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Is Taking Out a Private Student Loan the Right Decision for Graduate School?

Today many private student loan lenders have displayed attractive options for graduate students to take out loans with them. They make their loans appealing by advertising low fixed interest rates, which look significantly lower than Federal student loan rates. Along with fixed rates private lenders offer they also offer variable rates, which are subject to change at any time thus they are a riskier option.

If only looking at the lower interest rates private loans offer compared to government loans, it seems more appealing to borrowers, there are still other factors to consider when deciding which loan is right for your situation.

Private loans for example do not have consumer protections that Federal loans offer, or repayment plans, such as, Pay as You Earn (PAYE), Income Based Repayment (IBR), and Income-Contingent Repayment (ICR). These payment options offer a cap of 10 to 20 percent of your monthly discretionary income and can extend repayment time from 10 years to up to 25 years.

Another important factor to focus on before you decide if a private loan is a good decision is if your credit score is in good standing. Most private loans won't give you their lowest interest rate advertised unless your credit score is outstanding. However, even if you do not think your credit score is good enough it is still worth the inquiry, and do not dismiss the option to take a private loan out. Private loans are a good option when a borrower has a good chance of a job after graduating, along with good credit.

Looking at your whole financial situation is also important to consider. If you have dependents, you need to think about how they would handle your debt if you were to become disabled or die. Private loan lenders, unlike government loans, do not dismiss loan repayments in the case of a death. Doing your research and reading the fine print on all loans is very important before you choose one to invest yourself.

If you find yourself in debt from student loans or struggling to pay off loans, look for an attorney who specializes in student loan debt; they can help to get you on the right track to a financially stable life, for not only you but also your loved ones.

Work Cited:

Should You Take A Private Loan For Graduate School? (Forbes)


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