Student loans, pt. 2

This is the second t in a three-part series about my experience with student loans for my junior year.
Entry Two: the difference between public and private student loans.

In the case of student loans, money’s not just money, and where the loan comes from makes a big difference in terms of amount, interest rate and repayment period.
The government does a pretty good job providing reasonable amounts for students to borrow at a low interest rate (5 or 6 percent) with a long repayment period. But the problem that I ran into is that it’s not enough for me to go to school.

Even after all the scholarships I received, I was still $7000 short of the amount I needed for school. Now, every student has to make choices when it comes to paying for school: lifestyle, school, work. I’ve made those choices too: I want to live in an on-campus apartment (as opposed to a dorm or a cheaper off-campus apartment), school is my absolutely number one priority and I work for the experience (both as a student journalist and as a referee). I refuse to work the hours necessary to pay for the rest of my schooling so I can focus on my classes. (And at about $20 a story, I would have to write 350 stories for the Daily Nebraskan. That’s 9 articles a week, and I definitely see that Not Happening.)
So the choice I ended up making is a private student loan.

I compiled ways and reasons private student loans differ from federal student loans:

Federal Student Loans:
Repayment on these loans is guaranteed, so it cannot be “discharged” even in bankruptcy.
The repayment guarantee results in a lower interest rate.
The interest may be federally subsidized.
Longer repayment period.
Require completion of the FAFSA.
May be issued through an educational institution

Private Student Loans:
Variable amounts that the borrower can determine.
Repayment is not guaranteed, so the interest rate is higher.
Usually don’t require completing the FAFSA.
Can have the funds issued directly to the borrower.
Interest rates and fees are determined by the lender and dependent on credit ratings
May require a cosigner if the student doesn’t qualify alone (A cosigner can lower the interest rate).
May or may not have deferment and forbearance options depending on the lender

And everything I’ve read and seen and heard recommends to go with federal student loans first and use private student loans as supplementary or to build and complete a financial aid package.

Information from here and here.


~ by khaslett on July 31, 2009.

One Response to “Student loans, pt. 2”

  1. This was really great info. I would rank this right up there with finaid and student loans for college. I bookmarked, good stuff!

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