These days more and more people are getting a college education in an attempt to circumvent the bad economy. Although many students can receive financial aid such as government grants and federal student loans, many of them find themselves borrowing from private lenders. CNBC reported that Sallie Mae, in conducting its annual study, found that many students finance their education through private loans; this percentage grew from 8% in 2008, to 13% in 2010.
Federal student loans give students many options in repayment. They are willing to work with an individual who is having trouble or out of work. Also, depending on income, many federal student loan lenders offer temporary forbearance’s for economic hardships and the income requirements are very reasonable. Of course if a student receives a federal grant to aid with educations costs, they never have to be repaid. Unfortunately, when a student is racking up loans from a private lender, they do not have these options available to them. Therefore, the default rate is much higher. Many students believe that they can take out as many students loan as they need to finish their degree and if they can not pay them back then they can be forgiven by filing bankruptcy. This is a common misconception.
Students should do their research before succumbing to a private lender for their financial needs in order to fund their education. There are many grants and other sources available. Private lenders are not to be mistaken for student financial aid. It is suggested that every student apply for federal student aid. The application process is free and it will determine exactly what aid is available dependent upon each students set of circumstances. Education is entirely too important to have to worry about defaulting on repayment of a student loan with outrageous interest rates from a private lender.