Important Information about Private Student Loans

Finding a way to pay for college and navigating financial aid can be a daunting process. That’s why Sallie Mae recommends a simple “1-2-3 approach” to help families pursue financing opportunities in the most economical order:

Look for free money. Seek out funds that don’t have to be paid back. These funds come in the form of scholarships, grants, work-study and gift aid. Be sure to fill out the Free Application for Federal Student Aid ( FAFSA) to see if you qualify for need-based federal grants. Sallie Mae's free Scholarship Search.
Consider federal loans. You may qualify for a federal loan with a fixed interest rate and flexible repayment options.
Fill the gap with private education loans. Private student loans can help cover the rest of your college costs. Sallie Mae’s Smart Option Student Loan^® encourages you to make small payments each month or pay your monthly interest while in school so you graduate with less debt, pay off your loan faster, and save significantly over the life of the loan, compared to conventional private loans. Securing a creditworthy cosigner may help you qualify or reduce your interest rate.

Consider Your Student Loan Options

Federal Student Loans
Federal student loans are available to U.S. citizens attending eligible higher education institutions at least half-time. The federal government sets the interest rate on federal student loans. It also sets the loan limits, based on the grade level of the student and whether the student is classified as a dependent student or an independent student. For example, current loan limits range from $5,500 to $7,500 for dependent students, and more for independent students. The FAFSA is required. This form may be completed and submitted online at www.fafsa.gov .

Federal Stafford Loans are available in two types. “Subsidized” Stafford Loans are available to students who demonstrate financial need as determined by a federal formula. No interest accrues while the student is in school and during the grace period and deferments. “Unsubsidized” Stafford Loans are available regardless of need. The student is responsible to pay interest that accrues on the loan, including while in school.

Federal PLUS Loans
These loans are available to parents who wish to help their child pay for school, as well as graduate students. With a PLUS Loan, parents and graduate students may borrow up to the full cost of a student’s education, less other financial aid received.

Private Loans
Private loans are available to undergraduate and graduate students from Sallie Mae and other financial institutions and are designed to fill the gap after exploring federal student aid. Unlike federal student loans, private loans are not sponsored or guaranteed by government agencies and do not require completion of a federal form to qualify. Private loan eligibility requirements, interest rates and terms vary from lender to lender. Private loans are credit-based, thus applying with a cosigner may help students access a lower interest rate. Many lenders, including Sallie Mae, offer private loans to help cover up to 100 percent of the cost of attendance, less other financial aid received. For Sallie Mae loans, the school’s financial aid office certifies the cost of attendance and funds are disbursed directly to the school.

College Planning Calculator^SM
The College Planning Calculator^SM is a free online tool from Sallie Mae, allows users to quickly and easily build their own unique college savings and funding plan. Based on what life stage the customer is in, the Planner can help the user build a savings plan for their child's future education, or help students and parents fund current or pending school costs.

The Planner delivers customized education funding guidance for each family based upon their own specific finances and goals. With this interactive tool, users can estimate the total cost of education, find ways to minimize or eliminate borrowing, estimate their potential monthly student loan payment, receive timely guidance about saving and planning for school, and much more.

Illustration of the Terms of Federal and Private Loans
Sending a child to college can be one of the most important investments a family can make. The terms of federal loans and private loans are different, as illustrated with the following two examples. Mary is in need of a loan to help fund her bachelor’s degree and her mom wants to help out. Mary’s mom takes out a Federal Direct PLUS Loan after passing a basic credit test. Mary’s mom is the loan holder and solely responsible to pay the loan. The interest rate for the Federal Direct PLUS Loan is a fixed 6.41% with a 4.3% Disbursement Fee¹. The standard repayment term is 10 years² and begins on the final disbursement of the loan. Parents can opt to postpone payments until after their student graduates though interest would accrue during that period.

Click on Link:
https://www.salliemae.com/student-loans/information.aspx