Private Student Loans

Some dental students look at private student loans to fill the gap in the costs for their education.. Some may not qualify for federal funding, or do not receive enough funding and need to supplement the federal loans, grants or scholarships they received, Similar to federal student loans, private student loans can be issued to the student, his/her parents or a guardian. While these loans also have a higher loan limits, repayment is not expected until after graduation (but the interest accrues immediately). The school's financial aid office can provide a list of the programs for which students may qualify.

Highlights of private student loans include higher loan limit amounts, grace periods that can be as long as 12 months after graduation, can be used for any education related expense (tuition, room and board, books, computers, and past due balances). In addition, international students studying in the United States can get a private student loan with a cosigner who is a US citizen or permanent resident.

Private Student Loan Fees

Practically every private student loan will carry an origination fee, a one-time charge based on the amount of the loan. These fees can either be deducted from or added to the total loan amount, often at the preference of the borrower. Some lenders offer low-interest, zero fee college loans, but these are usually given to those with high credit scores. Also, while each percentage point on the front end fee gets paid once, the percentage point on the interest rate is calculated and paid throughout the life of the loan. Some suggest that this makes the interest rate more critical than the origination fee. But, there is an easy solution to the fee vs. rate question.

Legally, all lenders are required to provide a statement of the APR (Annual Percentage Rate) for the loan before a borrower signs and commits to it. Unlike the "base" rate, this rate includes any fees charged and can be thought of as the "effective" interest rate including actual interest, fees, etc. When comparing private student loans, it may be easier to compare APR rather than "rate" to ensure an apples-to-apples comparison. But, APR is the best yardstick to compare only those loans that have the same repayment term. If the repayment terms are different, the APR becomes a less-perfect comparison tool. In this case, one must look at the "total financing costs" to understand the options.

Types of Private Student Loans

Generally, there are two types of private college loans: School Channel and Direct to Consumer

School Channel Loans

School Channel loans offer borrowers lower interest rates. These types of loans are "certified" by the school who signs off on the borrowing amount. Funds are disbursed directly to the school.

Direct to Consumer Loans

Direct to Consumer loans are not certified by the school. Colleges and universities have no interaction with the lender. The student simply supplies enrollment verification to the lender, and the loan is disbursed directly to the student. While direct to consumer loans generally have higher interest rates, they are processed more quickly - some in a matter of days. Some opponents argue that the convenience is offset by the risk of over-borrowing and/or using the funds inappropriate purposes, due to the lack of a third-party certification that the loan amount is appropriate for the educational expenses of the student. Nevertheless, Direct-to-Consumer private school loan programs are quickly becoming a large growing segment of educational finance programs. Some of the companies that provide direct to consumer private loan assistance include:

    Offering an objective, sortable, online comparison solution that makes borrowing for college clearer, Simple Tuition stands behind their simple, straightforward navigation, a complex engine crunches real numbers to give you real, accurate results. Find the ideal student loan.

Shopping for Private Student Loans

Shop and compare loans, carefully reviewing all of the terms of each loan. Do not simply respond to "rates as low as..." tactics sometimes used bait-and-switch techniques. Compare the borrower terms and benefits, as these can vary in terms of deferment policies, the amount of time after leaving school before payments begin and forbearances - the period when payments are temporarily stopped because of financial hardship1. The policies are based solely on the contract between lender and borrower and not set by Department of Education.

Most private student loan programs are tied to one or more financial indexes, such as the Wall Street Journal Prime rate or the BBA LIBOR rate, plus an overhead charge. Because private loans are based on the credit history of the applicant, the terms will vary from lender to lender. Students and families with excellent credit will generally receive lower rates and smaller loan origination fees than those with less than perfect credit. For some dental students, this is an advantage. Their families may have too much income or too many assets to qualify for federal aid, yet have insufficient assets and income to pay for dental school.

1 As of 1998, all loan borrowers are eligible for cancellation benefits, regardless of when the loan was made or the terms indicated on the promissory note. As of 2002, a borrower determined to be totally and permanently disabled1 will have his/her loan placed in a conditional discharge period for three years from the date the condition became effective. During this period, no payments will need to be made. At the end of the three year period, if the total-and-permanent disability requirements are met, the borrower's repayment obligation is canceled. If the requirements are not met, repayment of the loan will resume. Total and permanent disability is defined as the inability to work and earn money because of an injury or illness that is expected to continue indefinitely or result in death.

This Website was compiled using a variety of resources and is not intended to substitute or replace the professional financial advice. The content provided is strictly for informational purposes on financing a career or education. Please seek additional information and consult a professional with any questions or concerns you may have regarding financing a dental or other professional career.

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