Finding student loans for undergraduate programs is not too hard. But finding the right lender is a quite challenging task. Federal student loans make the first priority when it comes to student loans. And private student loans are available from various private lenders. For those who are confused to choose between federal grad loans and private student loans, this article may be of help.
Table of Contents
- Grad Plus loans
- Pros of Grad Plus loans
- Cons of Grad Plus Loans
- Private Student loans
- Pros of Private loans
- Cons of Private student loans
- Concluding thoughts
What is Grad Plus Loan?
A Grad PLUS Loan is a federal student loan acquired by students to fund their graduate or professional education program. The interest rate of the loan is fixed at 7.6% has and an adjustable loan limit with no aggregate limit.
If you’ve used your loan amount towards all the educational expenses and still there is extra amount remaining, then you can use it for other education-related expenses, or if you do not need the extra money and you haven’t disbursed it, you can opt for canceling it in less than 120 days without any interest or penalties.
The lender of this loan is the US Department of Education.
You should not have an 'adverse credit history' to qualify for this loan. Your credit report will be cross-checked for this. But in case you do not meet this criterion, there are other requirements that you need to meet to qualify for it
The loan limit is calculated as the difference between the cost incurred for enrolling in a graduate program and any other financial aid you received.
Pros of Grad Plus Loans
A fixed interest rate
If you are attending an accredited graduate or professional college at least half-time, then you can qualify for deferment
You do not need a co-signer
You have the option of choosing from a number of repayment plans which includes the income-based repayment plan
The interest rate might be deductible from tax.
Disadvantages of Grad Plus Loans
It can be used by graduate or professional students.
7.6% fixed interest rate which is quite high when compared to other federal loans and many private student loans
The origination fee is charged at 4.248%.
The loan limit is $20500 per annum.
The eligibility is based on your credit score
What is a Private Student Loan?
A private student loan is a good way to cover costs for students. It is a non-federal or a private education student loan used to cover education-related expenditures. It may be advised to take these loans, once individuals have already exhausted other forms of free and federal financial aid. These loans are typically based on good credit history and verified proof of income or employment history.
The loans are given based on credit and are usually easier to get if applied with a co-signer as most students don't have a good credit score. They have better loan limits when compared to standard federal loans hence they are the go-to option after exhausting all other federal loans, grants, and scholarships.
Pros of Private student loans
Both fixed and variable interest rates
No organization fees
Interest rates effectively lesser than 7%
You can start repaying toward private student loans while you are in college, or maybe after graduation.
Disadvantages of Private Student loans
Generally higher interest rates when compared to federal loans
Fewer repayment options in comparison to federal loans
Cannot be discharged in bankruptcy which is important to note
Credit will be damaged if payments are missed which can further hamper any future loan requests.
Both Grad plus and private student loans have their own pros and cons in various concerns. Simple differences cannot make proper sense in choosing the right choice. Make choices among the available options according to your requirements. Select the best student loans by knowing about student loans in detail.