Lost in Financial Aid

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
swoosh
Posts: 12
Joined: Mon Nov 26, 2012 5:22 pm

Lost in Financial Aid

Postby swoosh » Sun Jun 16, 2013 5:22 pm

Okay as someone who knows literally nothing about finance, I was hoping for some advice.

My situation: Lucky enough to have graduated undergrad debt free, so I really know nothing about the loan process right now. Parents are nice enough to help out with living expenses, but I'll need to cover the full cost of tuition. I'm maxing out on Stafford, Perkins, etc but that leaves me with roughly $15,000 / yr of additional loans I'll need to take out.

I've been leaning towards going with a private lender in order to get a lower interest rates (my school does not require GradPLUS to qualify for its LIPP). My parents are also willing to cosign my loan for a lower rate as well.

So, my main questions right now are:
1. Is fixed or variable rate the way to go?
2. Does anyone know which lenders are known to have the lowest rates?

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holdencaulfield
Posts: 478
Joined: Sun Apr 26, 2009 7:12 pm

Re: Lost in Financial Aid

Postby holdencaulfield » Mon Jun 17, 2013 1:17 am

1. Im guessing fixed is the way to go. Interest rates are still pretty low.

swoosh
Posts: 12
Joined: Mon Nov 26, 2012 5:22 pm

Re: Lost in Financial Aid

Postby swoosh » Thu Jul 11, 2013 4:23 pm

any thoughts/experiences using private lenders from fellow TLSers?

Mr.Throwback
Posts: 142
Joined: Sun May 19, 2013 3:42 pm

Re: Lost in Financial Aid

Postby Mr.Throwback » Wed Aug 07, 2013 11:15 am

I'm in a very similar situation. Need loans for tuition and that's about it. After maxing out perkins and stafford (also work study), I will be going for Grad Plus. I can possibly consolidate this loan once I graduate.

akg144
Posts: 118
Joined: Wed Jun 12, 2013 9:56 am

Re: Lost in Financial Aid

Postby akg144 » Wed Aug 07, 2013 11:23 am

Curious about this too, can a finance geek/expert please chime in...

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MormonChristian
Posts: 214
Joined: Sat Nov 19, 2011 11:33 pm

Re: Lost in Financial Aid

Postby MormonChristian » Fri Aug 09, 2013 10:06 pm

Mr.Throwback wrote:I'm in a very similar situation. Need loans for tuition and that's about it. After maxing out perkins and stafford (also work study), I will be going for Grad Plus. I can possibly consolidate this loan once I graduate.



They changed the Stafford loan max this year. I doubt you maxed on unsubsidized Stafford.

I personally would avoid Private Loans like the plague, unless they were short term and for a small amount. Too many reasons to enumerate.

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vanwinkle
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Joined: Sun Dec 21, 2008 3:02 am

Re: Lost in Financial Aid

Postby vanwinkle » Sat Aug 10, 2013 1:40 am

Potential pitfalls of private loans:

1) Variable rate loan payments could spike if interest rates rise. If we have a repeat of the 1980s you could suddenly see your interest rate go into the double digits. (The highest the "prime rate" has ever been is 21.5%, and variable rate loans will always be above the prime rate.) Given that there's almost no room for interest rates to go lower than they are now, variable rate loans are just inviting a world of hurt.

2) Private loans are not eligible for federal loan forgiveness plans. While your school may offer a generous LIPP now, there's no guarantee that it will continue to be available, or that it will continue to cover your full loan payment cost. (While I imagine the precise answer is that it depends on the loan and the lender, I don't believe private loans are eligible for loan deferment or forebearance, either.)

Potential benefits of private loans:

1) Lower interest rates, and if you lock in rates with fixed-rate private loans, you're sure you'll have to repay less in the long run (assuming you ever had to repay it all, see above for loan forgiveness).

2) In a worst-case scenario, private loans are less impossible to discharge in bankruptcy. Good luck trying to convince a judge you meet the insanely high standards for discharging federal student loans!


If you're planning to rely on LIPP, then you certainly should only take out federal loans. First of all, a substantial amount of your loans will be federal loans anyway (Stafford, Perkins, etc.) so we're only talking about whether the remainder will be GradPLUS or private; you're going to have a significant amount of federal loans either way. If LIPP is available, then you shouldn't worry about the higher interest rates since you're not the one paying it anyway. If LIPP stops being available, you have a number of fallback options from the federal government (deferment, forbearance, income-based repayment plans, loan forgiveness) that only your federal loans will be eligible for.

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arkgawilson
Posts: 155
Joined: Sun Oct 21, 2012 6:33 pm

Re: Lost in Financial Aid

Postby arkgawilson » Wed Aug 14, 2013 8:48 am

vanwinkle wrote:Potential pitfalls of private loans:

1) Variable rate loan payments could spike if interest rates rise. If we have a repeat of the 1980s you could suddenly see your interest rate go into the double digits. (The highest the "prime rate" has ever been is 21.5%, and variable rate loans will always be above the prime rate.) Given that there's almost no room for interest rates to go lower than they are now, variable rate loans are just inviting a world of hurt.

2) Private loans are not eligible for federal loan forgiveness plans. While your school may offer a generous LIPP now, there's no guarantee that it will continue to be available, or that it will continue to cover your full loan payment cost. (While I imagine the precise answer is that it depends on the loan and the lender, I don't believe private loans are eligible for loan deferment or forebearance, either.)

Potential benefits of private loans:

1) Lower interest rates, and if you lock in rates with fixed-rate private loans, you're sure you'll have to repay less in the long run (assuming you ever had to repay it all, see above for loan forgiveness).

2) In a worst-case scenario, private loans are less impossible to discharge in bankruptcy. Good luck trying to convince a judge you meet the insanely high standards for discharging federal student loans!


If you're planning to rely on LIPP, then you certainly should only take out federal loans. First of all, a substantial amount of your loans will be federal loans anyway (Stafford, Perkins, etc.) so we're only talking about whether the remainder will be GradPLUS or private; you're going to have a significant amount of federal loans either way. If LIPP is available, then you shouldn't worry about the higher interest rates since you're not the one paying it anyway. If LIPP stops being available, you have a number of fallback options from the federal government (deferment, forbearance, income-based repayment plans, loan forgiveness) that only your federal loans will be eligible for.


^this is awesome. 180.




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