Private student loans can make going to college a reality for many students, but when should you take one out?
All college students should fill out the Free Application for Federal Student Aid (FAFSA) when they enroll in school, regardless of financial need. This is the first step to see if you’re eligible for financial aid beyond federal student loans such as grants, scholarships, and gift aid. Once you’ve exhausted all of your federal and free money options, then you can consider taking out a private student loan to fill your funding gap.
Private student loans are one option families can use to help pay for college. Here are some instances when it can make sense to take out a private student loan.
Use Private Student Loans to Fill a Funding Gap
One of the primary reasons students decide to take out a private student loan is when other financial aid doesn’t cover all of the college costs. For example, federal student loans come with limits, and for many students, federal student loans don’t cover their entire cost of attendance. Once you’ve exhausted scholarships, grants, and federal loan options, a private student loan can help you get the extra money you need for college . Before you borrow, just make sure you’ve done the math and can expect the investment in your education to pay off.
Private Student Loans Can Pay for a Summer Session
Taking summer classes can be a good strategy for graduating faster, getting into the workforce sooner, finding smaller classes, or taking a course that fills up during the school year. Many students use their federal student loans and other financial aid to pay for fall and spring, leaving them short for a summer session. If there is significant value in taking a summer course, a private student loan might be a solution for you.
A Private Loan Can Help If Your Expenses Suddenly Change
College can be unpredictable. Sometimes you need help covering last-minute costs or other bills. For example, your roommate might suddenly decide to move out, leaving you with the other half of the housing expenses. Or your computer dies halfway through the semester. Before turning to a high-interest credit card to make ends meet, explore options like a private student loan.
Don’t forget that your school considers expenses related to your education, like room and board, transportation, and supplies into the cost of attendance, and student loans can be used to cover those related costs.
The federal government offers Federal Direct PLUS loans to either graduate students or parents who want to pay for school. You’ll need to fill out the FAFSA and have no adverse credit history to qualify. PLUS loans tend to be the most expensive of your federal loan options and come with higher fees.
Private lenders use your credit history to determine your interest rate. So, if you’re considering taking out a PLUS loan, it could make sense to shop around for a private student loan if you have good credit and a steady income. Some private lenders, such as College Ave, do not charge origination loan fees.
One important thing to note is that graduate PLUS loans are eligible for the federal income-based repayment program while parent PLUS loans and private student loans are not. If you are a graduate student deciding between a Grad PLUS loan and a private student loan, you should factor this into your decision.
When Should You Apply For Private Student Loans?
At whatever time your school’s tuition due date falls, about 30 days prior you should submit an application for a private student loan. The exact time to apply for private student loans varies, because every school online payday loans Maine has a different tuition due date. The best thing you can do is check with your school’s financial aid office to nail down exactly when you should submit your private student loans.
You can apply for a private student loan at any time. A general rule you should follow is that the earlier you submit your student loans, the better off you are to ensure the funds arrive on time.
One way to help you decide when to apply for private student loans, or if you should take out a private student loan is to use our prequalification tool. It will show you if you and your cosigner qualify for a private student loan and what interest rates to expect before you apply. Prequalifying does not impact your credit score. For more information about private student loans, visit our Private Undergraduate Student Loans page.