed Rate Loans: Interest rates remain constant for the life of the loan. Fixed-rate loans provide stability and are advantageous when interest rates are low.
- Variable Rate Loans: Variable rate loans often feature very low introductory interest rates, but rates can fluctuate based on market conditions and other factors.
- Consolidation Loans: With a consolidation loan, the single monthly payment is often lower than the separate payments for the original loans. In some cases, the overall amount owed is frequently reduced thanks to lower interest rates. Consolidation loans can also be used to refinance student loans that have fallen into default.
- Origination Fees: Fees imposed when the loan is dispensed. Origination fees reduce the amount of money that is received, but not the amount that must be repaid.
- Application Fees: Application fees must be paid at the time the loan application is submitted. These fees are often nonrefundable, even if the application is denied.
- Early Termination Fees: Early termination fees are penalties that are assessed when borrowers repay their loans early. Such fees allow lenders to recover profits they would have otherwise lost from borrowers repaying their loans early.
Repayment terms for private student loans should include a grace period after graduation or leaving school during which no monthly payments are due. There should also be an option for automatic payments along with a discount or interest rate deduction as a reward. However, private lenders are often much less flexible than federal student loans about providing deferment or forbearance for borrowers who encounter financial hardship.
- Default: Failure to maintain required payments on student loans. Default on federal student loans makes borrowers ineligible for future loans. Default on private student loans may subject borrowers to collection efforts.
- In-School Deferment: Allows students to skip payments on their loans while they are enrolled in qualified undergraduate, graduate or co-op programs. In-school deferments are often automatically granted, but students must inform their lenders.
- Grace Period: A grace period is the period between the period where borrowers graduate or leaves school and the first student loan payment is due. Grace periods are often for six or nine months.
- Hardship Forbearance: For students who experience financial setbacks, a hardship forbearance allows them to skip payments without fear of going into default. However, interest continues to accrue during forbearance.
- Volunteer or Work-Related Deferment: Students and new graduates who volunteer for organizations like the Peace Corps or who take certain jobs may be eligible for deferment – which allows them to skip loan payments without going into default.
- Loan Cancellation: Taking certain jobs, such as teaching in certain areas, can entitle borrowers to have some or all of their loans cancelled. The cancelled portion of the loans need not be repaid.
- Interest Capitalization: With some forms of deferment, interest continues to accrue. However, rather than require borrowers to make payments, the interest is added to the remainder of the loan – or capitalized. Interest capitalization ultimately increases the amount owed on the loan.
Contact and Support
School is tough enough without unnecessary added hassles from student loans. Many commercial student loan websites include rate calculators estimate repayment obligations for loans of varying amounts. Such tools guide borrowers in determining how much they can borrow, along with helping borrowers understand the mechanics of private student loans,
Borrowers should also look for FAQ sections and extensive information about various types of loans, repayment terms and ways to minimize their loan burdens. Finally, commercial student lenders should provide readily available support via telephone, live chat or email.