It is estimated that 90 percent of student loans come from the federal government. However, some people will have to take out a private student loan. There are several reasons you may need to take out a private student loan.
You Have Borrowed up to Your Limit
College is expensive, and there are limits placed on the amount that you can borrow from the federal government. If you are going to school out of state, then your education will be even more expensive. That is why you may find that your federal student loans are not enough to cover your education.
You can get 100 percent of your education covered through a private lender. Private lenders will take your credit into consideration. If you have excellent credit history, then you may be able to get a loan with a low interest rate.
Your Household Income is Too High
You will be required to submit your household income information before you get a student loan. If your income is too high, then you probably will not get any financial aid. They use something called Expected Family Contribution to determine how much aid you can get. If your parents make a lot of money, then the financial aid office will likely think that they can cover your entire education.
However, even if you come from a high income household, your parents may still not be able to pay for your education. If they have other children who are attending college or they are having a financial hardship, then they may not be able to pay for your education.
You can talk to the financial aid office if your parents are struggling financially. However, you may still have to get a private loan.
Your Residency Status Prevents You From Getting Federal Student Aid
If you are not a United States citizen and do not have a Green Card, then you may not be able to get federal student aid. A private loan may be the only option.
Keep in mind that private loans have fewer repayment options. You will not be able to put the loans in forbearance or deferment. They also are not eligible for student loan forgiveness. Furthermore, it is important to compare lenders.