After you have explored and applied for all federal aid, Maryland State aid, and institutional financial for which you are eligible, you may wish to investigate private (or alternative) loans. You will want to be knowledgeable about loans and know what alternatives you have before you sign up for a private student loan that may require years of repayment. You may need and be offered a private student loan when your cost of education exceeds available personal funds and federal and State financial aid. Private student loans typically are very different from federal loans, contain more restrictive terms, and are more expensive.
Private student loans are credit-based loans offered by private banks or lending instruments with terms and conditions that vary from lender to lender. These loans are similar to personal loans you might receive when you purchase a car. Most private student loans are available to U.S. citizens and permanent residents attending schools within the USA; however, not everyone is approved because a credit check and oftentimes a co-signer are required. Private Alternative Student Loans are NOT funded or guaranteed by the federal government. Private Loans are a contract between you (the student) and the private lender. You are responsible for repayment even if the school you are attending closes and does not refund the loan amount used in paying your cost of attendance.
What does it cost to obtain a private student loan?
The cost of the loan = the original loan amount + fees + compound interest.
A breakdown of the various loan charges is provided below. Note that "fees" are the lender's cost for processing, issuing and maintaining the loan.
What a Private Student Loan CostsInterest Costs for a 15-year, $10,000 Loan Based on Different Interest Rates)
Note: Typically, private lenders allow 10 to 25 years for repayment. The longer the repayment period, the more the loan will cost.
What's the relationship between a school and a private lender?
The loan agreement signed at the school is a binding contract between the private lender and the student borrower and, once signed, the student has agreed to borrow and owe the lender the money. Therefore, the student is usually still held responsible for repaying the private loan even if the student withdraws or is terminated, or if the school closes. For that reason, it is especially important to know the school's published refund policy.
How do you know if a private student loan is right for you?
Explore Private (or Alternative) Loans only after you have applied for all other sources of financial assistance.
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