Now is the time to start researching private loans for students. Most colleges will be distributing tuition bills for the spring semester in the middle of December. If you need to borrow to help pay for your tuition, take the time now to explore your options and give yourself the time needed to make an informed decision.
We’re often asked, “What are the best student loans?” The simplest answer is that the best student loan is the lowest cost student loan. However, it can be tricky to decide which student loans cost less than others. Here are a few tips to get you started:
Federal Student Loans are Usually Cheaper
Your financial aid award letter will let you know what your eligibility is for federal student loans. However, you may still need additional funding to cover your expenses. If your parents plan to make up the difference, they can apply for a Direct PLUS Loan for Parents which is a federal loan they take in their name that can cover up to your cost of attendance minus other financial aid including student loans.
There are a lot of student loan lenders. Sorting through who’s who can be more difficult than you might think. For example, some banks that offer private student loans only supply the funding for the loans while a third-party structures their program. In other cases, what looks like two different lenders is actually the same lender operating under two different brands. In still other cases what may appear to be a lender is, in reality, a company marketing student loans on behalf of lender partners. In fact, that’s what we do here at eStudentLoan. We’re not a student loan lender. Rather, we market student loans on behalf of our lender and marketing partners.
So, how can you tell who is a lender and who is a marketer? What student loan lender should you choose? Does it matter how you find a student loan?
If you’ve shopped around recently for private student loans, you’ve probably found out that you need a healthy credit score, or a cosigner with good credit, to qualify. But what determines your credit rating? There are a variety of factors that are considered, including your payment history (ability to consistently pay your bills), amount owed, credit history (how long you have been using credit), the amount of new credit you possess and the types of credit (bank cards, gas cards, loans, etc) you carry. Your credit score will range between 300 and 900, with anything above 720 being considered a good score. For most college students, this is not the case and they must use a cosigner to secure private student loans. Even if you only take out federal student loans while in college, you should be aware how your student loans will affect your credit rating.
No doubt you have seen the recent chatter about Niagara Falls’ new plan to lure young professionals to its city limits. According to the article published by ABC News, Niagara Falls’ population was 100,000 about 50 years ago, but it’s now closer to 50,000. If it drops under 50,000 by the time the next census occurs, leaders fear the city will lose some forms of federal assistance.
In an effort to encourage recent college graduates to consider calling Niagara Falls home, they’ve dangled the proverbial carrot in front of them by offering to pay $3,500 a year toward their student loan debt (for up to two years). To qualify, applicants must have earned an associate, bachelor or graduate-level degree, and they must be willing to rent or purchase a home within a designated area of the city.
If you have exhausted all federal financial aid, grant and scholarship opportunities, and still find you need additional money for college, a private student loan may be the solution. Unlike federal loans, which require students to attend school at least part-time, a private loan can be used for any number of credit hours and students are not required to complete the Free Application for Federal Student Aid (FAFSA). Keep in mind that students are not guaranteed approval for a private loan and must meet certain criteria. In most cases, students will need the following when applying for a private student loan:
- Social Security Number
- Driver’s License
- Be a U.S. citizen, permanent or temporary resident alien
- Provide employment and income information (annual gross amount, contact information, etc)
- Provide contact information for his/her intended college
- Provide monthly housing/living expense information
- Co-signer (who must provide the same documentation)
Typically, students do not qualify for a private loan without a co-signer. In addition, any permanent or temporary resident alien applying for a loan will be required to have a co-signer, regardless of his/her credit history. According to the Boston Globe, nearly 90 percent of private loans issued have a co-signer. Anyone with a good credit history may act as a co-signer, including family, friends and co-workers. Even if you do qualify for a private loan, you may want to add a co-signer to help reduce your interest rate. Many private loan lenders will allow a co-signer to be released from the loan once a total of 24 consecutive, on-time payments have been made. In some instances, lenders will also forgive the loan if the student beneficiary is deceased or becomes permanently disabled. Always be sure to check with the lender about these provisions prior to having another party sign any loan documents or contracts.
The world of student loans can be very confusing. Do you know the difference between subsidized and unsubsidized? How does a Direct Plus Loan for parents differ from one for a graduate student? Not to mention the differences between federal and private student loans; searching the Internet can sometimes lead to further confusion and frustration. Luckily, we are here to break down each type of loan into easy to digest nuggets of enlightenment.
First, let’s start with federal student loans. After you have applied for every possible grant and scholarship available to you or your student, start here before even considering a private student loan.