Single Mom School Loans

Private College Education Loan-7 Facts About Private Student Loans

A private college education loan is a huge responsibility. Apply for this only if you have exhausted all your options for federal student aid, including grants and scholarships. If they’re still not enough, that’s about the right time that you should seek other fund sources, such as a private college education loan.

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A processing fee (or origination fee) is not necessarily part of applying for a private student loan. An origination fee is basically a fee charged by lenders to cover the costs of processing a loan.  Citibank doesn’t ask for an origination fee for their education loan programs.  Others, however, require a 2% origination fee.



Is a co-signer really necessary? Not really. Most student borrowers don’t meet the requirements anyway because of insufficient credit, income, and employment history. That’s why majority of private student education loan lenders strongly encouraged borrowers to apply with one, so that they can get more affordable interest rates and higher loan limits.You can usually borrow up to the full cost of your education, less other financial assistance that you have received prior to your application. Before you can receive the loan money, your school still needs to certify that the amount you have borrowed does not exceed your cost of attendance.

Since private student loans are credit-based, the interest rate will vary for each borrower. Private loans also have flexible rates, which is affected by the LIBOR or Prime index changes. The true cost of a loan is not based on the interest rate alone, but on its Annual Percentage Rate (APR). The approximate APR value could reach up to 11.375%.

Most lenders don’t really require students to make payments while they’re in school. Usually, repayments will start 6-9 months after they graduate, fall below half-time status, or leave school. The amount of time that a loan has to be paid off can last from 15-25 years. If possible, it’s better to make early payments to get bigger savings.

You or your parents can benefit from tax deduction if you meet the eligibility requirements. Take note that you can deduct only the “interest” you have paid on your student education loans. For 2007, the maximum amount that you can deduct is $2,500 per tax return, not for each person.

A dependent student can apply the deduction on their tax return if they’ve taken out a loan in their own name. In case both the parent and child took out a loan, the tax deduction will only go to the parent if the child was a dependent when the loan was granted.

You can easily find most of these alternative education loans online. Just remember that popularity is not the ultimate basis for accepting a lender’s services. Make sure to always read through their list of services, borrower benefits, APR, and terms. A borrower will incur lesser risks when choosing a private college education loan if well-informed.