Grad Plus VS Private, let's discuss

[jack24]

I'm trying to decide between two loans and this is what I know so far.  Grad Plus VS. Bank of America Private.  Will someone please tell me why I would want Grad Plus?
What am I missing.

Lets just assume I borrow 15K for three years = 45K total  (This could vary dramatically)


Grad Plus 
Fee: 3%
Rate: 8.5% Fixed
Payment of Interest during school is perferred
Repayment Term = 10 Years
Monthly Payment after law school = $557
Total Cost: $72,411.36  (For 45K in loans..  ouch!)

BOA Private
Fee: 0-1%
Rate: Libor + 1.5% while in school,  Libor + 3 after
(the 10 year Libor rate is 4.19%, the current rate is 3.07.  The peak was 7.4, the low was 1.2)
Payment of interest during school is optional
Repayment Term = 10-20 years
Estimated Average Monthly Payment after Law School  = $459.67  (based on 10 year term and interest payments during school)
Total Cost: $65,222.28  (This is an edit, I didn't add the +3 to the lipor.. but I fixed it)


This of course is based on a 10 year average LIPOR rate of 4.19.  I can not tell the future, so I guess it's possible the rate could go up.

[sstar]

Tigity tag.

[.......2]

tag

[.......2]

Stupid question, but how did you come up with the total amount you'll end up paying?

[Bulldog86]

I think one benefit of Grad Plus is fixed interest rate. Yes, the rate is great now, but in 5-10 years, what will the rate be? You don't know. I think I remember a financial aid person saying that normally, GP is always a better deal (if the adjustable rate is above 9% or whatever), but right now, private might be, although there is substantially more risk down the line that it won't be and you'll be screwed.

I don't know if there are other benefits to GP, since it's a federal program, that might also weigh in its favor.

Hoping to hear more information from more well-informed people than me...

[jack24]

Stupid question, but how did you come up with the total amount you'll end up paying?

36 Interest payments on 15k
24 Interest Payments on 15k
12 Interest Payments on 15k

Total monthly payment based on principal and interest * 120

+ Fees

So Grad Plus  (Based on 8.5% fixed rate)
1L  2046.36
2L  1363.92
3L  699.48
10  year Repayment   66,951.60
Fees = 1350
Total = 72,411.36

BOA Private  (3 years at 4.19%  10 years at LIPOR 10 yr avg of 4.19 + 3 (7.19)  The current rate is 3.07, so I just used the average rather than the average + 1 for the 3 years of school.  The difference this would make would be minimal)

1L   988.32
2L   663.36
3L   342.60
10 year repayment  63,228
Fees = 0
Total = 65,222

[jack24]

Oh, here are the LIBOR rates

http://www.moneycafe.com/library/libor.htm

[cali_girl]

I think most outside companies have stopped issuing private loans for the time being (e.g. Bank of America, Access Group), since the economy is in the toilet.  See their websites. You can't even pull up interest rate info on their private loans.

I've heard similar to what Bulldog said.  That private loans are riskier, because the interest rate can change every quarter and you can't do anything about it.

8.5% is hard to swallow though (does anyone know if it's dropping on July 1?)

[The Knight]

I think most outside companies have stopped issuing private loans for the time being (e.g. Bank of America, Access Group), since the economy is in the toilet.  See their websites. You can't even pull up interest rate info on their private loans.

I've heard similar to what Bulldog said.  That private loans are riskier, because the interest rate can change every quarter and you can't do anything about it.

8.5% is hard to swallow though (does anyone know if it's dropping on July 1?)

Wake Law told me it will be dropping.

And did Bank of America Seriously offer you 4.19%, Jack?  Like, you talked with someone and got paperwork?

[jack24]

I think most outside companies have stopped issuing private loans for the time being (e.g. Bank of America, Access Group), since the economy is in the toilet.  See their websites. You can't even pull up interest rate info on their private loans.

I've heard similar to what Bulldog said.  That private loans are riskier, because the interest rate can change every quarter and you can't do anything about it.

8.5% is hard to swallow though (does anyone know if it's dropping on July 1?)

Wake Law told me it will be dropping.

And did Bank of America Seriously offer you 4.19%, Jack?  Like, you talked with someone and got paperwork?

Check out
http://www.bankofamerica.com/studentbanking/pdf/Loan_comparison_chart.pdf

The rate for private loans is  libor + 1-2% during school and Libor + 3% after school.

The Libor average is 4.19 percent over 10 years.  The current rate is right around 3.0 percent.
Because I can't tell the future I'm just assuming ten years of payments will be around the ten year average so the effective average interest rate for the payback period would be 4.19 + 3  (7.19%)  During school I'm assuming that the rates will probably hold pretty low, so I figure it will be around 4-6.5% during the time I'm at school.

And I have A+ credit so I'm also assuming that I'd get the offered rate.  I realize I am making a few assumptions, but most of them are pretty neutral rather than ignorantly optimistic.

And I know people are scared about private loan funds drying up, but that's just silly.  They will just be harder to get.