<p>My child (with me being the co-signer) was able to secure an initial approval for a private loan with a variable interest rate of 1-month-LIBOR + 4.75% (currently at 5%), full deferment, 20 year repayment, and 0.25% interest rate discount for setting up automatic payment. Wondering if this is a "good enough" deal out there? Those of you who have had experience in private student loans recently, please chime in. I'd appreciate your input!</p>
<p>Also, what's considered a good fixed rate deal? Considering the interest rate might go up in a few years with the recovery of the economy, would it be wise to go with a fixed rate loan?</p>
<p>The problem with variable interest rate is that there is no cap on the interest. The LIBOR rate may go up quite significantly within the 20 years (+ at least 4 years while you are in school).</p>
<p>I prefer fixed rate.</p>
<p>Well, the best fixed loan deal I got was an interest rate of 7.72% (while in school) and 6.72% after graduation. It’s 15 year loan term and it asks for a minimum $25 monthly interest payment while in school. So would you think this is a better deal?</p>
<p>For me, I would think so. At least this is better than the Plus loan with fixed interest of 7.9% and 4% origination fee. Although Plus loan has the advantage of loan being forgiven if the student or parent taking the loan passed away. But, you can take a life insurance for yourself and the co-signer.</p>
<p>So, it is up to you. If you think the LIBOR rate will not go above 2% in 24 years (which is unlikely), then the variable rate loan is better. Otherwise, fixed loan of 6.72% (with life insurance) should be better.</p>
<p>Anyway, paying monthly interest is a good idea as the interest is accruing immediately after the loan is dispersed. This will avoid having a larger loan amount when you graduate.</p>
<p>BTW, you should look at other threads in this forum where most people should advise against taking large private or plus loan, but select a cheaper school option.</p>
<p>I see a lot of different private loans and those are very goods terms. But of course I would suggest against full deferment. If you feel that you are really going to take 20 years to payoff the loan a fixed rate might be better. However, your interest rate will probably 3, or more, points higher.</p>
<p>^^Thanks. In our case, we actually can afford it, with some “adjustment of lify style” of course. Both child and parents choose to borrow a moderate amount to ease the impact of large payouts of tuition within a short period of time. </p>
<p>I’d love to hear more from people who have taken or is in the process of applying to a private student loans. What are your considerations? Fixed rate or variable? lnterest only or immediate payback options? etc etc. Thanks.</p>
<p>@bshooltotech: You are right. With that lender, the interest rate for full deferment is the same as with other options, so I took it just to give ourselves more freedom. I do expect at least a portion of interest will be paid while in school, and the loan to be paid back much sooner than 20 years.</p>
<p>See a thread in this forum titled “private loan rates” from summer 2011. My post #2 in that thread has links to other earlier threads on this issue. we got loans at 3.25% from Wells Fargo in Fall2011 and January 2012. we’ve now paid off our higher rate loans from them (at 4.75 and 5.75) Keeping the 3.25 ones for now - that’s lower than the <em>real</em> rate of inflation (not the b.s. rates the govt gives us), especially when you factor in the student loan interest deduction. (Sorry for not posting links to those threads, but it’s a real PITA on the IPad)</p>
<p>I have a mortgage with Wells Fargo at 3.25% fixed rate but have no luck with a student loan as a cosigner. Really don’t know if I could ever get the “lowest rate” as advertised.</p>
<p>The PLUS is no great shakes. It makes it easy to get since applying and getting the answer is a quick 1,2,3, but the interest rate is no bargain. The other advantage with PLUS is that it has no income requirements and does not look at the credit score. Also, has built in life insurance for parent and student, and flexibility in terms. The other thing is that it doesn’t bind you and the student by the financial ankles so that both of you have the danged loan on your credit reports. It can hurt a kid looking for jobs, an apartment, buying a home, financing a car to have that nut on the report. The loan/earnings ratio can be an issue for someone right out of school looking to get into financial industries and/or wanting loans, credit, etc. But you pay for those benefits with the high interest rate right now during a time when the rates are low through quite a premium. Fixed is nice, but 8% fixed is no deal.</p>