When to Choose a Private Student Loan Company

A private student loan company will generally be more flexible with your loan options than a public lender, such as a federal student loan program. However, there are many drawbacks to private loans, such as higher financing costs. Private loans are best for those students who do not qualify based on need for federal subsidies and want the flexibility of a private loan.

Need Based Federal Loan Standards

Students who come from high income families but are not receiving a large amount of money to pay for college are most at risk for high cost of college tuition. They will not likely qualify for subsidies on federal loans, meaning they will have to pay more than average borrowers for a public loan option. Without these subsidies, the main advantage of a public loan - affordability - is negated.

Private Loan Flexibility

If the borrower has good credit, he or she may find a reasonable interest rate at a private lender that offers much more flexibility. Private student loans can be distributed in one lump sum at the beginning of an academic year while public loans require a new application each semester. Private loans can also help cover living expenses, while public loans may only be spent on direct education costs. 

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