what is a private student loan

A private student loan is a type of financing option for higher education in the United States that can supplement, but should not replace, federal loans such as Stafford loans, Perkins loans, and PLUS loans). Private student loans are nonfederal loans made by a lender such as a bank, credit union, state agency, or a school. They can be used to pay for college costs, but they come from a bank, credit union, or online lender rather than the federal government. Private student loans are best used to fill a college payment gap after maxing out federal loans. Federal loans are preferable to private loans for several reasons, including lower interest rates and not requiring a credit history or a co-signer. Private student loans have higher interest rates than federal loans, and interest accrues while the student is in college, even if repayment does not begin until after graduation). Private student loans do not have the same borrower limits as federal loans, and each lender may have its own limits for the total debt you can take on. Private student loans are an important option for many borrowers to fund the rising costs of college, but it is recommended to understand the different kinds of student loans available, the pros and cons of each, and to maximize federal student loans before turning to private student loans.