Private Lending Options For College – OnlineBusinessDegree.org
Student debt is an issue faced by college graduates and new students alike. While online colleges strive to offer students convenience and affordability, funding can still seem like a daunting task. Equipped with the proper financial guidance, students and their families can make informed decisions.Melissa Hunt, vice president of client relations and education for Credit Union Student Choice (CUSO), said though credit unions are great lending options for students, it’s beneficial to go after grants and financial aid monies first. Not completing the Free Application for Federal Student Aid (FAFSA) is one of the biggest mistakes potential students can make, she said.
“People think their families make too much money to be eligible for financial aid, or that the form is too complicated to fill out. Those are all misconceptions” Hunt said. “There are a lot of factors that go into whether or not someone will receive financial aid. It’s not just based on your family’s income or your GPA. Even someone with a dual-family income of $100,000 can qualify for financial aid.”
In addition to FAFSA, private lending institutions are another option for students. Launched in 2008, CUSO was formed with hopes of improving the economic value found in private student lending. Several different credit unions came together and invested to create a service to help members lower their overall cost of higher education.
“Members of the individual credit unions kept asking for ways to help fund college education,” Hunt said. “We looked at the market and felt like we could offer the loans in a better way, with lower interest rates than other private lenders.”
Each individual credit union has the right to establish its own lending criteria, but Hunt said generally a student will either have to have a credit score of 0 or at least 620 to be approved for a loan. About 92% of CUSO’s loan recipients require a co-borrower because they do not meet the criteria.
An unfortunate reality is that everyone pursuing an online degree is not going to be able to qualify for certain loans.
“A big mistake a lot of young people make is not trying to repair their credit. They’ll let it get messed up and take no steps to repair it,” she said. “I recommend they sit down with a financial advisor who can pull their credit report and go over counseling about credit repair with them. Some credit unions offer second-chance accounts that customers can set up to help them re-establish their credit.”
If you have to borrow, it’s important to understand how a private student loan works, Hunt said. When comparing different private lending options, students should be familiar with all the factors associated with the loan – rate, fees, repayment terms, co-borrower options, and payment options.
“If a student plans on using a parent as a co-borrower, he or she should know what the lender is looking for, such as credit score and history,” Hunt advised. “You would want to use the parent with the better debt-to-income ratio, obviously. Also, many students aren’t thinking about their repayment terms because they won’t be paying for them right away. But it’s very important to consider because the length of your loan repayment period will directly affect your installments.”
In order to better educate the public on the private lending process, CUSO offers several outreach programs.
“We conduct seminars, podcasts, do radio talk shows and offer many other ways to tell people about the educational process of receiving aid,” she said.
Follow Valerie Jones on Twitter @ValerieJonesCMN