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What are private or alternative education loans?

Private student loans – also known as alternative loans – are offered by private lenders to provide funds to pay for educational expenses. They are not part of the federal student loan program and generally do not feature the flexible repayment terms or the borrower protections offered by federal student loans.

While current federal loans have a fixed interest rate, private student loans may have variable interest rates, meaning that your interest rate may change over time. The interest rates and fees you pay on a private student loan are based primarily on your credit history or credit score and the credit history of your co-signer, if you choose to have one.

You can apply for a private student loan with a co-signer even if you could qualify for the loan on your own. In evaluating a loan application, lenders will look at your co-signer’s credit history. So, if your co-signer has a better credit score than you do, it could result in a lower interest rate and lower fees for your loan. However, a co-signer would be financially liable for the student loan if you are unable to make payments on the loan in the future.

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