When You Should Consider Taking Out Private Education Loans?

As the average cost of college balloons to more than $6,000 a year the use of private loans has grown as well. The ease of obtaining a private student loan has helped the private student loan volume increase by approximately 25% a year. However, it is highly suggested that students attempt to first attempt to obtain federal student loans prior to private student loans.

The primary reason for this being that, like scholarships, private student loans reduce the amount of financial need, or need-based aid, required to cover the cost of attendance. This means the borrower is more limited on the amount of federal loan assistance they are eligible for receiving. A direct-to-consumer private loan can bypass this problem as it is not required to inform the school of the loan therefore isn’t factored into federal loan calculations.

However, this could soon be changing as there is legislation currently pending that would require lenders to inform a college about all private student loans.