How Do Private Student Loans Work? Key Facts About Private Student Loans

Provided by College Ave Student Loans

When it comes to paying for college there are various ways to help you pay for college, such as grants, scholarships, savings, and federal student loans. If these don’t cover the full cost of college, one option to cover the gap is private student loans. But what are they? And how do they work?

We’ve partnered with College Ave Student Loans to help you understand key facts about how private student loans work.

5 Facts About How Private Student Loans Work

1. They provide gap funding for college. Before taking out private student loans, you should look into federal student loans in the student’s name first. They have a low fixed interest rate, but they also have a limit on how much money you can take out each year. If you’ve maxed out what you’re able to borrow in federal student loans, private student loans work for you by covering that financing gap.
2. Private student loans usually require a cosigner for undergraduates. Private student loans are issued by private banks or financial institutions and require a credit and income check to determine the borrower’s ability to pay back the loan. College students often have not established much of a credit history, so they need a parent or guardian to cosign on the loan for them.
3. Interest rate is determined by the lender and your credit qualifications. Each private student loan provider sets their own interest rates. Private student loan interest rates are determined by each applicant’s creditworthiness and their ability to pay back debt. Applicants are also typically able to choose between fixed vs. variable interest rates.
4. Repayment plans vary. Federal student loans have repayment plans set by the government and the standard repayment plan is to pay back those loans within 10 years of graduating. Private student loans may offer a variety of flexible repayment plans depending on the lender. College Ave, for example, has repayment plans ranging from 5 years to 15 years and whether to make payments while the student is in school or wait until after graduation.
5. Loan forgiveness programs don’t exist. Private student loans don’t have forgiveness programs that help you eliminate your student debt after working for a certain time frame. Federal student loans do have some forgiveness programs, but you have to work in the public sector for several years before becoming eligible for those programs.

_{College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.}

_{WE RESERVE THE RIGHT TO MODIFY OR DISCONTINUE (IN WHOLE OR IN PART) THIS LOAN PROGRAM AND ITS ASSOCIATED SERVICES AND BENEFITS AT ANY TIME WITHOUT NOTICE. CHECK WWW.COLLEGEAVESTUDENTLOANS.COM FOR THE MOST UP-TO-DATE INFORMATION.}

_{©2021 College Ave Student Loans. All Rights Reserved.}

_{1 Source: CNN Business, 2019.}

^{While we trust you’ll find value in this content, it’s important to view it as a starting point. For personalized guidance tailored to your unique circumstances, we strongly advise consulting with a qualified professional who holds the necessary licenses. This article, along with any associated resources, should not be interpreted as legal or financial advice. While efforts were made to ensure accuracy at the time of preparation, we cannot guarantee its current relevance.}

^{Citizens National Bank does not warrant or represent the accuracy, applicability, completeness, or suitability of the information provided. Citizens National Bank explicitly disclaim any responsibility for the use or misuse of these materials. By accessing this site, you agree to absolve Citizens National Bank from any associated liabilities. Exercise caution and seek professional advice before making any financial or legal decisions based on the information provided here.}