Private student loans are administered by standard financial lending institutions. Among the most common are private banking student loans and private banking signature student loans. These financial institutions are basically providing unsecured (or in some cases secured) student loans to you as a student, and will in most cases charge higher interest rates than the federally funded student loans.

Private student loans and federal student loans, along with scholarships, can be combined to fund your complete education. However, it is important to remember that when it comes time to consolidate your student loans, you can not mix the two types together. You should always consolidate your federal student loans first, and then separately consolidate your private student loan debt. The benefits of consolidating your federal student loans will include: a lower interest rate usually, (but keep in mind that interest rates change every July 1), increasing the time for student loan repayment to 30 years which does reduces your monthly costs but could increase your over all cost, and reducing the number of lending institutions you are making payments to every month.

Nearly 50% of current college graduates had to take out student loans, with an average borrowing about $10,000. Until recently, private student loan interest rates ran between 6-8%. Recently though, rates have dropped even lower. As of fall 2003, Stafford student loan interest rates were in 3-4% range.

Students who currently have private student loans, either a single loan or multiple student loans, have a variety of options to reduce their payments and debt. Because interest rates have dropped, private student loans can be consolidated or in many cases refinanced. When you are considering refinancing your private student loans or student loan consolidations, you need to compare the current interest rates before you consolidate a federal student loans.

Like any kind of debt, student loans can influence your credit history and your future purchasing decisions. Students who have borrowed a substantial amount for college (more than $5000) are usually less likely to pursue higher education. In addition, student loan debt that exceeds 8% of there income can be easily seen negatively when your credit history is getting assessed for future loans (this is especially true if you have one or more defaulted student loans).

Two ways to reduce the debt burden are as follows:

1) Reduce or eliminate the principal private student loan balance. Specific types of student loans can sometimes be forgiven by service or other higher education - look into the specific student loan program you may have.
2) Try to reduce your monthly payment. Since debt burden is measured by comparing your student loan payment to your income, reducing your payment helps your credit history evaluation.

By using the above information when you are seeking either a private student loan or a federal student loan, you will be much more informed about your options. This will allow you to make much better decisions as well. You need to do what is right for your and your specific financial situation. Do not make things harder on yourself. Think smart and you will make the right decisions. Not only in financial matters but also in all the matters of the world.

This entry was posted on Friday, June 20th, 2008 at 10:05 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.