Crazy for looking at Variable Rates?

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MyManKanye
Posts: 96
Joined: Mon Feb 07, 2011 2:11 pm

Crazy for looking at Variable Rates?

Postby MyManKanye » Mon Jul 02, 2012 7:54 pm

I'm looking to take about 30k a year in loans outside my stafford loans. From what I see, I have a few options:

-Grad plus fixed at 7.9% with origination fee
-fixed private loans (Discover/PNC/etc.) at ~6.5-8% with no origination fee
-variable private loans (all over) at ~ 3.5% up to 18% with no origination fee.

My plan (I know mice and men) is to pay off these loans within 5-8 years out of school. The difference between a near 8% fixed rate and a 4% starting variable rate is significant even at only 5 years out.

I just see everyone naysaying variable loans all the time. I have a good credit score and a co-signer with exemplary credit. The economy doesn't seem poised for a massive recovery in the next half decade, so is it reasonable to assume interest rates will stay below the fixed rate for the next 8 years?

Has anyone else taken out private variable loans over what looks to be horrendously expensive grad plus loans?

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2014
Posts: 5832
Joined: Sat Jun 05, 2010 3:53 pm

Re: Crazy for looking at Variable Rates?

Postby 2014 » Wed Jul 04, 2012 12:52 am

The issue with variable private loans is not so much the risk of the interest rate as it is low enough now to make up for it being higher in the future unless shit literally hits the fan. The issue is that private loans are not eligible for IBR or any sort of forgiveness.

While people here talk repeatedly about how anything over like 150k in debt requires big law to pay off, they will usually admit that with IBR this is an exaggeration because while it sucks you can still enroll and not have debt collectors at your door. With private variable loans, you literally NEED big law. If for whatever reason you strike out, your loan payments are going to be huge and your creditors probably don't give a fuck about silly things like whether you need to feed yourself or your family.

For variable loans to make sense imo you need savings or family you can tap in case of worst case scenario situations, you should be at a T6 at least, perhaps only HYS, and it would be great if you have a UG/Grad degree/Spouse that can contribute income greater than the 50k you will be lucky to have if you miss the big law boat.

Eta: All that being said, if you get big law and can stay in it for 5-7 years, variable loans are probably going to save you money




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