Student Loan Savvy
November 9th, 2006Do You Know the Difference Between Federal and Private Student Loans?
I had no idea such a thing could happen until I read the piece in the October 29, 2006 Business section of floridatoday.com.
It seems that students can actually take out a private student loan and not even realize that they are not participating in the Federal student loan program. That’s because some lenders make both kinds of loans, federal as well as private and don’t bring it to the student’s attention that the loan they are actually taking out is at a much higher rate of interest and won’t be eligible for consolidation.
Know thy Loan
Now, this doesn’t excuse the student who needs to read every word before signing on the dotted loan line. Unfortunately, there are some lenders who will take advantage of students who just want to complete the loan application as fast as possible and get on with it. Some lenders thrive on students such as these.
Students too are knowingly making private students loans when they haven’t exhausted their federal loan options yet. With the high price of a college education in the news literally every day and most of us screaming that we need more help with tuition, we really need to do our part to keep costs down. Besides, we’re the ones stuck with those private loans with the variable interest rates so it makes sense we need to know what we’re doing before we take out those oh so easy to get student loans.
Don’t even think you’re getting a federal loan, but know you are. “But I thought Sallie Mae meant it was a federal loan,” you moan 3 years from now. “It is,” I remind you, “but Sallie Mae also makes private student loans and that happens to be the kind you made.”
Do This in Order
Make sure you have exhausted all federal loan options before you even think about taking out a private student loan. Then, shop around for an interest rate you can live with. Most important, know all the terms before you sign off on the loan. If you don’t, it will haunt you later.
