Loans - Private Student Loans

Level 4 - Highly Selective

Welcome! One of the most important thing that you can do is prepare financially for the cost of higher education.

Whether you will pursue just an associate’s degree or potentially achieve multiple degrees, understanding loans is critical. The reality is that loans are likely to be at least a part of almost any financial aid package that is offered.

In order to help families understand the different types of loans, we want to provide a series on each type of loan.

Before we begin, we want to preface this by saying that no one should pursue loans. At the end of the day, loans are not free money. Loans are money lent today that will need to be repaid with interest later. If you have the opportunity to earn scholarships, grants, or otherwise mitigate the cost of college, you should strongly consider taking it.

We repeat: do not get caught in the prestige of college where you are crushed by debt.

That being said, if you do find yourself needing to take a loan, you need to do so with as much information as possible.

With that being said, we will dive in. For the purpose of this series, we will cover the following loans:

1. Direct Subsidized Loans

2. Direct Unsubsidized Loans

3. Parent Plus Loans

4. Perkins Loans

5. Graduate Plus Loans

6. Direct Consolidation Loans

7. Private Student Loans

8. Private Parent Loans

Today we will focus on private student loans.

Part 1: What are private student loans?

Private student loans are loan taken from non-federal government entities - namely banks. Private loans typically have different interest rates and terms than the previous federal loans we have discussed, some good and some not as great.

Private student loans typically require a co-signer, are taken out directly by the student, and can be used for any level of study (e.g., undergrad or graduate study).