Is it Convenient to Take Out a Private Loan for Education
                     I S I T C  O  N V E N I E N T T 
O   T A K E O  U T A
P R I V A T E
L O  A N F O  R E D U C  A T I 
O  N ?
B Y L E V E L F I N A N C  I N 
G

When it comes to paying for your education, it’s crucial to  
have a full picture of all the available solutions. Before even  
considering a loan, you should check whether you qualify 
for  other financing options. Here are some examples.
Scholarships –  This type of financial assistance is  
assigned based on achievements in your field of study  
and/or extracurricular activities. Scholarships are usually 
 awarded by colleagues and universities and can 
finance  your studies, either partially or fully. Unlike 
loans, you  don’t need to repay them.
Grants –  They are usually awarded based on  
demonstrable financial needs. They can be assigned 
by  the federal government, the state, universities, or  
colleges. Like scholarships, they are gifts, meaning you 
 don’t have to pay them back. The Federal Pell Grant is 
 the most popular one in the US.
Negotiating with your school –  The room for negotiation 
 changes from institution to institution, but it doesn’t 
harm  to try and have a talk with your desired school’s 
financial  aid office on how to make your education 
more  affordable.
When possible, you should also consider alternatives such 
as:
financial assistance from your family 
 saving money before going to 
school  saving money by living off-
campus  working through school.
This article will explore when it is convenient to take a 
private  loan for education (and when it’s better to focus on 
other  types of loans). First, we will have a look at some 
recent  statistics on student loans in general.
One of the main reasons why federal loans are the most 
popular  option is the lower borrowing cost. Based on data 
provided by  Forbes, the fixed interest rate on federal student 
loans for the  school year 2022/23 was 4.99%. This compares 
to a fixed rate  ranging between 2.99% and 13.95% for private 
student loans.
Many students also choose federal loans for the lack of credit 
 checks, as well as the lack of need for a co-signer. Indeed, 
this  is a great advantage when your credit score is not high 
enough  to obtain low-interest private loans. However, some 
federal  loans (like PLUS Loans for graduate students) require 
credit  checks.
Other federal loan benefits include:
six-month grace period for repayments after you 
graduate  different repayment plan options
270 days without payments before default
possibility to either postpone or lower your payment 
in  case of financial difficulty
tax deductible interest
loan forgiveness options for people working in the 
public  sector.
Moreover, if you are an undergraduate with exceptional  
financial needs, you may qualify for a subsidized federal 
loan.  This means that the interest will be paid by the 
government  while you are in school.
Please remember that you need to submit the FAFSA (Free  
Application for Federal Student Aid) as one of the 
requirements  to be eligible for federal student loans (as well 
as federal  scholarships and grants). This application is 
available each  October 1 for the following academic year.
However, there are also reasons why you may want to  
consider a private student loan. For example, there are 
private  loans that don’t have an origination fee (unlike federal 
loans).
On top of that, private loans have less strict caps on the 
total  amount you can borrow. In contrast, undergraduate 
students  can only borrow up to $31,000 in federal loans 
($57,000 if  they are financially independent).
T H A N K Y O 
U
H T T P S : / / L E V E L F I N A N C I N G . C O M / P R I V A
 T E
- L O A N - F O R - E D U C A T I O N /