Taking out any student loan is a big financial decision. If you’ve exhausted the amount of federal student loans you’re eligible for, you may be considering additional, private loans to bridge the gap. If you are, there are particular characteristics of private student loans and credit to consider.
With many student loans, you may not have to start making full payments until after graduation. As a result, you may not feel the full impact to your day-to-day finances immediately. However, it’s important to consider how private student loans fit into your future budget. According to our latest Consumer Pulse survey, 23% of consumers say they will be unable to pay their current private student loan bills. Before taking out private student loans, you’ll want to fully understand the amount you’ll owe, the loan’s terms and the potential impact to your credit health.
Difference between federal and private student loans
To receive federal student loans, those granted by the U.S. Department of Education, you need to fill out the Free Application for Federal Student Aid (FAFSA). Even if you have no or limited credit history, most federal student loans don’t require a cosigner. Federal student loans have a maximum amount you can borrow each year based on the type of loan. They also offer certain benefits that may not be available for private student loans, such as forgiveness programs and flexible repayment plans. As a result, federal student loans tend to be prioritized as a funding choice.
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