Private vs Fed Loan Forum

[hairbear7]

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[Kinky John]

You can refinance your federal loans privately once you actually have the job. Can't do it the other way around.

Have you run the numbers on the savings with 3% vs 6.8%?

[hairbear7]

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[Kinky John]

Yeah that's what I meant. Not sure if I typed it in a strange manner.

No, it was clear. Just repeating for emphasis

Have you done all three? 3% 5 year repayment, 6.8% 5 year repayment, 6.8% refinanced to current rates on 5 year repayment

And why do you want to repay it all in five years?

[hairbear7]

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[Kinky John]

Shortcut would be to take the Fed amount at repayment @ ~3%. I think that would put it at about $200 or so more/month.

What happens if the economy tanks again? Or if you get into the job and decide it's not for you? Or worse yet, what happens if even better federal loan forgiveness options get passed? Plus the rate is variable, so who knows: maybe it climbs up to 6% and the difference isn't worth it anymore.

Just too many contingencies to go with private loans IMO - they should be a last resort. Hopefully others more experienced than me will chime in but I think

Would it be a better idea to take out federal loans for the added security and then refinance once I have graduated and know for sure that I have a job?

is a good balance between safe and "cheap."

[Kedabra]

In the same boat looking at similar debt and also tempted by the variable option.If the economy tanks again ( ), I would imagine that the rate would remain low instead of skyrocket. Seems like the bigger risk to analyze here is the opportunity to get/sustain a job long enough to aggressively pay back the loan.

[hairbear7]

Bump for the weekday crowd. Hoping to get more input =)

[Philafaler]

OL here.

I think it's misleading to consider the monthly payments with the two options, since you'll always have the opportunity to re-finance when you graduate. You should really only be looking at the total debt at repayment. According to your calculations, it costs 14k at repayment (period 0) to take out federal loans rather than private ones. That's essentially the cost of the benefits that go along with the federal loans, which could be quite valuable if the economy tanks, decide you would rather flip burgers than work biglaw, whatever.

Then when you graduate, you can gauge whether you feel comfortable refinancing to the private loan. The rate might even be lower than what you could get now because you'll have a more favorable debt-to-income ratio if you've got a biglaw job. I would take the federal loans and refinance at the end, if I were you. 14k is real money, and that 4% origination fee is bullshit, but I think the security is worth it.

Another ancillary point: I'm pretty sure you can use your first partial year's earnings to qualify for PAYE with super low payments, which could allow you to more easily build up an emergency savings fund in your first few months at work while only simple interest accumulates.

[hairbear7]

OL here.

I think it's misleading to consider the monthly payments with the two options, since you'll always have the opportunity to re-finance when you graduate. You should really only be looking at the total debt at repayment. According to your calculations, it costs 14k at repayment (period 0) to take out federal loans rather than private ones. That's essentially the cost of the benefits that go along with the federal loans, which could be quite valuable if the economy tanks, decide you would rather flip burgers than work biglaw, whatever.

Then when you graduate, you can gauge whether you feel comfortable refinancing to the private loan. The rate might even be lower than what you could get now because you'll have a more favorable debt-to-income ratio if you've got a biglaw job. I would take the federal loans and refinance at the end, if I were you. 14k is real money, and that 4% origination fee is bullshit, but I think the security is worth it.

Another ancillary point: I'm pretty sure you can use your first partial year's earnings to qualify for PAYE with super low payments, which could allow you to more easily build up an emergency savings fund in your first few months at work while only simple interest accumulates.

Yeah that all makes sense, thanks!

[Johann]

OL here.

I think it's misleading to consider the monthly payments with the two options, since you'll always have the opportunity to re-finance when you graduate. You should really only be looking at the total debt at repayment. According to your calculations, it costs 14k at repayment (period 0) to take out federal loans rather than private ones. That's essentially the cost of the benefits that go along with the federal loans, which could be quite valuable if the economy tanks, decide you would rather flip burgers than work biglaw, whatever.

Then when you graduate, you can gauge whether you feel comfortable refinancing to the private loan. The rate might even be lower than what you could get now because you'll have a more favorable debt-to-income ratio if you've got a biglaw job. I would take the federal loans and refinance at the end, if I were you. 14k is real money, and that 4% origination fee is bullshit, but I think the security is worth it.

Another ancillary point: I'm pretty sure you can use your first partial year's earnings to qualify for PAYE with super low payments, which could allow you to more easily build up an emergency savings fund in your first few months at work while only simple interest accumulates.

I cosign this.