Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jan 13, 2012

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When the government doesn’t provide student loans to an applicant, or when the federally-backed loans aren’t enough to satisfy the high costs associated with college today, private student loans are available. A private student loan refer to a type of financing available to students pursuing a higher education at an approved university or institution.

[loansform]Since private student loans are administered by private corporations or investors, they typically carry higher percentage rates than federal forms of financing. As a result, students should use this kind of financing as a supplement to government-backed loans. In addition to using a private loan as a supplement, students should also apply for certain scholarships and grants to help fund their education.

Students can receive some breaks though, as lenders realize their interest rates are high—particularly for a portion of society who is likely unemployed, as pupils often don’t have time to work while studying. As a result, many lenders offer certain breaks, discounts, or bonuses to students who demonstrate consistent and on-time payments.

Interest rate deductions may also be acquired if a pupil provides a co-signer.

Most private student loans are backed by the financial services company called Sallie Mae. Sallie Mae was originally a government-sponsored entity that was established in 1972, but as of 1997, the company began privatizing its services. Since its creation, it has backed more than 31 million students with loans.