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I have some student loan debt from UG (around 17k) and was wondering if anyone would advise taking out private loans instead of federal loans? My credit history is excellent (750's and above depending on the score). I am just wondering if this could allow me to get very low interest rates (seeing 3%) if I go with like a Sallie Mae or some other private lender? Or, could I just take out the federal loans (most of which will likely be unsubsidized the first year) at the 6.8% rate and consolidate under a private lender at a lower rate? All I have now is unsubsidized federal loans, so I have not had to deal with this before. I will "only" need to take out about 20k per year.

Thanks!

Interesting way to go about it. I had to take out a private loan freshman year of undergrad and I got an awful rate. Assuming you have great credit, it may be smarter to take out private loans. Just be aware that the interest starts accruing immediately. I would advise taking out a subsidized Stafford at least, and since it's only 6K/ year, you can get that paid relatively quickly if you prioritize that.

As far as I know, private loans do not allow for income based repayment. You need to consider whether you might need to do IBR at some point if you can't met your loan payments.

Why don't you do a few calculations based on the debt you will have - is it $60,000? At 3.0% on 60,000 the payment is just under 580 a month for 10 years.

I honestly don't know anything about loan consolidation.

I think you should talk to a good financial advisor about this.

sunynp wrote:you should talk to a good financial advisor about this.

+1, worth the money.

superbloom wrote:Interesting way to go about it. I had to take out a private loan freshman year of undergrad and I got an awful rate. Assuming you have great credit, it may be smarter to take out private loans. Just be aware that the interest starts accruing immediately. I would advise taking out a subsidized Stafford at least, and since it's only 6K/ year, you can get that paid relatively quickly if you prioritize that.

Subsidized Stafford loans go away next year.

I've heard that consolidating Federal loans into private loans is next to impossible. Keep in mind that if you go the private route you won't be eligible for IBR.

Most private loans have a variable rate, basically LIBOR + a margin. You might get low 3s now, but if LIBOR goes up, you'll be stuck with a much higher rate.

zozin wrote:Most private loans have a variable rate, basically LIBOR + a margin. You might get low 3s now, but if LIBOR goes up, you'll be stuck with a much higher rate.

Consolidating can make it one flat rate. Agreed, though, otherwise.

I think you should do it. The fed has said they aren't increasing interest rates until 2014 (even with an increase, you'll still almost certainly beat 6.8% plus an origination fee with that kind of credit score), IBR is a joke, and, like somebody already said, subsidized loans go away next year. If you have good credit, there's no reason to get grad plus loans.