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Private Loans To Pay For Your Online Education

Private Loans To Pay For Your Online Education

Guide to Online Education > Paying For Online Education > Borrowing the Money > Private Loans for Online Education

If you are short of what you need to pay for your online degree after you have exhausted all your options at the federal level, you may want to consider a private loan.

Private loans make up about 8% of all student loans and about 10% of all student aid awarded. Also called alternative or non-federal loans, private loans are those that are not sponsored by government agencies and provided by banks, non-profit organizations, and other financial institutions.

Private loans are unsecured - no collateral is required - and eligibility generally depends on your credit score. Interest rates are typically higher than federal loans, but competitive when compared to taking on credit card debt. The application process is fast (not tied to deadlines) it can be completed on-line, and payment is made directly to you.

Although in the academic year 2005–06, federal loan volume equaled nearly $69 billion, and private loans "only" totaled over $16 billion (College Board, Trends in Student Aid, 2006), private loans are growing at a much faster rate than federal loans, causing some concern among higher education and policy groups.

Why?

Many believe that with the ever-rising price tag associated with a college education, as long as students are faced with a gap to bridge between what a school costs and how much they can afford to pay, private loans serve a great need. Sallie Mae states "nearly 80 percent of all schools and college students depend upon the private sector to help them pay for college." However, critics of the private loan industry feel that heavy marketing lures in students who lack awareness about federal loan options that are more cost-effective, as well as the lack of consumer protections for these loans. (Search and compare different private educational loan options in our Student Loans and Financial Aid Center.)

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