What are your private student loan interest rates? Is there a grace period on your student loans? How long are your student loan repayment terms?
So take time to read over your private student loan contract for all the need-to-know information. Here’s what to look for in your student loan contract before you sign on the dotted line.
How much are you borrowing?
What’s your interest rate?
Is your rate fixed or variable?
What’s your loan term?
Do you have a grace period?
Can you apply for deferment or forbearance?
Can you get cosigner release?
While this might seem like an obvious question, it’s a good starting point for diving into your student loan contract. Your contract should say how much you’re borrowing.
But this sum won’t mean much on its own, so use a student loan calculator to estimate your monthly payments. With a student loan calculator, you can see how much you’ll need to pay back each month, plus how much you’ll spend on interest.
Let’s say you’re borrowing $25,000 at a 6.8% interest rate on a 10-year term. By using a calculator, you’ll see that your monthly payments will be $288 and that you’ll spend $9,524 on interest.
If you’re borrowing any federal student loans, remember to take those into account, too. By estimating your monthly payments, you’ll have a clearer sense of what your financial obligations will be after you graduate.
Knowing your interest rate will reveal the long-term costs of your loan. Interest typically starts accruing on a private student loan from the date of disbursement.
Once your loan enters repayment, that interest will capitalize, or get added to your principal. If you haven’t paid the interest during school, you’ll end up paying back an even bigger balance than the amount you initially borrowed.
To keep costs down, you could make small payments while you’re still in school. It’s also useful to shop around with several private lenders to ensure you find the best rate.
Along with looking for your rate, find out if your loan comes with any origination or other fees that could add to your costs of borrowing.
Unlike federal student loans, which come with fixed interest rates, private lenders typically offer you a choice between a fixed and variable rate. So when looking at variable- versus fixed-rate student loans, what’s the difference?
Well, variable rates tend to start out lower, but they could rise over time. Fixed rates stay the same over the life of your loan. You’ll always know what you’re paying from month to month.
If you’re confident you can pay back your loan quickly, a variable rate could potentially save you money. But if you’re sticking with a 10-year term or prefer the peace of mind of a steady rate, opting for a fixed rate could be the better call.
Once you know your loan amount, interest rate and rate type, take a closer look at your loan term. Many private lenders let you choose a term between five and 15 years when you borrow.
It’s important to make an informed choice since you typically can’t change your term after you sign your contract. The only exception is if you refinance your student loans for better rates and new terms.
The standard term is 10 years, but you can pay your loan off ahead of schedule without penalty.
Similar to the federal government, most private lenders offer a student loan grace period, meaning they defer payments while you’re in school and for six months after you graduate. But not all lenders offer this benefit, so it’s crucial to find out when repayment begins on your loan.
Before finalizing your contract, find out when your first payment will be due.
Your private student loan contract should detail any benefits that come with your loan, such as deferment or forbearance. Not all private lenders offer these perks, but some allow you to postpone payments if you run into financial hardship or go back to school.
These benefits can be a godsend if you can’t make payments since they’ll let you pause your bills temporarily without going into default. That said, interest will continue to accrue on your private student loans during a period of paused payments.
So look over your student loan contract to see if these protections are there, and don’t forget to read the fine print when it comes to interest.
If you’re an undergraduate, getting student loans without a cosigner is rare. Most students apply with a cosigner, such as a parent. Your cosigner becomes just as responsible for the debt as you are, and this loan increases their debt-to-income ratio.
If you want to get your cosigner off the hook, check to see if your private student loan comes with the possibility of cosigner release. Some lenders will remove your cosigner from the loan after a year or two of on-time payments.
If your contract has this perk, you can eventually apply for cosigner release and assume full responsibility for your student loan.
Read over the details before you borrow
Signing a private student loan contract is a binding legal agreement, so you want to make sure you know what you’re getting into before you finalize the deal. Find out how much you owe, what your interest rate is and what your monthly payments will be.
Familiarize yourself with all the important student loan terminology, and watch out for any extra fees, such as origination fees or late payment fees. And make sure you understand what will happen to your loan once you sign your agreement.
Most lenders will send the loan directly to your financial aid office. Once your tuition bill is paid in full, any remaining funds will be returned to you to use or return to the lender.
Along with using your loan money wisely, you can decide whether you’ll start paying while you’re in school or wait until your grace period is up. By informing yourself about your loan now — and shopping around to find the best student loan — you can make smart decisions that will set you up for future financial success.
Need a student loan?Here are our top student loan lenders of 2020!
|1.24% – 11.44%1||Undergraduate, Graduate, and Parents|
|1.25% – 11.15%*,2||Undergraduate and Graduate|
|1.24% – 11.98%3||Undergraduate, Graduate, and Parents|
|1.24% – 12.49%4||Undergraduate and Graduate|
|1.80% – 11.89%5||Undergraduate and Graduate|
|2.71% – 12.99%6||Undergraduate and Graduate|
|3.52% – 9.50%7||Undergraduate and Graduate|
|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers. |
1 Important Disclosures for Earnest.
2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
3 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 9/1/2020. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.
4 Important Disclosures for Discover.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
5 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.76% annual percentage rate (“APR”) (with autopay), variable rates from 1.90% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.83% APR (with autopay), variable rates from 1.80% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.98% APR (with autopay), variable rates from 1.97% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 11.26% APR (with autopay), variable rates from 1.90% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 07/10/2020. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).
6 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicant’s ability to supply the necessary information for submission.
7 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.17% effective Sep 1, 2020 and may increase after consummation.