Private Student Loans
Private student loans (also referred to as alternative loans) are credit based, non-federal student loans that can help bridge the gap between the actual cost of education and the limited amount the government allows them to borrow in its programs.
Before applying for private student loans, students should exhaust all other resources such as grants, scholarships, and federal student loans.
Example of how a Private Student Loan may fit into your education funding:
|Total cost of education||$30,000|
|Scholarships and Grants||- $6,000|
|Federal Aid||- $4,000|
|Private Student Loan Eligibility||$20,000|
Private loans are offered by financial institutions. Learn about Private Student Loans offered by Commerce Bank. Terms and features differ by lending institution, however some consistent features include:
- Borrow up to the full cost of your education, less other aid received including scholarships, grants and federal aid.
- Interest paid may qualify for a tax deduction*
- Repayment period varies by lender
- A creditworthy cosigner can help you qualify and/or receive a lower interest rate.
- Interest rates, fees, and other terms can vary significantly between financial institutions.
- If you have the opportunity to make interest only payments while in school, you will greatly reduce your overall cost of the loan.
- Borrowers may prefer loans that are based on the LIBOR index over loans that are based on the Prime Lending Rate. Over the long term a loan with interest rates based on LIBOR will be less expensive than a loan based on the Prime Lending Rate.
- Current LIBOR and Prime Lending rates can be found in the Federal Reserve's Statistical Release. The LIBOR rate appears in the London Eurodollar Deposits lines (1, 3 and 6 month figures) and the Prime Lending Rate appears in the Bank Prime Loan line.
Here are some helpful terms when comparing private student loans:
- COA-Aid is the Cost of Attendance minus all other student aid received.
- APR is the Annual Percentage Rate, this rate factors in the interest rate, fees, and other terms.
- LIBOR is the 3-month average of the London Interbank Offered Rate. LIBOR is the average interest rate paid on deposits of US dollars in the London market.
- PRIME is the Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers.
- Consult a tax advisor for details. IRS Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits.
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