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Author Topic: Grad Plus vs. private loans  (Read 2113 times)

yanno

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Grad Plus vs. private loans
« on: April 08, 2007, 01:23:03 AM »
I have a pretty good credit score (780+) and was wondering which of the two is a better deal (grad plus or private loan) in my situation. I have never financed my education before (went to a public university for undergrad while working full time to pay tuition), and this is all very confusing to me.
 

togbra

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Re: Grad Plus vs. private loans
« Reply #1 on: April 08, 2007, 08:51:03 AM »
See this thread:

http://www.lawschooldiscussion.org/prelaw/index.php/topic,85531.0.html

It depends on your school preferred lenders (if you want to use them) and the risk you want to take on interests rates.

jacy85

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Re: Grad Plus vs. private loans
« Reply #2 on: April 08, 2007, 11:18:01 AM »
Depends on your risk aversion.  The grad plus loans are locked at 8%, the private are variable.  For me, my private rate was pretty good, much lower than grad plus.  I decided to "diversify" and used grad plus this past year for 2L (1L I used private, since grad plus wasn't available).  I'm going to look into what to do next year.  I may go with the private loans again, but I'm not sure.

with your credit score, your private loan rate will likely be quite a bit below 8%, so you just have to decide if it's worth it to have a lower interest rate for however long, with the risk that it could change and perhaps someday climb above 8%.

Drew P. Bottom

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Re: Grad Plus vs. private loans
« Reply #3 on: April 08, 2007, 03:12:06 PM »
A fin. advisor I spoke with said 750 was the magic number to make it worth it to get private loans instead of GRADPLUS.
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togbra

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Re: Grad Plus vs. private loans
« Reply #4 on: April 08, 2007, 03:41:42 PM »
So, for private loans, if the % isn't locked it, does that mean that whatever % you take them on at (during your 1L or 2L years) can change before you even graduate? Like, they're at 3% when you choose them, but by the time you graduate they're up to 8%?

You are correct.  Private loans are generally variable rate loans, so they do change over time.  Some are based on the Prime Rate and some are based on the LIBOR (and I guess there are others as well).  Google these terms to see where they are at currently.  There is a historical graph of the Prime Rate in the previous posted link.

togbra

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Re: Grad Plus vs. private loans
« Reply #5 on: April 08, 2007, 04:12:28 PM »
Thanks, the W&M site explained a lot for me. So, basically it's deciding if you'd rather have less interest accruing while you're in LS and take the chance that it goes up which is good if you want to pay it off quickly, vs. have a set rate that is higher (but possibly better if you're going to be on a 30 year plan).

If you are going for the long term plan, then I think consolidation is where its at (I haven't read too much into this yet).  At this moment, I plan on getting GradPlus loans and paying off quickly because I think prime rates will go higher overall in the next few years (I could be wrong).  But, mostly because I don't want to have my parents co-sign the loan (for the sense I did this on my own).  I haven't looked at the rates I would get with my parents co-signing on a private loan(they have near-perfect scores), but I will just to see if it is significantly lower (at which point I may reconsider my position).  You owe it to yourself to become competent in this area (as well as investing and IRAs, for that I recommend reading fool.com / finance.yahoo.com).  www.finaid.org is a good resource on student loans.  After you read the different resources, I think it will be a personal choice on what one feels comfortable with.

togbra

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Re: Grad Plus vs. private loans
« Reply #6 on: April 08, 2007, 04:44:04 PM »

Out of curiosity, what makes you think the prime rates will go higher? 8.5 seems like a high rate, but I haven't checked out what private lenders are offering. If they're offering anything a lot lower, wouldn't it make sense, short-term to take that and risk it for a few years? Or is that too great a risk?


http://upload.wikimedia.org/wikipedia/en/0/09/Historical_US_Prime_Rate.png

the trend doesn't look that great.

The preferred lenders rates for my school don't look that appealing to me.  8.25% is the prime rate.  Citibank is offering variable rates as low as 7.75% variable for my school, but I don't think that includes a co-signer (it may, it's something I have to look more into).  The incentives from a non-profit lenders lowers my Plus rate 1.3% on start of repayment (ie after i graduate)  which amounts to about .5% discount on the 8.5% fixed rate starting from the beginning (ie 8% fixed). Plus loans also has more protections ie in case of death, the loans are not transfered to my parents versus a loan co-signed.  I am pretty financially savvy and have been working for a while, but not as long as you.  I have a good amount in savings and IRA, but I am also trying to be risk adverse in some sense.  Note: Early withdrawals from IRA for education expenses is allowed penalty free.  Again, like I said before, there is a part of me that want to do this on my own (I don't have enough credit built up like you to get a good private loan rate) and gradplus allows me that flexibility without screwing myself financially. You being out of school for a while have the advantage of better credit.  If I were in your position, I would probably do the same.  I am still in the process of weighing my options since this too is all new for me.  I have just been posting what I have found to be good resources for other people who are also doing this for the first time.

Drew P. Bottom

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Re: Grad Plus vs. private loans
« Reply #7 on: April 08, 2007, 11:05:53 PM »
Sorry I did not arrive back until now. Togbra knew more about this topic than I did anyway.
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy." -- James Madison

Violet247

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Re: Grad Plus vs. private loans
« Reply #8 on: April 08, 2007, 11:17:23 PM »
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marlinspike

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Re: Grad Plus vs. private loans
« Reply #9 on: April 10, 2007, 12:32:52 PM »
A fin. advisor I spoke with said 750 was the magic number to make it worth it to get private loans instead of GRADPLUS.

Is that 750 on the 850 scale or the 990 scale?
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