Consider A Credit Union When Shopping For Private College Loans

america's credit union

Photo: Flickr – I-5 Design & Manufacture

If you have to borrow for college, the best college loans are the ones available through the federal government, which provide the same student loan rates and terms for everyone.If you are interested in pursuing private college loans, you need to proceed carefully. Here are seven things you need to know when shopping for private loans.

1. Turn to credit unions.

Credit unions, which are newer players in the private student loan world, almost always provide better interest rates. Ironically most people stick with the well-known lenders even though their rates are typically higher. You can look for college loans at credit unions through cuStudentLoans.

2. Check for schools that have their own credit unions.

If your school is affiliated with a credit union, check its rates. Here are institutions that have a credit union:

Harvard University

University of Chicago

Amherst College

Hampshire College

Mount Holyoke College

Smith College

University of Massachusetts

University of Wyoming


University of Kentucky

Princeton University

California State University system

Eastern Iowa Community Colleges

Canada College

3. Apply for multiple loans.

At AllTuition, a private college loan comparison site, parents research many loans, but rarely apply for more than one. Unfortunately, borrowers won’t know what rate they qualify for unless they apply. It’s well worth the effort.

“A family taking out a $12,000 private loan is paying $5,000 more in interest because the parents aren’t taking 30 minutes to shop and they only complete one application,” says Sue Kim, Alltuition’s CEO.

4. Don’t assume you’ll get the lowest rate.

The teaser rate on private loans can look much more attractive than federal college loans. For instance, the interest rate for the federal PLUS Loan for Parents is 7.9 per cent vs. some advertised rates of 3.5 per cent or 4 per cent.

Mark Kantrowitz, the publisher of FinAid, however, estimates that fewer than 5 per cent of borrowers capture the best rate. The difference between the lowest rate and the highest rate at an individual lender can be huge.

Read the rest of this story on CBS MoneyWatch >

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.