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Private Student Loans: When to Borrow and How to Apply

Budgeting Student Loans

5 minute read

Understanding Private Loans for College

Around the nation, students and their families are thinking about how they're going to pay for college. There's no question that education is a smart investment, but the rising cost of college is no joke, and everyone’s financial situation is different.

You may not qualify for enough federal student loans, or the financial aid package your school sent out may not be enough to cover the cost of attendance. In that case, you may be considering private or student loans. You’re not alone. More than 7% of students use private student loans to help cover the cost of college. Here is what you need to know about private student loans in North Carolina.

Make Sure You Use Free Money First

Before you think about taking out student loans, it's crucial that you use all the free money that’s available to you. This can be in the form of scholarships, grants, work-study programs, and previous savings (like an NC 529 Account).

The first step to access that free money is filling out the Free Application for Federal Student Aid (FAFSA). Your college or university will use the information on the FAFSA to determine your eligibility for financial aid from multiple sources, including federal, state, and institutional aid. Your school will send you a financial aid letter, which creates a financial picture for you regarding college.

After getting your financial aid letter, you may still need money for school. Using a student loan calculator after getting your financial aid letter is a great way to only borrow what you need to help cover the difference between financial aid and the cost of college. 


What Are Private Student Loans?

Fortunately or unfortunately, providing student loans is a big business. On the one hand, it means you have lots of options to find the right loan for you. On the other hand, it can be a confusing process.

Many private student loans are operated by large, publicly traded companies. These are for-profit corporations where it is in the provider's best interest to make as much money as possible from each loan. They profit when they loan money to people at higher interest rates. Interest rates on these loans can vary wildly, depending on credit histories and other aspects. There are two main types of interest rates:

  • A variable rate: An interest rate that can rise or fall over the life of the loan
  • A fixed interest rate: A rate that remains the same.

Annual percentage rates on these loans can be higher than 16%, so be sure to shop around for a credible lender with the best rates and terms for your financial needs.

Non-profit or state-based organizations, offer private student loans, such as the NC Assist Loan, to help students bridge the gap between the cost of attendance and other financial aid. Non-profit loan providers are not motivated by profits; they’re motivated by helping students reach their educational goals. Without having to worry about shareholders or profits, NC Assist Loan is able to focus on what matters most: the students.

How Do Private Student Loans Work?

Private student loans are available for students and parents to borrow money to cover college costs and then pay back the sum slowly over time. NC Assist Loan is a private student loan in North Carolina available to state residents who attend in-state or out-of-state schools. NC Assist Loans are also available to out-of-state residents who choose to attend eligible North Carolina colleges and universities. The loans are offered by College Foundation, Inc. (CFI), a North Carolina non-profit organization that administers student loans on behalf of the NC State Education Assistance Authority.

Pros and Cons of Private Student Loans

If you need more money to meet your college needs, you can explore private student loans. As with anything, there are pros and cons.


  • Help cover college costs 
  • More lenders to choose from
  • Non-profit lenders are available
  • Fixed-rate options


  • Important to shop around to find the right lender
  • For-profit lenders make money from higher interest rates
  • May have variable interest rates

How To Decide on the Best Private Student Loans

The decision to take out loans for higher education is never one that should be made lightly. A student loan is a big commitment, and borrowers should be fully informed on the terms of their loan. Still, a student loan can be essential to bridge the gap of covering the cost of college.

The best way to find the right loan for you is to get organized and do your homework. Read the fine print, compare rates, and understand what you’re agreeing to before you sign anything. If you have questions, don’t be afraid to ask.

NC Assist loans are available to students and parents with competitive, fixed rates and no origination fees, application fees, or prepayment penalties. Read more about the benefits of an NC Assist Loan and apply for student loans today!

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