Today, as more and more students are going to school, whether it be for the first time or they are going back, it is becoming increasingly difficult to pay for the cost of secondary education. There are many different options, such as scholarships, grants, federal student loans, and private student loans. This article will discuss what a certified private student loan is and whether or not it is a good resource to use to fund your education.
What Is A Certified Private Loan?
When you use a certified private student loan to fund your education, the lender sends the funds directly to your school, so you don’t have to worry about getting the money to the school personally. Certified student loans can help you pay for all of your education that your federal student loans, scholarships, grants, and work-study do not cover. Many certified loans offer an interest rate reduction when you provide proof of graduation from college.
How Is A Private Loan Different than a Federal Loan?
A private student loan is different than a federal loan because it is not eligible for many federal loan forgiveness programs and will also not be eligible for bankruptcy except for in highly unusual circumstances. Federal student loans have interest rates ranging from 3.4% to 7.9%, whereas private loans can have interest rates that are as high as 12%. Federal student loans also do not require a credit check, whereas your creditworthiness directly impacts whether or not you qualify for the loan and the interest rate you are offered.
Should I take out a certified private student loan?
There are some advantages to taking out a certified private student loan:
- Private student loans can help you pay off what is not covered by other financial aid. This means you are not paying potentially thousands of dollars out of pocket.
- Many lenders offer fixed and variable interest rates, depending on what you are interested in.
- Lenders are also willing to be flexible with duration of repayment period. The most common repayment period duration is between 5 and 10 years, but some lenders offer up to 20 years to repay your student loan.
- There are different options for when you want to start paying back your student loans. Some borrowers choose to start paying back the student loan immediately, while other choose to only pay the interest that their loan is collecting while they are still in school. Some people choose to defer the whole loan until they graduate and have a job.
Differences between certified and non-certified loans
- Certified student loans require authorization from the school about the amount you need to pay for that year or semester. Non-certified student loans can also be used to pay for out of pocket expenses.
- Certified student loans go directly to the school; non-certified student loans go directly to the borrower.
- Certified student loans have lower interest rate compared to non-certified student loans.
- Non-certified student loans require a much more creditworthy borrower than a certified student loan, since a non-certified student loan can be for much more money than a certified loan.