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**Financial Aid / Re: Loans based on LIBOR or Prime Rate?**

« **on:**June 07, 2005, 08:49:49 AM »

Historically, LIBOR rate has been lower than the Prime. Check out the following link:

http://accessgroup.org/students/LIBORforstudents.htm

that's true but irrelevant I think. all the loans add some % to the prime or libor rate so even though the LIBOR is lower it will have more added on top of it.

It does seem that most schools recommend Access or Northstar/T.H.E. This is probably because they are non profits and in fact THE redistributes their profits by way of interest rate deductions. This fact made their rate the best deal for me and hence my choice.

I haven't thought this out too much but, it seems if you have a constant and a variable rate and rates are undoubtably the lowest they will be for decades to come, then you are better off going with the rate whose total includes less variation. In other words if the effective rate at both place were say 7.0%; 3.4% LIBOR + 3.6% vs. a 6.0 Prime rate + 1.0%. If the rates were to go up by the same percentage (of themselves) you would be better off with LIBOR because only half of your effective interest rate went up instead of about 85% of the effective rate with the prime loan.

Please someone let me know if that logic is incorrect.

Not all lenders add a percentage to the Prime. I just got Prime + 0% from Citibank's Law Loan program. Pretty good deal I think.