Will Obama's student loans proposal affect your decision?

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blueberrymuffin
Posts: 54
Joined: Tue Dec 15, 2009 6:58 pm

Re: Will Obama's student loans proposal affect your decision?

Postby blueberrymuffin » Thu Jan 28, 2010 11:05 pm

PS does anybody else feel screwed by the fact that FAFSA does not consider existing student loan debt? I know that the schools will with their own forms and Need Access stuff.... but still... FAFSA calculates the expected family contribution....

Anonymous Loser
Posts: 568
Joined: Fri Sep 11, 2009 11:17 am

Re: Will Obama's student loans proposal affect your decision?

Postby Anonymous Loser » Thu Jan 28, 2010 11:15 pm

blueberrymuffin wrote:
Since we're explaining things here-
Aren't gradplus loans at a relatively high fixed rate? For someone with good credit, maybe it's better to get a private loan for the same amount at a lower rate? My understanding is that gradplus rates are higher because they don't cap the loans and don't take credit scores into consideration.

*edit* - credit check is required. but I don't think it receives as much weight as with private loans, and in any case it doesn't affect the interest rate.


The considerations you've mentioned certainly play a role in setting the GradPLUS rate. As an additional consideration, GradPLUS loans offer far more generous deferment and forbearance provisions than private loans, which, as with all benefits to borrowers, increases costs and/or risks for lenders, which of course results in higher rates as well.

Frankly, private loans are to educational lending as option-ARMs are to home mortgages: the ideal situation for a handful of sophisticated borrowers willing to take on increased risk in exchange for an advantageous interest rate, but probably not appropriate for most borrowers.

For most people, it makes little sense to so severely limit forbearance, deferment, and repayment options, while at the same time loosing the federal guarantee of funds availability, in exchange for a marginally more favorable interest rate.

blueberrymuffin
Posts: 54
Joined: Tue Dec 15, 2009 6:58 pm

Re: Will Obama's student loans proposal affect your decision?

Postby blueberrymuffin » Thu Jan 28, 2010 11:59 pm

Anonymous Loser wrote:
blueberrymuffin wrote:
Since we're explaining things here-
Aren't gradplus loans at a relatively high fixed rate? For someone with good credit, maybe it's better to get a private loan for the same amount at a lower rate? My understanding is that gradplus rates are higher because they don't cap the loans and don't take credit scores into consideration.

*edit* - credit check is required. but I don't think it receives as much weight as with private loans, and in any case it doesn't affect the interest rate.


The considerations you've mentioned certainly play a role in setting the GradPLUS rate. As an additional consideration, GradPLUS loans offer far more generous deferment and forbearance provisions than private loans, which, as with all benefits to borrowers, increases costs and/or risks for lenders, which of course results in higher rates as well.

Frankly, private loans are to educational lending as option-ARMs are to home mortgages: the ideal situation for a handful of sophisticated borrowers willing to take on increased risk in exchange for an advantageous interest rate, but probably not appropriate for most borrowers.

For most people, it makes little sense to so severely limit forbearance, deferment, and repayment options, while at the same time loosing the federal guarantee of funds availability, in exchange for a marginally more favorable interest rate.


I thought that the gradplus rate was the same fixed rate for everyone (as mentioned on their website) - not dependent on credit history:
http://studentaid.ed.gov/PORTALSWebApp/ ... udents.jsp

Maybe I misunderstood your first statement ("setting the GradPLUS rate").

But yes, I agree- for many, private loan rates will not be much better. But just a consideration.

User avatar
FunkyJD
Posts: 1039
Joined: Tue Dec 22, 2009 3:38 pm

Re: Will Obama's student loans proposal affect your decision?

Postby FunkyJD » Tue Feb 02, 2010 3:19 am

blueberrymuffin wrote:PS does anybody else feel screwed by the fact that FAFSA does not consider existing student loan debt? I know that the schools will with their own forms and Need Access stuff.... but still... FAFSA calculates the expected family contribution....


Hell, yes.




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