Private education loans are nonfederal loan sources used to supplement federal student loan eligibility. There is a variety of options and resources available. Usually, a school maintains a preferred lender list in order to save you the time of having to research prospective lenders and products on your own.

Parents contemplating borrowing a private student loan to cover education costs should consider the following:

• Interest rate. Rates will vary by lender. Sallie Mae gives borrowers a choice of a monthly variable or annual variable interest rate on its suite of private loans.
• Fees. Vary, depending on lender.
• Credit eligibility. Required to pass a credit check. If you don’t pass, some lenders provide you with the option to add a co-borrower with passable credit to co-sign your loan. You may also have to meet a minimum income level.
• Tax considerations. You may be able to deduct from your taxable income for the interest you paid on a student loan taken out solely to pay qualified education expenses. Visit www.irs.gov for more information.
• Borrowing amount. Depends on lender, usually limited to the cost of attendance less financial aid as certified by the school.
• Borrowing for all your children. You may be able to borrow up to the cost of attendance less financial aid for every child for all their years of college.
• Borrowing for school-related expenses. In general, depending on the loan program, the borrower cannot finance expenses in excess of cost of attendance, such as a commuting vehicle, travel home, furniture, and appliances. The amount must be certified by the school and the loan proceeds may be co-payable to the school.
• Deferment and forbearance clauses. If economic difficulty arises, payment deferment or forbearance clauses may be provided, depending on your lender.
• Repayment. Repayment will start usually within 60 days after borrowed funds are disbursed. Some lenders allow borrowers to postpone payment while the child is enrolled. However, interest will accrue and be capitalized on the principal, increasing the overall cost of the loan.
• Repayment options. Lenders may provide borrowers the choice of standard, graduated, or extended (depending on loan balance) repayment plans to suit the family budget.
• Liquidity, emergencies, and other expenses. Personal investments and savings are available for other purposes and emergencies.

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