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The COA at my school is $135k. My financial aid package includes both subsidized and unsubsidized Federal Stafford loans, but together those only cover $20k, so I need to cover another $115k. My school's package covered the rest with a Federal Grad Plus loan... which, frankly, seems like a pretty lousy loan as far as fees and interest rates go:

 

Federal Grad Plus: fixed 7.9%, 4% fees.

Best private loans, fixed: 3.4%, NO fees.

Best private loan, variable: 1M LIBOR + 2% (currently that equals 2.25%), NO fees.

 

The private loans I've found seem to offer comparable perks to the Fed Grad Plus: deferment, grace periods, no prepayment penalties, etc.

 

Am I missing something, here? My wife and I both have excellent credit, so does the Grad + loan offer us ANY advantages? I've gotten a vibe of, "Private loans are risky and for desperate people, you're taking your financial future into your own hands if you do them." But based on my research, they seem like the far better option... ???

 

Do loan repayment programs work for private loans in the same way they do for federal loans?

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First, stafford loan is 20k per semester, and I doubt your program cost 135k per semester. Grad plus loans have a fixed rate and private is typically variable. Variable interest rate is taking a gamble. It's low now, but it could sky rocket whenever they want.

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First, stafford loan is 20k per semester
it is actually $20,500/year which equals $6,833 a semester...

 

I, too have an excellent credit score, and expect to receive the lowest possible interest when applying for a private loan. I have spent hours with a calculator crunching the numbers and I just can't see how a federal loan (unsub in my case) would be better. When I talk to student aid advisors, they seem to automatically default to saying "take all the federal loans you can get". Unless I'm missing something, I will probably take out the fixed rate sunTrust loan for 100% COA...

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750+ credit score here as well - I am just now starting to look at private loans after my meeting with the financial aid office yesterday. They tell me they will give me 1000$/month as living expense (my mortgage is $1400).

 

Question - will private loans allow you to defer payment to graduation? I would think aside from students with low or no credit scores, delayed payment would be the ONLY reason one would agree to pay 7-8% for a grad school loan.

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In my opinion, if you could get private loans at lower rates, go for them. The 4% fee for Grad Plus is ridiculous and 7.9% interest is robbing people blind. Before you sign up for the loans, make sure you read their terms and conditions e.g. grace period after graduation, deferment/forebearance options in case you cannot make payments at some point. National Health Service Corps loan repayment does pay for private loans as long as they were used to pay for PA school and undergraduate coursework as prereqs for PA school. I think people go for federal loans with outrageous interest because they are easier to do deferment in case of economic hardship, unemployment, etc...

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Cameronlee, may I ask you what private loan you are considering that offers fixed rates? My impression was that private loans were always variable vs. Federal always being fixed, but higher. I guess I need to do more research.

 

If there are low fixed rate private loans, I really don't see the benefit of federal loans, unless you think you might default. I feel like I'm missing something here too. In all the programs I interviewed at, they made it seem like private loans were much more risky compared to federal.

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http://www.suntrusteducation.com/custom_choice.asp

 

I'm sure it's credit based, but sun trust advertises fixed rate education loans at the above link. They list 3.40% as the lowest in the range of fixed rate loans with a 5 year repayment term.

 

I'm just starting to look at this but I can say that I havn't been working hard to build a credit rating over the past 15 years to pay the government 6-8%... I'm really hoping this is an option that pans out. Anyone that is familiar with these loans please speak up :)

 

JD

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Be very careful with variable rate private student loans. Historically the prime and libor rates they are tied to have been much higher than they are now, and when they go up so will your payment. I’m personally thinking of taking the max in Stafford and using private loans for the rest to balance the risk.

A few bits of info about student loans

1- NHSC loan repayment will work with private and federal loans.

2- Military loan repayment will only pay federal loans, paid directly to the loan servicer.

3- Historically the LIBOR 3 Month rate has been more stable than Prime.

4- Most people do not get the advertised rate for private loans, you usually need a FICO score >740.

5- Federal loans have income based repayment, private do not.

6- Federal loan consolidation is only for federal loans and is basically guaranteed and is not credit based and your overall interest rate will be an average based on theindividual rates of the loans included.

7- Private loan consolidation is only available right now with 3 companies and number has been decreasing over the past few years. This consolidation is credit based and your interest rate is based onyour FICO score and current rates.

8- Most private loans will release a co-signer after a predetermined amount of payments.

9- Federal GRAD Plus is credit based, but not based on your score. They are making sure your credit report is free of any past due debt. 4%origination fee and 7.9% interest rate.

10- Stafford has eliminated subsidized Grad loans, and the current rate is 6.8% with a 1% origination fee.

 

This is not advice, just info I’ve accumulated. Do your homework and read the fine print, you will be stuck with this debt a long time.

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Thanks for all the responses! atmu, the private loan I'm most considering is from suntrust, because that's the lowest fixed rate I've found... I've been using the same site that jwdavis1 posted, and found it to be incredibly helpful, here it is again: http://www.finaid.org/loans/privatestudentloans.phtml . I agree with jdobbs completely. Every time I talk to financial aid advisors, they default to "take all the federal loans you can get!!!" In one conversation, I pointed out that the grad plus loan of 7.9% interest and 4% fees is pretty lousy, and the advisor said "Well, we point students toward federal loans because it's the loan that 99% of students end up choosing." I was like, seriously? Got your cause and effect mixed up there, maybe?

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Every time I talk to financial aid advisors, they default to "take all the federal loans you can get!!!" ~ Got your cause and effect mixed up there, maybe?

 

Maybe I'm being a short sided, but I got the feeling the financial aid office knows how to answer the questions they are given answers to on paper by the the directors. When I mentioned credit score and private loans she looked right through me and pulled out her book showing federal loans again.

 

It's disappointing that the fin aid office is the trafficker of all of the funds for these professional and MD students but they seem to not know much more than how to read a piece of paper.

 

JD

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Do you have any advice based on your decision?

 

Only what others have said, really. Do lots of research, and be realistic about how financially-literate you are, because I'm finding a lot of the commercial loans are not nearly as good as I thought at first glance. Know terms like forbearance, capitalization, grace period, etc, and how they will affect your payment. Also, realize that applying for loans slightly hurts your credit in the short term. Variable rates are obviously a gamble, my wife and I decided to steer clear of them. The loan that I thought was the best deal – through suntrust – is not actually that good... They gave the impression they offered a 3.4 fixed rate and a 15 year payback, but it's more like a 3.4 fixed OR a 15 year payback; they only give the low rate if you pay back over 5 years and make payments while you're in school (which is stupid.... if one had the means to make large payments during school, one wouldn't need a loan).

 

So... I'm still debating whether to go commercial or grad plus. I'm running out of time, so going to sit down and crunch the numbers this w/e. Good luck to you!

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  • 2 weeks later...

Just as a reference here are the interest rates that were proposed to me from suntrust. These rates are for my first year's tuition, books, and fees only. Both myself and my cosigner have reasonably good credit. Variable rates: 2.25% to 5.029%; Fixed rates: 3.75% to 7.5%. Rates vary due to length of repayment period and repayment option selected (immediate repayment, full deferment, ect). The loan combination I am choosing has a fixed interest rate of 5.6%. Keep in mind that if you choose to have automatic payments withdrawn from your suntrust bank account, suntrust will deduct 0.5% interest.

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