Setting the Record Straight on Private Student Loans
All around the country, students and their parents are thinking about how they're going to pay for college. There's no question that education is a smart investment, but the rising cost of college is no joke. This has left plenty of potential students scrambling to earn extra cash to make ends meet by the time they get to school. Thankfully, there are all kinds of options available for people to pay for college. This includes private student loans.
The media might have given private student loans a bad rap, but it's important to understand that not all private student loans are created equal. Private loans come from a variety of sources. These wide-ranging origins also have far-reaching effects on how loans are serviced, what interest rates are, and your options regarding repayment. We want to break down what you need to know about private student loans, and how you can make the most informed decision in finding the right loan for you.
Make Sure You Use Free Money First
Before you think about taking out student loans, it's crucial that you use all of the free money that is available to you. The first step to access that free money is filling out the Free Application for Federal Student Aid (or FAFSA). Your college or university will use the information on the FAFSA to determine your eligibility for financial aid from multiple sources, including federal, state, and institutional aid (meaning grants or scholarships that your school provides). Your school will send you a financial aid letter, which creates the financial picture for you regarding college.
Federal, state, and institutional aid includes grants, scholarships, and work-study programs. The FAFSA and your financial aid letter will also explain your eligibility for Federal Stafford Loans. Once you have this number, you'll be much better prepared to make an informed decision about whether or not you need to take out additional student loans, beyond Stafford. Once you've made the choice to take out additional loans, it's time to look at what loan is right for you.
Not All Private Loans are Created Equal
Many private student loans are operated by large, publicly traded companies. These are often for-profit corporations where it is in the provider's best interest to make as much money as possible from each loan or investment they make. Interest rates on these loans can vary wildly, depending on credit histories and whether a student opts for a variable rate (an interest rate that can rise or fall over the life of the loan) or a fixed interest rate (a rate that stays the same the whole time). Annual percentage rates on these loans can be higher than 11 percent.
Unlike other private student loan servicers, the NC Assist student loan is offered by College Foundation, Inc. (CFI), a North Carolina non-profit organization that administers student loans on behalf of the State Education Assistance Authority. Without having to worry about shareholders or profits, the NC Assist Loan is able to focus on what matters most: the students.
Fixed Interest Rates Mean No Surprises
NC Assist Loans come with a fixed interest rate. This allows borrowers to better understand how much they'll pay over the course of the loan. Even better, interest rates on NC Assist Loans are extremely competitive. In fact, they're often lower than the interest rates for Federal Direct Loans. Borrowers can compare rates online to ensure that they're getting the best deal when it comes to paying for their education. It's important to note that some Federal Direct Loans allow certain repayment plans that are not available on NC Assist loans and other private loans. It is up to you to determine what is most important to you (lower interest rates vs. repayment plans).
The decision to take out loans for higher education is never one that should be made lightly. A student loan is a big commitment and borrowers should be fully informed on the terms of their loan. Still, a student loan can be essential to bridging the gap of covering the cost of college. The right student loan with a competitive interest rate is an investment in your future that can pay off down the line.
Learn more about the NC Assist Loan, its interest rates, and how you can qualify for a student or a parent loan to cover the cost of school.