I have pretty decent credit, so I was able to score a 2.25% rate on a private loan. This is LIBOR (currently 0.25%) + 2%. The risk is if/when LIBOR increases before I finish paying off the loan. Should I go for this or should I stick with the 7.9% fixed GradPLUS loan?
Also, does anyone have experience mixing it up, say taking a variable private loan out the first year and then 7.9% fixed federal loans the second and third year to hedge my bets? This way if interest rates are still low, I can pay off the 7.9% loans first, and vice versa if rates jump.
2.25% (Variable) Private Loan or 7.9% (Fixed) GradPLUS Loan? Forum
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lsatgenius
- Posts: 32
- Joined: Sun Jan 31, 2010 12:13 am
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Kabuo
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Re: 2.25% (Variable) Private Loan or 7.9% (Fixed) GradPLUS Loan?
I could be way off here, but I thought the major benefit of the federal loans was IBR/LRAP related.
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NYCbound35
- Posts: 138
- Joined: Sat Oct 30, 2010 12:48 am
Re: 2.25% (Variable) Private Loan or 7.9% (Fixed) GradPLUS Loan?
I've looked into this a great deal, and this is the advice I'd give.
1) Do not take out private loans if you have ANY interest in PI. You lose the LRAP and IBR benefits and you are just throwing money down the toilet. So basically if you are biglaw or bust/have a family firm to fall back on and don't see any way your doing PI, then private loans might be a good option.
2a) I would not take out private loans unless I had a way to kill/pay off those loans within 5 years of graduation. By this I mean you (or perhaps your parents if they are generous enough) have a home or other asset that you could borrow against. If those interest rates on your loan hit 12%, your going to want to pay those off ASAP. A home equity loan at half that rate would be very appealing at that point.
2b) Not many people have the prerequisite above, but I suppose this alternative could suffice. If you attend a top school, (Im talking HYS, CCN maybe) and have a somewhat decent shot at biglaw, you could consider private loans. Biglaw is the only way you're paying off those student loans in 10 years, let alone 5. But remember, if you don't hit the biglaw boat out of school, you could very well be stuck with an egregious interest rate that your income can't even cover. IE, this is a risky proposition.
I was able to get roughly the same rates on a private loan, but I do not qualify for 2A or 2B, so I'll be biting the bullet and taking out another 10k of Grad Plus a year.
Hope that helps.
1) Do not take out private loans if you have ANY interest in PI. You lose the LRAP and IBR benefits and you are just throwing money down the toilet. So basically if you are biglaw or bust/have a family firm to fall back on and don't see any way your doing PI, then private loans might be a good option.
2a) I would not take out private loans unless I had a way to kill/pay off those loans within 5 years of graduation. By this I mean you (or perhaps your parents if they are generous enough) have a home or other asset that you could borrow against. If those interest rates on your loan hit 12%, your going to want to pay those off ASAP. A home equity loan at half that rate would be very appealing at that point.
2b) Not many people have the prerequisite above, but I suppose this alternative could suffice. If you attend a top school, (Im talking HYS, CCN maybe) and have a somewhat decent shot at biglaw, you could consider private loans. Biglaw is the only way you're paying off those student loans in 10 years, let alone 5. But remember, if you don't hit the biglaw boat out of school, you could very well be stuck with an egregious interest rate that your income can't even cover. IE, this is a risky proposition.
I was able to get roughly the same rates on a private loan, but I do not qualify for 2A or 2B, so I'll be biting the bullet and taking out another 10k of Grad Plus a year.
Hope that helps.
