Many students are turning to private loans to help them pay for college. These loans can come at a high price, so if you find yourself in a situation where you can’t afford to pay back your loans, you could benefit from speaking to an Ohio student loan attorney at Luftman, Heck & Associates. Call us today at (216) 586-6600.
The High Cost of An Education
College is getting more expensive every year. The National Center for Educational Statistics (NCES) recently updated their survey on the price of a four-year undergraduate degree to indicate the following figures:
- $23,300 for a public university
- $47,400 for a private nonprofit university
- $30,600 for a private for-profit university
Those totals reflect tuition, books and classroom fees, and room and board, which is often mandatory for many students for at least the first year or two.
Perhaps what’s more disheartening is the paltry amount of scholarships, grants, and other aid students can receive to help offset the costs. After these awards, you can expect to still owe around 50-75% of your tuition. While their families may try to help, it can be difficult for parents to set aside tens of thousands of dollars for college, so it’s no surprise that students must turn to financial aid resources to help them out.
Choosing A Private Student Loan
When students apply for financial aid, they generally start with federal options. Federal loans offer many perks like low-interest rates and several repayment options. But currently, the maximum amounts allotted to students for a year are $5,500 for direct subsidized loans and $20,500 for direct unsubsidized loans. Granted, there is some money available to certain students in the form of Pell grants and specialized federal loans, but many students find the federal aid is not enough to cover their costs.
Private student loans are available to those who need a bit more help with expenses. Private loans are usually provided by banks, credit unions, or lenders that specialize in these types of loans, like Sallie Mae and CommonBond. These lenders provide peace of mind for students who can’t afford tuition even after they’ve explored all federal loan options, and they may even offer interest rates that rival those of the federal loans.
A private loan cannot provide the same advantages that federal student aid can. For example, the private lender will set your repayment terms, whereas federal loans let you pick a payment plan. Private loans often come with variable interest rates, so they may start low but they can rise over the course of repayment. Additionally, private loans rarely have options that let you temporarily stop payments if you’re in a financial bind.
Cosigning a Student Loan
If the person applying has subpar or nonexistent credit, the lender may request that they get a cosigner. A cosigner reassures the lender that the loan will be repaid because if the original borrower defaults on the loan, the lender can go after the co-signer to pay for it.
Cosigning a loan can be risky, especially if you’re backing a loan for someone who doesn’t pay their bills in a timely manner. But it can be just as precarious to sign for someone who doesn’t have much of a credit or job history, as is the case for high school seniors heading off to college for the first time. You will be responsible for all payments and accrued interest that goes unpaid, which could wind up hurting your credit score.
It can be difficult and time-consuming to get yourself removed as cosigner – on Sallie Mae’s application to release a cosigner, for example, the borrower must be current on loan payments for 12 consecutive months and prove they are financially responsible enough to assume the loan.
Defaulting on A Private Loan
Chances are, if you default on your private student loan, you’ll hear from the National Collegiate Student Loan Trust. This trust does not actually loan out the money but rather buys private loans from banks or financial institutions that initiated the loan and then sold it as an investment.
These loans are put in trusts, from which the company creates bonds to sell to investors. The investors are paid distributions based on the amount of money the Trust collects from repayments on the loans. If students are paying their loans, the investors get money. But if the students fall behind on payments or default on the loan, the bonds don’t pay out as much. This process incentivizes the National Collegiate Student Loan Trust to ensure students make good on their payments. To do so, they sue borrowers who have defaulted.
If you received notification from the National Collegiate Student Loan Trust about a lawsuit, you will need to contact an attorney right away. Failure to respond to the lawsuit entitles the trust to get a judgment against you, meaning you will have to pay back the money and risk the Trust going after your assets and the assets of your cosigner if you have one.
You may not have received a lawsuit, but it’s possible you’ve received threatening calls from a collection agency. When defaulted loans get turned over to debt collectors, their call centers often contact borrowers on a daily basis in an attempt to get payment. Debt collectors are required to follow the regulations laid out in the Fair Debt Collection Practices Act (FDCPA).
Contact an Ohio Private Student Loan Attorney
If you’re having trouble paying your private student loans or you’re being harassed by debt collectors, you should talk to a debt relief attorney. Our Cleveland student loan attorneys at Luftman, Heck & Associates have spoken to many people about their difficulty with repaying their debts, and we can help you, too.