Facts about private student loans

Unlike federal student loans, private student loans are credit-based

Every college student, whether fresh out of high school or returning after years of being out of school, should fill out the FAFSA, or Free Application for Federal Student Aid. The application should be filled out at the beginning of each year. This application will determine a student’s eligibility for federal and state grants, federal student loans, and work study programs. If a student still needs additional funds for college expenses, he or she can apply for private student loans.

Federal student loans are need-based loans. This means that they are given to students who demonstrate a financial need for assistance. They are not based on a student’s credit history.

Students who are fresh out of high school may not have an extensive credit history. They may not have a credit history at all. Some are not even eighteen years of age when they graduate from high school and prepare for college. Continuing education students generally have a credit history, but it may not be a positive one. Financial hardships may have caused them to pay bills late. They may have bad credit.

Federal student loans are beneficial to these people because their credit reports are not taken into consideration. Unlike federal student loans, private student loans are credit-based, meaning that they are based on credit profiles. They are not need-based in the sense that you have to demonstrate a financial need, but verification is needed from the school, stating that a student is attending on at least a half-time basis. A student’s credit report is considered to determine eligibility, and those with no credit or bad credit generally need a creditworthy cosigner.

If you are a college student, and you do not qualify for federal grants and student loans, or your federal grants and student loans are not enough to pay your tuition and all of your other college expenses, private student loans are a great way to fill the gap.