Remember, it's important to consider federal student loans before you take out a private student loan because there are differences in interest rates, repayment options, and other features.
Understand private student loans
Private student loans are different than federal loans.
They’re credit-based. That means the lender will review your creditworthiness—your ability and willingness to repay—before making the loan.
Your interest rate is based on several factors. How you’ve managed your credit (money you’ve borrowed and repaid) in the past and what loan terms and options you choose are considered.
You have options. Most private student loans are taken out by the student (usually with a creditworthy cosigner), but some private student loans can also be taken out by a parent or creditworthy individual, such as a legal guardian, or relative.
You can choose different ways to pay. Some private student loans offer different repayment options (including making payments while in school) which can help reduce your interest rate and/or total loan cost.
Before applying for a private student loan, remember that regardless of whether you actually graduate from school or not, you need to pay back student loans. Defaulting on a student loan can have a negative impact on your credit health.