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Private Loans – Proceed with Caution
So, you have worked your way through your Perkins loan or your Stafford loan and still have a semester to go? Either you stay in for the entirety of the next semester and beg steal and borrow your course books from other students, or take out the private loan that you have been offered to cover any shortfall.
Just take a minute to read this before you do!
The one thing that you have to remember is that a private loan is not free money for college! Neither is any federal loan you have already been granted as part of your financial aid award. They all have to be repaid just as soon as you graduate and get a job. You cannot just brush this fact aside in the hope that you land on your feet with a fantastic wage the day after you graduate. You have to be realistic!
Before you take out a private loan, take time to understand what your financial commitments will be after you graduate and what your monthly repayments will have to be. Look at your commitments now and how it would increase if you took out a private loan on top of that. If you find that you will be paying two or more lenders every month an unmanageable amount of money, do not take out a further private loan.
If you do, you may find yourself in serious financial trouble. Rather than reaping the financial rewards that being better educated will bring, you will find yourself scraping around every month to repay your loans. And where will you get the money to clothe and feed yourself?
In summary, a private loan is a useful source of money to help you through college but do not use it to finance your flamboyant student lifestyle without thinking about the consequences.
If you do decide to take out a private loan after this advice, make sure you check the credentials of the company you apply to. Ask your college to provide you with a list of accredited private loan lenders.
Also remember that after you graduate you may want to consider looking into student loan consolidation. This will enable you to take out a loan to pay off all of your existing loans into one manageable loan, with one monthly payment and one interest rate.