Nowadays, more and more parents and students who seek financial aid are considering non federal student loans or private student loans over government aid. Chances are, if you are reading this article, that you are likewise considering this option. Below is information you need to better understand what non federal student loans are all about and to be aware of the things that you should look into when and prior to applying for this type of loan.
Introduction on Non Federal Student Loans
The simplest difference that can be given between non-federal and federal student loans has something to do with the lending entity. Non federal student loans are granted by private financial institutions such as banks and lending companies while the latter are either guaranteed by government agencies or offered by institutions sponsored by the government.
The Difference between Federal and Non Federal Student Loans
Another difference is with regard to aggregate limits. The increase in the number of individuals who prefer non federal student loans became evident in the 2000s when the cost of education became higher. This incident drastically affected students and parents seeking or enjoying government aid. As there were federal student loans limits being observed, the need for supplementation from other sources came about. Non federal student aid – such as Sallie Mae student loans – was the answer for most people. Loans of this type were used by individuals either to supplement government aid or replace it entirely. This is still the case today.
Why Take Advantage of Non Federal Student Loans?
As mentioned in the previous paragraph, there is a ceiling figure or a limit as to how much a person can borrow when it comes to federal loans. On the contrary, with non federal student loans, the amount that can be borrowed is flexible and largely dependent on the credit history of the borrower. This means that if you or your parents are in good credit standing, you stand a chance of obtaining a larger amount of money.
On a related note, “flexibility” in non federal student loans can likewise be seen in the interest rates applied to private loans. As a fixed figure has not been mandated by the government, these may differ from one lender to another. However, like the loan amount, the interest rate that will be applied by the lender will likewise be determined by the credit history of the borrower.
Another advantage has something to do with loan consolidation, a topic similar with consolidating federal student loans. Both the government and most private financial institutions offer this alternative to those who are having difficulty settling their accounts. However, individuals who are under a non federal student loan consolidation program find that the interest rates and federal student loans repayment options afforded to them are better. For most people, then, it is better to go for non federal student loans.
As you can see, students nowadays have better financial options to take in order to provide for their education. At the end of the day, the actual loan will not be the only priority, it is as important to find one that will offer the best terms and interest rates.