Whenever the news examines college funding in America, you can bet the topic of student loan debt will be front and center.
While it is impossible to trivialize a 1 TRILLION dollar problem, issues with parents going into debt seems to garner far less attention. In reality, many students can only borrow a limited amount for college before parents need to step in. When student loan borrowing reaches its peak from the federal government, the private sector becomes an obvious place for family’s to seek money for college. This journey yields countless options but many red flags to be aware of.
Firstly, when seeking out a private loan it is important to understand who is truly responsible for paying off the loan? Companies enjoy advertising “student loans” but are they actually trusting young adults to pay them back? This is rare so a co-signer is almost always required and it is important to see if the loan offers a co-signer release option after X number amount of payments.
Secondly, nearly all private loans for undergraduates at a four-year college require a student to be enrolled at least half the time. Students attending school less than half the time or attending a community college will have less options to choose from.
Another point to keep in mind when researching private loans is to be very careful with variable interest rates. These rates can jump quickly and may seem like the right fit in the short term but may very well be a mistake in the long term.
Lastly and perhaps most importantly, before accepting any private loan, it is wise to check with you local bank and/or credit union to compare terms, fees, interest rates, repayment options, etc.