Private student loans are available to parents and students to help supplement federal loans such as the Stafford and PLUS loans. The federal funding programs are very good and are designed to help students attain their goal of successfully completing college with some financial assistance. However, most government loans will not cover the entire cost of a college education. You will also need to take into consideration the price of living expenses, books and resource materials and housing. Although tuition may be paid for, other expenses may not be and this is where private student loans come into play.
Private student loans can be made by banks, credit unions and other financial institutions. Many funding agencies such as Sallie Mae and Nellie Mae will work with private entities to provide additional funding to federal loans. The restrictions on private student loans are a little more stringent simply because qualification is based on credit score. With most high school students, there has not been any credit, good or bad, established to where a loan will be granted from a private source. This is where a co signer or co borrower will come in handy. Typically, it is the parents who cosign for a loan for their child. However, any one with a good credit score can become the guarantor of the loan should the primary applicant default. Sometimes family members, siblings or grandparents decide to co sign on a loan for the student applicant.
Repayment of private student loans varies from place to place but the repayment options are typically similar to those of federal loans. Typically, there will be a grace period of six months to nine months before payment of the note must commence. The grace period happens when either the student graduates or the student drops below half time attendance at the school. During this grace period, the student should be able to secure a job in order to easily repay the loans. It is important to take the debt seriously and always pay on time and in full. This will ensure your good payment history is reported to credit agencies and you will have a good credit score. A good credit score will help you finance a car, a house and will even help you get a job. If possible, it is also a good idea to pay more than the minimum required amount. If you do this, you will reduce the amount of interest paid and will pay off the entire loan a lot faster.