When compared to Federal Loan Programs, Private loans are a MUCH MORE EXPENSIVE source of educational financing.

A student should NEVER consider borrowing from private loan program until they have exhausted all their Federal Loan options first.

Dependent Undergraduate students applying for private loan financing with a parental cosigner are advised to first investigate the options offered by the Federal  PLUS program before applying for an private loan.  A detailed comparison between the PLUS and Private loan programs can be viewed here.

Private student loan pricing consists of two components: interest rate and other "fees" which may be charged at the time the loan is disbursed or when the loan enters repayment. The Annual Percentage Rate (or APR) is a value which expresses the true cost of the loan and captures both of these components. Lenders are required to provide APR information to prospective borrowers. Also, private loan borrowers should be aware that the formula used to calculate APR often will change depending on whether the borrower is in school or in repayment. You should compare the costs of private loan products by comparing both the in-school and in-repayment APRs.

Many private loan providers will market their products advertising "rates as low as" a certain interest rate. Unless you are a borrower with an outstanding credit score, chances are you will not qualify for the lender's lowest rate.  Your APR is determined by your credit history, your debt-to-income ratio and, with many lenders, by the school you will be attending (borrowers attending schools with a low student loan default rate are viewed favorably). A smart borrower will obtain their credit score first from one of the three major credit bureaus (Experian, Transunion, or Equifax - you should be able to get your score for $15.00 or less) before starting to shop for private loans. With this information, you should be able to get an idea of what your APR will be before applying. Though a lender will usually not be able to tell you your actual APR until you apply (they have to do their own credit check), they should be able to inform you of their available pricing "tiers", which are the different APRs available to borrowers with excellent, good, or fair credit. Pricing tiers will also vary depending on whether or not you apply with a co-borrower and the co-borrower's credit (applying with a co-borrower will often provide access to a lower pricing tier). As new private loan applications have a negative effect on your credit score because lenders view the fact that you're looking for more credit as a risk, it is advised that you do not apply for any private loan product until you have some idea of the rate you will qualify for. If your prospective private loan provider will not provide you ANY idea of their pricing tiers prior to applying, it is STRONGLY advised that you do not do business with that entity.

Interest capitalization is basically how often the amount of accrued interest is added to your loan principal. Some lenders capitalize your interest annually, others do it once a quarter, and some capitalize interest only once you enter repayment. It can have a big impact on the cost of the loan. The more frequently interest is capitalized, the more you end up paying because you are basically paying interest on interest as it compounds.

Most lenders offer interest rate reductions or principal refunds if you pay your loan on time. Many will offer interest rate reductions when you sign up for automatic payment withdrawals from your bank account. If applying with a co-borrower, many will offer co-borrower release option to good customers that allows the co-signer to be taken off the loan after a number of on-time payments. Make sure to investigate all available borrower benefits when selecting an private loan provider.