Private Student Loan

What Is A Private Student Loan?

The most common type of student loan available is a federally guaranteed loan that offers lower interest rates and favorable repayment terms.  In some cases, though, a private student loan may be the best or the only option to consider.  So what is a private student loan?  Let’s take a look.

Private Student Loans
Sometimes called alternative student loans, this type of loan is not federally guaranteed and is obtained directly from your lender of choice.  In many cases the financial aid package you receive from your college of choice is not enough to cover all of your college expenses (tuition, books, room and board, etc.) so a private student loan is a way to borrow money to cover that difference.  A private student loan may be obtained by the student as sole borrower or by the student with a parent or other creditworthy person as a co-signor.  

Technical, Vocational And Other Training
A private student loan is also a good option for students pursuing technical or vocational training, or for returning students seeking additional career training.  Traditional financial aid is less available for these types of educational needs, so shop around for a private student loan as you would any other loan. 

An Alternative To Traditional Financial Aid
In some cases, traditional financial aid may not be an option for you.  For instance, if your parents still claim you as a dependent and their income is too high then you will not qualify for most federal loan programs.  If your parents cannot afford to pay for your college expenses up front then a private student loan is in order.

Sometimes it is possible to obtain a private student loan to refinance or consolidate other student loans, but consider this move very carefully because it may not save you money over the long term.  In some cases, though, if you are struggling financially and do not qualify for any of the federal consolidation programs then a private student loan may be worthwhile to improve your financial standing.