Private Student Loans

Private student loans from banks, credit unions or other financial institutions are available to students to help pay for their education. Many are aggressively marketed through TV ads and other media. Most private or alternative student loan programs consider your credit history, have a higher interest rate than federal student loans and may require you to have a co-signer. Federal student loan programs such as the Perkins, Stafford and PLUS loans have fixed interest rates ranging from 5 to 8.5 percent. Private or alternative loans typically have interest rates that rise and fall with the economy. Before you search for the right private student loan here are some things to remember:

1. Many private loans require payments while you are in school;
2. Private loans can have variable interest rates greater than 18 percent;
3. Private loans are not subsidized which means you pay the interest while you are in school;
4. Interest on private loans is not tax deductible;
5. Private loans can't be consolidated into a federal consolidation loan program.

Finally, not all students can take advantage of all the benefits lenders advertise. Benefits that are promised several years down the road may not help if you get into financial trouble.