I’ve been out of college for a little over eight years. I have student loan debt that I’m still paying back. I’m one of the folks that took out federal and private loans. When I was in college, my federal loans were not enough to cover my school costs. At the time, I had to find a private loan lender pretty fast. I settled on one particular company and was just happy to be approved. I figured that once I graduated from college, I’d be able to get that $50,000 job and pay my loans off in no time. Raise your hands if you think that actually happened. Keep those hands down because it didn’t.
After graduation, it took me a year and a half to find a decent full-time job. I was finally making a little bit of money, but not enough to pay all of my bills. Luckily, I was able to postpone my payments on federal loans, but my private loan lender wasn’t hearing that. I still had to make some sort of payment. During this time I was only able to put $20 – $30 on the loans once every couple of months. That was far below the minimum, but I wanted to pay something. During the next few years, life was a roller coaster. I moved back to Atlanta, traveled cross country and was unemployed for a few months. In late 2014, I finally began to tackle my private loans seriously.
What started out as $14,000 worth of debt in 2008 ballooned to nearly $27,000 because of interest and late fees. Seeing that balance makes me wish I would have taken the time to understand them truly.
I’m currently a financial aid counselor at a college. I’ve been paying on my private loans for a while now, and I can say that understand how they work. Unfortunately, many of the students that I speak to on a day to day basis are in a similar situation that I was in back in the day. They don’t know much about private loans. They think they are just like federal loans, but they aren’t. There are a few common things that students are surprised about when it comes to the private loans.
A lot of the students think that private loans have the same interest rates as federal loans. They are a little surprised when they find out that they are different. The interest rates for private loans are variable, and they can be a little higher. I tell students to check with several lenders before choosing one. That is something that I wish I would have done when I was in school.
Students can get federal loans without having to get a cosigner. For one of my loans, I had to get a cosigner. I’m glad my mother’s credit was good enough for that loan to be approved. I’ve seen many students who weren’t that lucky. Both of their parents had horrible credit. They were denied a private loan because of that It sucks to see students postpone their studies because they couldn’t get any private loan money for school. For a lot of them, school is the only positive thing that they have going for them.
During the years that I struggled financially, I learned that the private loan lenders don’t care about your situation. They want their money and will bug with numerous phone calls every day. I was able to get an economic hardship deferment with my federal loans. As I stated earlier, that wasn’t the case with the private loans that I had. They wanted their money. When talking to students, this is one of the main things that I tell them to be wary of when it comes to private loans. That’s not a good situation to be in. My credit suffered because I wasn’t able to put the private loans in forbearance or get a deferment. Students need to know what they are getting themselves into.
There are several repayment options available when it comes to federal loans. They really work with students when it comes to repaying their loans. From my experience, most private loans don’t have that many options. It’s different per lender. That is something that students must look at before they make their final loan decision. It should be noted that all student loans are eligible for student loan refinancing and consolidation, however.
When selecting a private loan lender, I don’t want students just to pick the first available choice like I did. I hope they take the time to compare several of the lenders before they make a decision. Comparing lenders will save them a lot of money and potential stress down the line.