Other than scholarships, grants and federal loans, when it comes to funding a higher education, the only option remaining is private loans. Private student loan interest rates are much higher than federal loans and vary from 3.17% to 9.37% APR. In addition, some private loan lenders charge additional fees.
Because of higher interest rates and other less appealing characteristics, private loans are most often only utilized by undergraduates to pay for off-set expenses where scholarships, grants and federal loans fall short. However, graduate degree students in lengthy programs (i.e. medical, dental and law school) are often forced to turn to private student loans more frequently to help pay for tuition and other school expenses, as Federal funding assistance is less available at this level of education.
There are some beneficial factors offered within these private student loan programs, such as no loan origination fees and repayments are deferred until 6 months following graduation or termination of school enrollment.
All student loan applications require school approval or certification in order for a potential borrower to qualify. Some lenders have a limit on the annual dollar amount available. Before accepting a loan from a private lender, the student should compare interest rates and payback options from several reputable lenders. Once the promissory note is signed and the money is accepted, the student borrower is legally obligated to pay back the loan amount according to the contract terms.
Unfortunately, debt from private student loans does not offer as much flexibility as federal loans.