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Ascent Blog

The Truth About Private Loans: Top Myths Debunked

Jul 24, 2018 | By: Ascent
Categories: Blog, For Students, For Cosigners

Just like ghost stories are inevitably told over a campfire, private student loan myths are shared between borrowers and soon-to-be borrowers. Instead of perpetuating this bad habit, let’s bust the top private loan myths right now.


Myth 1: Private Loans Are Always the Worst Option

Federal student loans are regulated more stringently than private loans and typically have more flexible benefits for repayment and forgiveness, but that doesn’t mean they’re always the best option.

Private lenders can base interest rates on more factors than federal loan rates, which were designed to be set annually by Congress. This means that if you have stellar credit and a favorable debt-to-income ratio, you may qualify for lower interest rates as a cosigner on a private student loan, which means paying less overall than federal Parent PLUS loans in some cases.

A commonly touted reason for federal loans being superior to private loans is their flexible repayment and forgiveness options. So, you’ll just want to be reasonably sure that your student’s ability to repay their private student loans will remain stable so that you won’t be missing out on potential options the federal loan may offer.


Myth 2: All You Need Is Good Credit

There’s often more to the eligibility process for private student loans than just good credit. Private lenders will at least consider a borrower’s debt-to-income ratio as well as your employment history. This means that a good credit score is only a piece of the puzzle.

Most private loan applicants and co-signers will need to document their sources of income compared to their debt obligations and their history of employment. Lenders use this information to offer interest rates to their borrowers’ unique circumstances.


Myth 3: If You Don’t Pay Right Away, They’ll Sue

Ever heard the saying, “Don’t base everything you believe off the evening news?” The same goes for nightmare stories about student loans. Millions of private undergraduate student loan borrowers repay their loans without any trouble, but that doesn’t make for an eye-catching story.

What does make for an interesting tale is the borrower who faces an unbelievable consequence of nonpayment. These are the stories we see, hear and read because they make for compelling news.

When you hear about a borrower being sued for nonpayment, realize that this unfortunate circumstance is possible, but by far not the norm – for both private and federal student loan borrowers. There’s also more to a case to cause a lender to sue. A lawsuit is timely and costly. It’s not the first, second or third recourse of a lender.


Myth 4: You Can’t Get Out of Default

As mentioned, federal loans are regulated. This includes the methods a borrower can use to get their loans out of default. Private loans don’t necessarily follow the same guidelines, but borrowers can work with their lender to get the loans back on track. It’s in everyone’s best interest to get the loans in good standing and back into repayment.


Don’t believe all those boogey man stories!  If you need help with private loans, whether for application, repayment or any issues, we’re here to help.



Ascent Student Loans sponsors these blog posts and creates informational content that is of interest to prospective borrowers and our applicants.