As of late there have been some private lenders who are offering options for student loans that will, in some cases, be comparable to federal loans in terms of incentives for not only rates but rewards for paying on time, which could lead to forgiveness in some cases. However, students who often compare rates on federal loans versus private loans, or who are simply thinking of borrowing in general and may not have gotten so far as to what type of loan they will acquire are often those who may see private loans as a better option, as there are some rates by certain lenders that are quite affordable and can be competitive in terms of overall student loan borrowing options.
An example of this practice comes when some students, like those here in June, who are late in terms of finding financial assistance for the fall semester of 2011 may feel that loans are their only option, and as there are banks that are offering an introductory rate of around 3.5%, in some cases, this seems to be a better option for some students, particularly if they noticed that rates on certain federal loans may range between 4% to 6%. Yet, private loans are often variable and can increase at a later time, while federal loans tend to be fixed in their interest rate and can offer incentives when it comes to repaying and debt relief.
However, there are some banks that have also used incentives like forgiving portions of a student’s debt or offering discounts if a student makes their payments on time, but there seem to be fewer options when it comes to students getting the opportunity of having their debts erased entirely after a set amount of time in repayment or when it comes to a student’s inability to meet their student loan payment.
What this translates to for students who are currently considering a private loan as a way to pay for tuition is that if a student does opt for a private loan, there may be a lower rate at the present time and potential incentives for making payments on time in the future, but it must be heavily researched what all these loans entail as a high rate could be a possibility and some students may not have options to either enter into a forbearance opportunity or an income-based repayment program that will be necessary if unemployment or a graduate’s income does not allow them to meet the minimum payments on their loans.