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It costs you money to borrow money

When comparing loan options it’s important to be aware of your loan interest rate, all the fees associated with borrowing the loan, and the repayment responsibilities. Below are some frequently asked questions regarding this process. 

What costs should I be aware of when I’m comparing loans?

Lenders charge borrowers an interest rate to borrow money. Other fees such as origination fees and repayment fees may also be assessed depending on your lender and loan type. The money the lender makes from the interest and additional fees is considered a profit to them. It’s important to be aware of your loan interest rate, all the fees associated with borrowing a loan, and the repayment responsibilities so that you can understand the true cost of borrowing the money you are requesting. See the chart below to compare the cost differences between federal and private loans.

Federal Student Loans Compared to Private Student Loans

Factors to Consider Federal Student Loans Private Student loans
Credit Score Federal Studen Loans are not
affected by your credit score
(only Federal PLUS Loans).
However, obtaining a Federal
Student Loan may help you
establish a credit score.

Private student loans require established credit. The cost of a private loan is determined by the applicant's credit score.

Co-Signer Co-signers are not required for
Federal Student Loans. Co-
signers may be an option for
Federal PLUS Loans.
Most students will need a
co-signer with established
credit to apply for a private
loan and receive the best
possible rates.
Interest Rate Interest rates are fixed. Most will have variable
interest rates.
Need Based Students with financial need
qualify for a Federal Subsidized
Stafford Loan. The government
pays the interest on this loan
while the borrower is in
You are responsible to pay
the interest.
Repayment Repayment begins 6 months
after you graduate, leave
school, or enroll less than
6 credit hours.
Lenders may require payments
while in school.
Prepayment Fees No Fees. Fees may apply.
Consolidation Visit
for consolidation information.
Private loans an not be
consolidated with Federal
Tax Deductible Eligible Some may not be eligible

How is my interest rate determined?

Your loan interest rate is determined depending on your loan type and your lender. Federal Student Loan interest rates are determined by the Federal Government and are effective July 1st each year. Private lenders use your credit score to determine a borrower’s loan interest rate. Contact your private lender to discuss how your interest rate is determined.

How much interest will accrue on my loan every month?

The interest rate assessed by your lender to your loan is charged on top of the principal amount of money you borrow. Try this simple calculation to determine how much you may spend on interest each month:
Interest Rate X Loan Balance / 12 months = *Approximate monthly interest accrued

*This is an approximate figure because it doesn’t consider the actual number of days since your last payment and it doesn’t use an accurate Interest Rate Factor