Of the 44.7 million people in the U.S. who owe student loan debt, 7.63 percent owe private loans. Private loans are a little different than federal ones, and can be useful if federal loans aren’t enough to cover your expenses. Here are some unique pros and cons to taking out a private student loan.
They’re Not Forgiven So Easily
Private loans can be forgiven under unique circumstances, but they’re not the same as federal: the Public Service Loan Forgiveness program, for example, is not an option. Generally, private debt can only be forgiven in the event of permanent disability, the death of the primary borrower, or if the loan was a scam… and even then, it’s no guarantee. There are ways of easing the burden, however—contact a private student loan lawyer to review your options.
You’ll Likely Need a Co-signer
Chances are you won’t be accepted without one. A co-signer is required to pay a portion of the debt, which can ease a primary borrower’s burden significantly and lower the loan’s interest (which tends to be higher than interest rates for federal loans). However, a co-signer must be willing to financially contribute until the debt is fully repaid, as co-signer releases are rarely allowed: as of 2015, the rejection rate for co-signer release requests was 90 percent.
Good Grades Can Help
Funny as it may sound, doing well in college can actually lower your loan interest rates. So study hard!
Scammers May Come Calling
Anyone who requests a student loan can be targeted by a scammer, but since federal loan borrowers have significantly more ways of easing their financial burden, private borrowers can be especially vulnerable. If a debt relief company gets in touch with you (or if you decide to seek one’s assistance), research them carefully. You’re likely better off contacting a loan lawyer or your loan servicer, e.g. if you’re interested in refinancing your debt.
Private student loans can be greatly beneficial, but students should know what they’re getting themselves into. Inform yourself to make the best decision.