<p>My D got her FA today and was offered three loans:</p>
<p>Fed. Sub. Stafford Loan $3,500.00
Federal Perkins Loan $1,500.00
Fed. Unsub. Stafford Loan $2,000.00 </p>
<p>How are they different? What is the best one regarding terms? Does Perkins have int. paid while in school?</p>
<p>We could also take funds out on a Home Equity line we have with a current rate of 3.25%. Is this smart or not?</p>
<p>Thanks, I appreciate the help!</p>
<p>A subsidized loan means the govt pays the interest until the student finishes school or drops below half time, plus a grace period.</p>
<p>Perkins loan - is a subsidized loan. 5% interest. Govt pays the interest until the student finishes school or drops below 1/2 time plus a 9 month grace period. No origination fee.</p>
<p>Subsidized Stafford - is a subsidized loan. 5.6% interest on loans issued in 2009/2010 school year. Govt pays the interest until the student finishes school or drops below 1/2 time plus a 6 month grace period. may have up to a 3% origination fee depending on the lender.</p>
<p>Unsubsidized Stafford - 6.8% interest on loans. Student is responsible for interest from day the loan is issued. May have up to a 3% origination fee depending on the lender.</p>
<p>I would certainly take the subsidized loans rather than the home equity as they are interest free at this point in time. You can always take the home equity loans when they are due for repayment.</p>
<p>Thanks Swimcatsmom!</p>
<p>Anyone else have an opinion?</p>
<p>I ALWAYS listen to swimcatsmom - she’s a guru on these things, lol! She’s right - take the subsidized Perkins and Stafford, unless you absolutely don’t want D to have any “skin in the game”. Home equity would start costing you interest immediately and may be needed at a later time.</p>
<p>Swimcatsmom is correct, as usual. Another consideration for home equity loans is the fact that your interest is most likely tied to the prime rate - and if that begins to rise during your repayment period, you may be looking at a much higher interest rate. If your daughter were to borrow subsidized Stafford & Perkins loans, you could repay for her interest free - but your home equity loan will be accumulating interest from the time you borrow the funds.</p>