Financial aid awards will generally contain some loans for the student. Most often these are government backed loans such as a Stafford or Perkins loan. However, families often seek to take out loans other than federal loans and will take out private loans from banks and educational loan providers such as Sallie Mae.
The New York Times has a good article warning families to be very careful when taking out private loans. Specifically, you will want to read all of the fine print in these loans very carefully to make sure you understand the terms of the loans.
If you are considering taking out private loans to pay for college I strongly recommend that you read the 2009 SLA Guide to Private(or Alternative) Loans.
A certain level of loans to finance a college education is acceptable in my opinion. However, when students take out more loans than they can afford upon graduation this becomes a very real concern. When the high interest rates that are typical of private loans is added in, the students ability to pay back the loans can quickly get out of hand.
Be very careful when taking out any type of loan but particularly if you are considering private loans. Your future ability to repay the loan may depend on it.
If you would like help finding the best college for you or your student, I offer a FREE 1/2 hour consultation to discuss your needs for college admissions counseling. Give me a call now at 952-449-5245 or drop me an email.
Have you taken a look at http://www.simpletuition.com? I’ve found them to be an excellent resource when looking for private loans because they spell out everything in one place: interest rate, monthly payments, and total repayment.
Comment by Mark Truman — May 4, 2009 @ 11:08 am
Mark,
Thanks for the suggestion. I have glanced at simpletuition in the past and it appears to be a good source of information. The more information families can get if they are using private student loans, the better.
Todd
Comment by Todd Johnson — May 4, 2009 @ 11:15 am
Todd,
You and your readers may want to have a look at http://www.DiscoverScholars.org, which allows charitable donors to award scholarships to the types of students they wish to support.
Naturally, grants are preferable to loans.
Jonathan Bydlak
Comment by Jonathan Bydlak — May 4, 2009 @ 4:57 pm
[...] have discussed before the issue of taking out private loans to pay for college. Just to refresh, private loans are those that do not come from the federal or state government. [...]
Pingback by Private Loans for College | College Admissions Counseling — August 25, 2009 @ 9:28 am
[...] I have discussed before the issue of taking out private loans to pay for college. Just to refresh, private loans are those that do not come from the federal or state government. [...]
Pingback by Private Loans for College | Everyone Read It! — September 1, 2009 @ 8:16 pm