Why I don’t like Private student loans
By Genevieve Dobson
I have worked in the student loan industry for 9 years and in that time I have learned a lot about the different types of loans that are available for students to take out. In my experience there are 3 main reasons why you would not want to take out a private student loan:
- Private student loans rates tend to be variable which means the rates can go up
- To qualify for a private loan they have to pull your credit which usually means a higher rate
- You don’t have the same repayment options like income based repayment like you do for federal
Essentially Private loans can end up costing much more than the fixed rate federal loans that are available and the rates can go up over time based on Prime or Libor rates. If you took the loans out while you were just starting school your credit may not have been the best and therefore you may have ended up with quite a high interest rate. Also, when you come out of school if you are unable to establish the income you may have expected you wont have the different repayment options that you have with federal loans like the IBR plan, or pay as you earn plan.
Therefore, when deciding what loans to take out to pay for school its vital to make certain that the loans will not be unreasonably so they can be paid back easily. Otherwise, like many borrowers, the loans are not able to be paid off within the agreed terms and the loans end up in default. Avoid private loans and you can avoid delinquency and default and the stress of managing your student loan debt.