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Student Loans

Student loans are a means to pay for college that you generally have to repay.  The repayment period may be immediate or delayed till after you graduate.  Student loans are divided into two very distinct groups.  When we discuss “Student debt” generally we are referring to student loans.

Private Student Loans

Private student loans are loans from private banks or other lenders for educational expenses.  These are generally the worst form of paying for your education.  Generally these have higher interest rates, less flexible repayment terms and may require co-signers who are themselves responsible for repaying the loan if the student fails to make payments.

These kinds of loans should be generally avoided.  The APR associated with a private student loan is generally higher than the APR associated with a public loan.  Private student loans can range between 4% to 13% interest.

Private student loans are applied for through the lending institution generally or through the college or university.  Private student loans do not necessarily require the student to meet performance levels or for the school to meet certain criteria.  An institution that is not recognized by the US Department of Education can not receive Public Student Loans but can receive Private Student Loan money.

Public Student Loans

Public student loans are loans that do not require a co-signer because the federal government is officially backing the loan essentially acting as a co-signer.  Because these loans are backed by the government the risk of default to the lender is low so the interest rates for these loans are generally very low.

Federal student loan interest rates rose for the 2018-19 school year and apply to loans disbursed or made between July 1, 2018, and July 1, 2019. The interest rate for federal direct undergraduate student loans increased to 5.05%, up from 4.45% in 2017-18

There are multiple federal student loan programs available but generally all of these loans are applied for through FAFSA

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