As mentioned earlier private education loans, also referred to as Alternative Education Loans, carry higher interest rates and fees than those of federal loans. Whereas federal student loans are offered at a low fixed interest rate, private student loans are like other loans in that the variable interest rate depends on the borrower’s credit and is also tied to LIBOR and PRIME index rate.
These index rates are representative of how much it cost the lender to borrow money and the interest rates lenders give to borrowers with the best credit, which affects the interest rates offered on a whole. The amount of the interest rate can also be manipulated depending on whether or not fees for the loan will be paid and how much those up front fees will be.
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