Comparing Loans
Private Educational Loans and Direct PLUS Loans should be considered as a last resort, but may be necessary to finance a college education. To learn more about these options, please review the comparison chart and the suggestions below.
Private v. Direct PLUS Loan Comparison Chart
Should I Borrow a Private Loan or Federal Loan?
Regardless of which option you choose, please follow these guidelines:
- Apply early! Loans can take several weeks to process and disburse. (If you need assistance estimating your account balance, just let us know.)
- Apply for the amount you’ll need for the entire year! This will ensure that you are credit approved for the full year and don’t need to worry about a future credit check. (The loan will generally disburse in two equal disbursements for Fall and Spring but we can always reduce or cancel part of the loan at a later date.)
- Work on improving your credit history (student, parent, and/or co-signer). The suggestions at www.myfico.com may be helpful. The better your credit score, the lower your interest rate will be.
- Consider making payments while the student is enrolled, rather than deferring payment. Choosing to make payment while in school will:
- Help establish the student’s credit history earlier (on private loans)
- Avoid interest capitalization
- Get a lower interest rate from most lenders (on private loans)
- Take advantage of any auto-debit discounts immediately, if offered by lender (on private loans)
To choose the best loan option for your family, there are several things to consider:
- Who do you want to be the borrower?
- Do you have a creditworthy co-signer?
- Do you or your parents have good credit?
- What is the total cost of repayment?
- How will the student loan fit into your overall financial picture?
- Does the loan come with forgiveness benefits for death or disability?
- Does the loan offer a co-signer release option?
When comparing the cost of student loans, be sure to ask:
- What is the interest rate? Is it variable or fixed?
- Are there any loan fees?
- Are there any loan discounts? (for auto debit or graduation)
- What will the monthly payment be upon graduation?
- What is the repayment term? What if I experience economic hardship?
The calculators at www.finaid.org may also help you compare the cost of Private and Direct PLUS Loans. If you have good credit history, a private loan may cost less than a federal student loan- be sure to consider all of your options and compare carefully!
For helpful loan repayment calculators and other helpful resources, visit:
www.geneva.edu/object/financial_literacy.
