03 Jul The Problem with the Rise in Private Student Loan Borrowing by Jason Spencer Dallas
As the cost of college education increases each year, more and more students, like Jason Spencer, are having difficulty in funding their education. The federal government provides federal student loans, but unfortunately these loans often cannot cover the amount really needed to complete college education. Many students have resorted to taking out private student loans and the number of these students increases each year according to Jason Spencer Dallas.
One would naturally think that the private sector actually helps in increasing the number of graduates each year. This may be true to some degree, but then, there have been reports,like the one done by Jason Spencer Student Loan Relief, that private student loans actually do more harm than good in the long run.
Many students have been fooled into thinking that the best way to fund college education is to use a private student loan. These students have been fooled to believing that there is no difference between a federal student loan and a private student loan. In reality, there is a big difference.
The difference between a federal student loan and a private student loan is mainly realized when repayment comes into play.
With federal student loans, a student can rely on fixed interest rates and this is not the case with private student loans. In fact, many students do not consider this or even informed of this before the loan is released to them. When the time comes to repay the loan, students are then surprised by the increasing rates and have difficulties in repayment.
Another difference is that newly graduates on federal student loans do not have to start repayment right after graduation. With a private student loan, you will need to start repayment right after graduation and this means that you will need to have job once you graduate. As we all know, finding a job right after graduation is not as easy as it may seem.
The biggest difference between a federal student loan and a private student loan is when you have difficulties in paying back the loan. The federal government offers different repayment schemes and programs to those who have financial difficulties. A private lending institution will often not be very accommodating.
The US economy will be greatly affected by the rise in private student loan borrowing during these difficult economic times. Students who have private student loans get too tied up in these loans. In many cases, majority of their monthly income will go towards the repayment of the loan and very little is left to purchase other products like homes or vehicles.
This is the case of Stefanie Holstein of Missoula MT. She graduated with more than $70,000 of student loans. $40,000 was in private student loans and her mother was a co-signatory. A few months after graduation, she and her mother felt the terrible pressure of the private student loans. They noticed that the rates would keep increasing and they had much difficulty in paying for the loan.
Her mother was also greatly affected by being a co-signer of the private student loan. When they had difficulties in paying for the loan, she also had difficulties in obtaining any mortgage.
Private student loans may help in funding a college education, but in the long run, much of the benefits you will have in a quality education will go towards repayment of the loan.