Private student loans which are offered by individual financial institutions come with some advantages and disadvantages. Similarly, the interest rates vary from lender to lender and can be either variable or fixed.
It’s advisable to know the pros and cons associated with the loans to enable you to choose wisely. Let’s consider the pros and cons, shall we?
There are different private lenders with similar terms and conditions. So, it’s up to you to decide the variety of loans to take to support your studies. The pros include:
- Private student loans provide quicker application processes. This is because students are not required to fill the Free Application for Federal Student Aid (FAFSA).
- Loans can be used to meet other educational needs apart from your tuition.
- Unlike scholarships which have specific amounts, you’re free to borrow as much as you need to cover study costs.
- Loans usually don’t have origination fees and they are disbursed immediately they are approved.
- It is necessary to note that private student loans have higher loan limits than federal student loans.
- Cosigners can be anyone with good credit and can be released from the loan after a period of on-time payments.
- International students can benefit from such loans if they fail to maintain satisfactory academic progress. It is also for those who have lost eligibility for federal aid.
- Before being awarded a loan, your credit history would be considered as well as the kind of interest rate you’ll receive.
- Private student loans have varying interest rates which may be higher than federal loans.
- One major demerit of these loans is that they don’t offer income-driven repayment plans.
- Similarly, the loans do not qualify for teacher or public service loan forgiveness.
- Of great importance is the fact that these loans provide limited options for financial relief when the borrower experiences financial challenges.
- Deferments and forbearances are limited to one year in total duration on private student loans. This is compared to three years for federal loans for international students.
- Not all such loans offer death and disability discharges.
- In a similar vein, these loans offer fewer repayment plans than federal student loans.
- It is also important to note that these loans are less available to low-income students.