For some people, college is the best time of their life. It’s a chance to make lifelong friends, get an education and help shape the future.
But it can also be a big financial burden. Between tuition, books, and room and board, the cost can add up quickly, and many people have to take out student loans to get the college experience. In fact, according to a report from Pew Research, approximately 37 percent of U.S. households headed by someone under the age of 40 presently have student loan debt.
The Office of Federal Student Aid suggests looking for applicable federal student loans before resorting to private ones. But, if your child doesn’t qualify for any aid from the federal government, private loans for college can be another option.
Private loans for college, sometimes referred to as alternative student loans, are those in which a private lender offers funding. The Consumer Financial Protection Bureau (CFPB) states these student loans often come from three sources:
How much an applicant can get for private student loans is based on credit, according to Sallie Mae, and having a poor credit history may result in higher interest rates. For this reason, if you decide your child needs private student loan help, it’s a good idea to shop around and compare rates from multiple lenders before signing any paperwork.
Getting private loans for college can enable your child to get an education. In addition to that, the other pros of getting private loans, according to the CFPB, are:
While getting a private student loan can mean the difference between attending college and not, alternative student loans have some potential drawbacks you should be aware of. The Office of Federal Student Aid lists the following disadvantages of private student loans:
When deciding which student loans to apply for, it helps to think long-term and consider both the positives and negatives. If you know what you are getting into ahead of time, it may help you make the right choice for both you and your child – and your financial futures.