QandAs: Loans

What is a Private Student Loan?

Answer:
The Federal government does not subsidize or endorse

private student loans. Rather, private student loans receive financial support from banks, credit unions, and private organizations. College tuition is expensive. While many students apply and receive financial aid from the Federal government, these loans amounts are seldom enough to meet all college expenses.

Loan eligibility amounts depend on grade level or student status. Students who need added resources to pay for tuition, books, or housing usually apply for a private student loan.

Private student loans are essentially personal loans that pay the college expenses not covered by Federal aid. Although intended for education, private student loans are very different from Federal student loan programs . Private loans are beneficial because they offer fast approvals and disbursement of funds, no application deadlines, and tax- deductible interest. Moreover, graduates and undergraduates can acquire money for all expenses (up to $40,000/year). The main distinction between Federal student loans and private student loans is that private funds aren't guaranteed. Federal aid is non-credit based, and everyone qualifies for assistance. To qualify for a private loan, students must have an acceptable credit score. If bad credit or no credit history is an issue, a co-signer is required.


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