4 Mistakes to Avoid When Comparing Private Student Loans

Image via Flickr by 401(K) 2012

When it comes to making the decision about a continued education after high school, it seems there is much thought put towards where and less consideration placed on how. In this case, how refers to acquiring student loans, whether it be through private or federal loans. In the event that federal student loans are not an option, private loans are sometimes your only option to pay for a college education. Here are some mistakes to avoid when comparing private student loan options.

Not Shopping Around for the Best Loan Providers

Make sure you do your homework when looking for a lender. You can compare private student loans on various websites. This allows you to see which lenders are offering the best rates and the best repayment options. Make sure you double check the interest rate you’re receiving on your loan. This can sometimes differ from what the advertised rate was since the advertised rates are usually only for those with very good credit.

Many private loans don’t have options for income-based repayment plans or forbearance. This can hurt you down the road, especially if you aren’t able to secure good paying work after you graduate. It is important that you exhaust your options for federal loans before looking at private loans.

Borrowing More Money Than You Need

Sometimes a lender will approve you for more money than you need. This can come as a welcome surprise, especially if you were nervous about being approved at all. But, taking the extra money when you don’t need it can cost you down the road. Taking a few extra thousand dollars out for things like laptops and other pricey school supplies isn’t usually worth it when you calculate how much you actually end up paying for them.

Choosing a more expensive school is another common reason to take out more than you may need. If you’re considering this, make sure the school has the credibility to back the higher price tag. There are over 5,000 colleges and universities in the United States. It’s more than likely that your potential employer isn’t familiar with the pedigree of most of those institutions. Avoid worrying about the stigma of going to a “less recognized” school.

Not Researching the Current Job Market

It’s also important to research the current job market. Your profession might not really require a master’s degree, or its benefits don’t outweigh the cost of graduate school. If this is the case, look for continued education opportunities provided by your employer such as conferences or classes.

Taking Out Extra for Living Expenses

The siren call of life outside of your parent’s home is a powerful one. This should not come at the expense of taking on extra student debt. Tacking on living expenses to your student loan debt throughout the course of college can add tens of thousands of dollars to your debt. 

The excitement around choosing a college can distract you from other important steps in the process. Try to focus on some of the pitfalls above when comparing private student loans and make an educated decision that makes sense for you.

Author: Brandon Park