Whats the verdict on the loan situation???

My calculations for $60,000 (20K per year) in loans based on 10 year repayment

**Grad Plus**

Fee- $1500 (500/year)

Interest Capitalization Year 1 1619

Interest Capitalization Year 2 3366

Interest Capitalization Year 3 5124

Total Amount at repayment- 71609

Monthly Payments for 10 years- 865

Total 103804

**MILoan fixed**

Fee- $2100 (700/year)

Interest Capitalization Year 1 1429

Interest Capitalization Year 2 2977

Interest Capitalization Year 3 4522

Total Amount at repayment- 71038

Monthly Payments for 10 years- 823

Total 98758 (a savings of 5046 over grad plus)

**MI Variable (assumed constant 6.18)**

Fee- $2100 (700/year)

Interest Capitalization Year 1 1279

Interest Capitalization Year 2 2637

Interest Capitalization Year 3 4000

Total Amount at repayment- 70016

Monthly Payments for 10 years- 783

Total 94039 (a savings of 9765 over direct)

Damn that took a long time to figure out- I couldnt find any loan calculators that accounted for capitalization. So it LOOKS, to me, that the MIloan creditworthy program is the way to go. Im not sure about fixed vs variable, any thoughts on interest rate trends?

Aight so tell me if if right or wrong here-- I don't see any benefit to choosing grad plus over the Fixed rate MI loan.

Bouzie, i've been doing many similar calculations myself lately. One important thing to keep in mind about the MILoan variable rate is that it likely will not be anywhere close to 6.18. Unfortunately it will probably be in the 6.7-6.8 range. This is because the rate is readjusted every June 1st and fixed to the yearly average of the LIBOR. It took me a while to figure this out this other day but its nice to be able to share the info I gathered with someone...

There are four LIBOR rates released each month. MILoan averages each rate individually over the course of one year and then averages these four rates to arrive at an aggregate average. This aggregate average is then increased by 1.5 to arrive at the rate.

I was able to find these rates online and messed around with them in Excel...

click here to open the image in a new window:

http://img116.imageshack.us/img116/6779/miloanzo4.jpgSo, as you can see in the June 2006 row, the pink, yellow, light blue and sky blue columns are each averaged out on the right. These four averages are in turn averaged and result in 4.68 (red cell). 4.68 + 1.50 = 6.18; the rate this year.

Unfortunately for us, rates have been rising steadily over the past year. We are missing one month of data (May 2007), but as things stand now, the average of the four rates over the last ELEVEN months is 5.37. 5.37 + 1.50 = 6.87, just .03 lower than the fixed 6.9 rate being offered. Unfortunately thi sis unlikely to go down based on whatever May's LIBORs are because the LIBOR average has been increaseingly steadily literally every single month for the last two years!!

So yeah, just wanted to share that with you. The rate will still likely be in the 6.8-6.9 range. The thing we have to consider is whether we want to take the chance that the LIBOR will not be any HIGHER on June 1, 2008 and June 1, 2009. If rates keep going up, we'll be paying a 7.5ish type rate when we could have fixed in at 6.9.

MILoan is still great since 6.9 is much less than the 7.9 or 8.5 you have to deal with for grad PLUS. But its not nearly as great as it used to be, it seems.

On a side note, I mentiond this a few pages ago but I am really dissapointed that UM does not permit its students to take part in the MSF (michigan students first) program offered by the state of michigan. they refund ALL of your disbursement fees and give you a ZERO PERCENT rate after 36 on time payments. which is an INCREDIBLE deal which could save many a law student hundreds of thousands of dollars over the course of his career. of course, we are not able to partake since michigan siphons everything through Direct Loan.