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Since you can take out GradPLUS loans up to cost of attendance, why would anyone bother taking out a private loan with its variable interest rates and lack of federal protections? If you have bad credit, you just need a cosigner. Sure, there may be a relatively small fraction of people who can't find a cosigner and thus are forced to go the private route, but otherwise there's no need to take out private loans, right? This seems too good to be true. Am I missing something?

I actually can't get approval or a cosigner for a PLUS loan, and would only imagine that if I can't convince Uncle Sucker to loan me money, I'm certainly not going to be able to convince.. a bank. Could always borrow from organized crime syndicates too.

I think that private loans somtimes have a lower interest rate than GradPLUS - but I'm with you, I'd take the security of a flat-rate, government backed loan over a slightly lower interest rate any day.

regatsrj wrote:Since you can take out GradPLUS loans up to cost of attendance, why would anyone bother taking out a private loan with its variable interest rates and lack of federal protections? If you have bad credit, you just need a cosigner. Sure, there may be a relatively small fraction of people who can't find a cosigner and thus are forced to go the private route, but otherwise there's no need to take out private loans, right? This seems too good to be true. Am I missing something?

I think people turn to private loans when the estimated cost of attendance from the school (the amount covered by Grad Plus) is less than their actual estimated cost of attendance. For example if you were a single parent, the cost of housing, childcare, etc would likely mean GradPlus wasn't enough to cover all your needs. It is generally a bad idea to get private loans, unless it is absolutely necessary.

The only thing that seems to be missing here is that some schools set the cost of attendance lower than some people can actually live for. For example, some schools count in low rent, but most law students there can't live on campus because of lack of housing, thus pay more rent and go above the cost of attendance. Others have spouses, children, that make costs higher than the alotted cost of attendance. Federal loans don't allow you to take out a GRADPlus higher than cost of attendance, thus people in these circumstances are forced to have private loans. But this may not always be the case as most schools allow you to petition the cost of attendance in regards to your specific situation.

Private loans can be MUCH cheaper in the short run, lower interest rate (Prime plus 1/2). and in some cases no co signer. Plus no fees, and a bonus rebate on graduation. Direct loans from the government carry hefty fees that increase your costs if you choose to finance them. Yes the rate is variable and we are in a low interest rate environment, but they are a reasonable option if you have good credit and think rates will rise relatively slowly (as they have historically). Also, many LRAP programs will cover these loans, so there is not a huge downside to them. If rates go up, and your payment goes up, LRAP wil protect you.

for someone probably going into PI work, gov't loans are the way to go for me. IBR and public service loan forgiveness FTW.

westbayguy wrote:Private loans can be MUCH cheaper in the short run, lower interest rate (Prime plus 1/2). and in some cases no co signer. Plus no fees, and a bonus rebate on graduation. Direct loans from the government carry hefty fees that increase your costs if you choose to finance them. Yes the rate is variable and we are in a low interest rate environment, but they are a reasonable option if you have good credit and think rates will rise relatively slowly (as they have historically). Also, many LRAP programs will cover these loans, so there is not a huge downside to them. If rates go up, and your payment goes up, LRAP wil protect you.

But private loans aren't protected by IBR, right? I'm very leery of any bank that claims to have better loan terms than the feds, especially in this tightened credit market.

regatsrj wrote:

westbayguy wrote:Private loans can be MUCH cheaper in the short run, lower interest rate (Prime plus 1/2). and in some cases no co signer. Plus no fees, and a bonus rebate on graduation. Direct loans from the government carry hefty fees that increase your costs if you choose to finance them. Yes the rate is variable and we are in a low interest rate environment, but they are a reasonable option if you have good credit and think rates will rise relatively slowly (as they have historically). Also, many LRAP programs will cover these loans, so there is not a huge downside to them. If rates go up, and your payment goes up, LRAP wil protect you.

But private loans aren't protected by IBR, right? I'm very leery of any bank that claims to have better loan terms than the feds, especially in this tightened credit market.

No, IBR is only for government or gradplus loans. Private loans = FAIL. Only do the if you have no other option.

Read about IBR VERY carefully- it's not all that you think it is Do PI for 9 years and see what happens to you.

westbayguy wrote:Read about IBR VERY carefully- it's not all that you think it is Do PI for 9 years and see what happens to you.

Elaborate?

DoctorNick189 wrote:

westbayguy wrote:Read about IBR VERY carefully- it's not all that you think it is Do PI for 9 years and see what happens to you.

Elaborate?

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