It is about that time of year again; Time to fill out the Free Application for Federal Student Aid, also known as the FAFSA. The priority deadline for filling out the FAFSA is December, 1st, which is much sooner than the March 1st date it had been in prior years. Mark it on the calendar and request an appointment with Powercat Financial to familiarize yourself with the FAFSA and federal student loan process. Peer Counselors can help you plan out your financial future and come up with how much you need to borrow. It is crucial to accept ONLY what you need to prevent over-borrowing.
For some students, savings, scholarships and federal aid may not be enough, so they may be forced to consider private loans to help pay for their education. What options are out there?
FASTChoice Tool: A guide to helping you choose your private loan which can be found at http://www.k-state.edu/sfa/aid/loans/private/
FASTChoice is a resource tool to allow students and families to see what lenders and loan products are available to help pay for educational expenses. If a student is in need of additional financial assistance, this tool should be the first place he or she turns to.
Before exploring the tool, it is important to know what to be looking for. There are several key categories to private loans that all students and families should be aware of before applying for loans.
Lenders rarely give complete details of the terms of private student loans until after the student submits an application. For example, many lenders advertise the lowest interest rate they charge (given out to good credit borrowers). Most students, with little to no credit, must be aware of this while comparing different lenders.
Students should also consider the differences between fixed and variable rate loans. The difference is simple: the rate on a variable interest rate loan can change over the life of a loan, whereas a fixed rate will remain the same unless you refinance it. On the other hand, rates on government student loans are always fixed, and don’t take into account the credit risk posed by the borrower. With that being said, it is important to understand and decide which type of private loan you want to apply for.
When looking at different loan options, make sure you understand what if any fees they may charge and if this fee comes out of your loan proceeds.
Private loans do not have the same range of flexible and affordable repayment plans as federal student loans do. Private lenders may offer flexible repayment plans or other affordable options, but they are not required to do so. As you begin to explore the tool, examine which lenders offer repayment plans and understand the details associated with each. You should review your private loan contracts carefully to better understand what rights you have.
These are just a few key, and important areas regarding private student loans. It is crucial that you understand what you are applying for before filling out the application. The FASTChoice tool offers an easy way to compare loan options from different lenders. If you are having a hard time understanding the details of these loans, schedule a meeting with a peer counselor today!
Upsides to private student loans (https://www.estudentloan.com/blog/pros-cons-private-student-loans)
- Private loans may cover the total cost of attendance
- Cosigners may often be able to be released from the promissory note after the student makes a number of on-time payments
Downsides to private student loans (https://studentaid.ed.gov/sa/types/loans/federal-vs-private)
- Fewer in-school benefits and may have higher interest rates than federal student loans as rates are based on credit-worthiness
- Lenders may require an established credit record and also a cosigner
- Students with private loans will not be eligible for loan forgiveness programs
- Private loan repayment plans will likely not include income-based repayment options like federal loans offer
- Private debt follows you to the grave and others may be held responsible. Federal student loan debt dies along with you and will not count against your estate when you pass away.
Peer Financial Counselor III