Some myths & facts related to private student finance
We can easily observe that student financing is a hot topic of discussion these days. The cost of education is increasing day by day making it difficult for parents to handle. Their earnings are not sufficient enough that can bear such high education cost. It forces them to go for borrowings known as student finance. It is the choice of borrower whether he wants to go for private student finance or federal finance. Various myths are prevailing with the name of Private student finance that is required to be corrected by facts. It has been heard that borrowers of suchfinance are living with massive debts & finding it impossible to repay their debts back. Such stories have spoiled its image and have created various myths in the loan market. Following are the myths or false information prevailing in the loan market regarding private student finance& facts correcting those myths:
- Many borrowers believe that private student financeincludes huge extra cost. But the fact is such financedo not require lengthy application procedure as in a case of federal finance& there is no disbursement fees charged at the time money is granted.
- Another myth spread related to such financing is the high-interest cost. It is said that the interest is charged at the higher rate as compared to other loan categories. The fact here is interest rate is decided by credit history of a borrower or the cosigner. If the credit history of the cosigner is good, the borrower can avail high amount of loans at best rates.
- Another myth under this financing arrangement is associated with the cosigner. It is believed that in a case of death of the borrower, the cosigner will bear the risk & will be responsible for the loss to the lender. But the fact is forgiveness is granted in the case of death or permanent disability of the borrower.
- The variable interest rates on private student finance create problems for the student borrowers, but the fact is terms related to interest rates differ from lender to lender. Many lenders are offering fixed interest terms. The borrower can select the terms as per his ease & suitability.
- Next myth associated with private student finance is that you cannot suspend the repayments on the loan. But the fact is repayment terms also vary from lender to lender & many lenders grant suspension under certain conditions. However, the benefits availableare not as good under private finance as in the case of federal student finance. If a borrower is facing economic hardship or some medical problem, he can request the lender for grant of suspension in repayment. The lender may either give partial forbearance or may allow the borrower to repay only interest amount.
- It is also believed that repayment terms associated with private student finance are not flexible. The fact is you can request your lender to change the repayment pattern if some emergency arises. The lender can suspend the repayments or may allow making payments partially or pay only interest payments.
Higher Loan Amount
The student can also avail higher loan amount at reduced interest cost & fees. Both the lenders and borrowers interest shall be protected as in the case of default; the cosigner will be contacted who will be responsible for removing the default & reducing the risk of both lenders as well as the borrower.