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Should You Take Out a Private Student Loan?

Should You Take Out a Private Student Loan?

Deciding whether to take out a private student loan involves several factors, including credit score, income, and the availability of a co-signer. While federal loans should be your first option due to their borrower protections and income-driven repayment plans, private loans can be beneficial if you have good credit or a co-signer, potentially offering lower interest rates and higher loan amounts. However, private loans come with higher risks, including double-digit interest rates for those with poor credit and limited deferment and forbearance options. They also lack federal benefits like loan forgiveness programs. Before proceeding, use prequalification tools to understand your potential terms and weigh the pros and cons, such as faster approval processes and potentially tax-deductible interest versus the absence of income-based repayment plans. Ultimately, the decision should be based on a thorough comparison of both federal and private loan options to ensure it aligns with your financial situation and future repayment ability.

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