Private Student Loans
Private loans are often used by undergraduate students to meet educational costs after more favorable grants, scholarships and federal loans are exhausted. Current economic conditions have caused major changes in private student loan offerings for undergraduate students. These changes have negatively impacted both the access and the affordability of private student loans. Therefore, Graduate Leverage is currently not offering a private student loan program for undergraduate students. Of particular note:
- Average interest rates on variable rate private student loans have risen to over 10%*
- Private loan eligibility requirements have become extremely demanding
- Some lenders require payments during the student's in-school period
Many families use private student loans because they allow the student to be the primary borrower. While this may be an attractive feature, families need to be aware of the high cost and unfavorable terms that may come with choosing a private loan. However, there are other options.
For undergraduate students and families searching for a low-cost loan option where the parent is the primary borrower of the loan, there is the Federal Parent PLUS Loan.
| Program Comparison Chart |
| | Private Loans | Federal Parent PLUS |
| Interest Rates | - Current rates average 10% *
- Variable rate based on Prime or LIBOR, which are historic lows
- Rates likely to increase as Prime and LIBOR normalize
| |
| Fees | | |
| Eligibility Criteria | - Minimum credit scores as high as 720
- Debt to income ratio and income verification reviewed
- Cosigner often required
| - Absence of negative credit history
|
| Repayment | - Principal and interest payments may be required immediately upon disbursement
| - May be deferred while student is in-school
|
| Payments Made By | - Student (parent/cosigner responsible if student defaults)
| |
Notes and Assumptions
* Student Lending Analytics, September 2009.