So you made it to your dream college—or colleges, and now it’s time to figure out how you’ll get there. With the average American income being at $48, 516 a year, and average annual tuition for a single year at private universities being $32, 410, you’re not alone if you’re unable to pay for college on your own.
Millions of students in the United States have depended on student loans to get them through their undergraduate, graduate, and post-graduate education. Though popularized in the Reagan era, student loans have expanded beyond the realm of Federal loans onto private as well.
But given the fear and apprehension surrounding them, with students remaining unsure about what to do, and if the decision is right for them, there’s no denying that the process can be quite daunting.
Understanding the basics
However, knowing what your options are and what’s right for your might help make the decision easier. When it comes to private loans, there are a few routes you can go down:
- Private lenders
- Credit union
- Institutional loans
- Personal loans
Each of these options has certain advantages and disadvantages to consider before you choose. For instance, banks though generous, are equally generous with their interest rates. Your terms’ flexibility is also curbed, leaving you with very little choice but to abide by them.
With credit unions, you get the advantage of having an organization that caters to your needs. Still, it’s difficult to gain membership and often comes with other requirements that you may not be able to fulfill.
Personal loans such as from friends and family are another option that many people with the means to do so resort to. However, it’s never really a good idea to mix business with the personal, because borrowing large sums of money like that from loved ones is a difficult territory to navigate. Additionally, the terms may or may not be legally binding, leaving both parties at risk.
Perhaps one of the safest, most specialized options is to work with a private lender that caters to student loans in particular. Many of these private lenders have programs and plans that allow students to repay through a flexible plan, allowing them to study without worrying about the costs, future repayments, and interest.
Another alternative is to apply for institutional loans, grants, and scholarships alongside external loans because they can help reduce the overall amount that is borrowed. Institutional loans are fairly flexible, but the downside is that they’re not always reliable, prone to revocation through a change in policy, academic standing, and various other factors.
Sometimes, it’s possible to combine various financing methods, but that can be difficult to manage in the long-run. However, the solution to something like that would be to consolidate your loans eventually.
What are the advantages of private loans
All in all, however, private loans are fairly useful in the perks they offer. They’re not need-based, so anyone can apply for them and receive the amount they require for their expenses, including living and boarding, tuition, cost of materials and textbooks, and other costs that come up.
You also have fixed and variable interest rates, and a host of advantages, including choosing a repayment plan of your choice, prepaying your loan or interest while still in college, and the interest that you pay eventually becomes a deductible charge in your taxes.
These loans are not without risk, of course, but the advantages are difficult to overlook. Borrowers often need to bring a cosigner on board for the application to be valid, and the application to be accepted. Still, many private lenders offer cosigner release forms if you’re in a financially stable spot.
Perhaps one of the biggest misconceptions surrounding these loans is the exorbitant fees that are charged. In reality, however, many major lenders, such as Education Loan Finance (ELFI), offer no-fee applications or charge minimal service fees.
How you can start your application
If you’re feeling more confident about seeking a private loan, there are a few steps to follow to help prepare your application and get the process started.
1. Shortlist the schools you wish to apply to
This is primarily to narrow down your options and get estimates and packages of your years there. Schools often provide annual tuition and other costs for students to go through, so once your list is in place, you’ll be able to calculate the amount you need to borrow more accurately.
2. Understand the financial documents and requirements
Out of these schools, see if some need separate financial aid applications and documents.If so, you will need to submit those orders to use your private loan.
Additionally, find out if you’re eligible for scholarships, grants, and any other ‘free money.’ Whatever amount comes your way, use it. This may entail filling out the FAFSA to learn about state grants and scholarships you’re eligible for. This doesn’t hinder your ability to secure a loan, it just helps reduce the amount you borrow, on the whole, providing you with a well-rounded financial package.
3. Review and sign the loan offer and agreement
It’s crucial to take your time with this step, after all, it is a document that will have several long- and short-term impacts on your life, including your financial and educational futures.
Now that you have your amount sorted contact your lender and draw up your contract and agreement. With the help of your cosigner, go over the terms, review the document, sign away, and get started!
While somewhat overwhelming, it’s not impossible to get a student loan. It’s something thousands of other applicants are opting for the same time as you. A little planning and foresight will help you avoid prolonged debt and stress too.
It’s a commitment, but it’s one that will help you get the education you want and the exposure you need to build your career. Your biggest takeaway should be to focus on the long-term benefits of the school and your loan’s most efficient use. The rest falls into place.
For more information regarding student loan financing, you can get in touch with ELFI and learn about their education loans, policies, and applications.
About the Author
The writer of this piece is a fresh graduate from one of the country’s leading state universities, sharing his experience with other prospective students faced with similar problems. Having majored in education policy, his areas of interest include education financing.