College is expensive. After scholarships and grants, student loans can help cover the cost. Most federal student loans have limits in how much you can take out, but what about the other option? How much can you take out in private student loans?
How Much Can You Take Out in Private Student Loans?
When it comes to private student loans, you can borrow up to the full cost of attending college (provided that you meet the lender’s borrowing requirements). When deciding how much they can lend you, private lenders will consider your credit history, income, debt-to-income ratio, and cost of attendance, as well as their own lender’s limits.
Consider Private Loans a Last Resort Option
However, and this is important, just because you can borrow as much as you want to, it does not mean you should. In fact, it is advisable not to take out private student loans if at all possible.
Why are private student loans a last resort? Several reasons.
For one thing, private lenders charge much higher interest rates as compared to federal student loans. Secondly, you won’t get as much flexibility in terms of repayment plans. Thirdly, some federal student loans are offer forgiveness options, while very few private loans do.
Before you consider taking out a private student loan, you must first ask yourself if you have explored all your options.
- Have you applied for the FAFSA and taken advantage of federal student loans and grants?
- Have you spoken to the school’s financial aid office?
- Have you exhausted all scholarship opportunities?
- Have you considered working part-time?
Consider applying for a private student loan only if you’ve done all of the above and are still running short of funds to cover your college expenses.
How Much Should You Take Out in Student Loans?
That being said, most students still need to take out private loans to help cover what scholarships and grants don’t. After exhausting all other gift aid and federal aid options, you’ll need to find a private student loan that works best for you.
The key to avoiding crushing student loan debt is to borrow only what you need and nothing more. Scholarships, grants, federal aid, and college savings will help minimize how much you need to take out in private loans.
Try to borrow as little as possible, search for other sources of funding, and do plenty of research when selecting a student loan, and you can minimize your potential for debt, or otherwise make it more manageable.