Why would anybody consider taking out toxic private student loans
With the economy not going any better, prices are going up including the cost of university education. Families are alrady burdened with rising unemployment rate and the risk of having their homes foreclosed. The high education costs are only adding to the burden on their shoulders. Currently the average education cost could reach over $30,000 annually at some colleges.
Many students are racing to get funding for their education and one of their first options is to take out private student loans. However, before anybody makes an important decision such as taking out a huge loan and putting such a great burden to themselves, one should sit down and consider the advantages and disadvantages of funding their education using private student loans.
The best way to fund your education is by exhausting all options of free money first. Whether it is scholarships or government grants, free money is obviously better than any kinds of loans. The balance remaining after all the free financial aid is factored in is what often forces families to consider student loans options. The best option for student loans is the government-backed student loans with the possibility of consolidating the loans and, later, possible programs for student loan forgiveness. One should always turn to federal student loans first, as soon as all the free financial aid for education has been used up.
Below are the advantages and disadvantages of private student loans:
The advantages are:
Quick approval process:
Private student loans are usually quickly approved in as little as five business days. The funds will be immediately availabel to the student. Federal student loans, in comparison however, takes years and the processing is usually completed throughout the college.
Financial aids such as scholarships or government grants usually are not enough to cover the whole cost of college education. Private student loans usually can lend you more money than even the government-backed loans. The loan amount you can take out with private student loan companies are limited to $30,000 annually.
Federal student loans are usually more restricted in how the fund is used. Students, however, are allowed to use their private student loans to pay other things such as a laptop.
The disadvantages are:
In order for you to be eligible to get a private student loan, the lender will have to check your credit history. Only creditworthy individuals will be approved.
Higher interest rate:
The best interest rate you can get are usually given by federal student loan lenders. Besides, government-backed loans are usually fixed while private student loans can go up and down each month and are generally much higher.
Although this is also true with federal student loans, private student loans must be applied for each academic year. Therefore, by the time you finish your education, you will have different loans with different interest rates charged over them. The difference is that in the end you will be able to consolidate all your federal student loans but due to new laws, private student loans have been forced out of the loan consolidation business. Therefore, many students now are having difficulties in repaying their multiple private student loans.
No loan forgiveness program: There are student loan forgiveness programs available for students with federal student loans. Unfortunately, students with private loans will not have the privilege to be eligible in getting a loan forgiveness at some point in the future after they graduate.
Now that you know the disadvantages and advantages of private student loans
, you should be able to make a wiser decision for your financial future.
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