March 29, 2016

Beware Private Student Loans

One of my favorite resources, The Squared Away Blog, recently posted a warning about private student loans. "It is much more difficult to negotiate affordable repayment plans with private lenders. Private loans are unlike federal student loans, which have standardized repayment options and procedures." The Q&A with student loan experts emphasized the importance of using federal loans before resorting to private lenders. (Other experts have suggested that students limit themselves to borrowing only as much as the federal government will allow: for dependent students the amounts are $5,500 for first year, $6,500 for second year, and $7,500 for subsequent undergraduate years. If one graduated in four years the total limit would be $27,000.  Many would argue that with the high cost of higher ed, many students would need to borrow more. But $27,000 is close to the average debt for recent graduates. Do you really want to incur more debt? Maybe it's time to consider other options such as community college, finding a high paying summer job, working while in school (no more than 12 hours/week according to the experts), and forgoing the costly private college. Before you decide that private loans are the answer, please read Private Student Loans: Borrower Beware at

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