<p>Hi,
Son will be a grad student, we didn't use loans for undergrad and I left this up to son. He has award letter from University, accepted it and didn't realize till yesterday he needed to choose a lender. Now we need last minute help. Oh well, things could be worse.</p>
<p>Trying to compare no origination fee loans-Discover (thanks to all on CC)
vs Citbank (with 2% fee) 0.5% reduction at repayment + 0.25% w/automatic withdrawal.</p>
<p>Is there a website/calculator where we can compare the actual costs of loans after repayment? Is the $170 "savings" for a 8,500 subsidized loan < or > interest reduction that would start at repayment?<br>
Thanks,
LA</p>
<p>Thanks,
Now try to follow my "logic" Trying to figure out if reduction in interest is better than no fee.
For my simple brain, I am using $10,000 of unsubsidized loan over 10 yrs.
6.8% = 3,809.66 interest w/o a 2% fee of $200</p>
<p>to calculate w/interest rate deducted to 6.05% at repayment?? (w/2% fee)
10,000 at 6.8 X 2 yrs= 723.67 interest-because interest is 6.8 during school
10723.67 at 6.05 x 8 yrs = 2830.03-when son starts repayment (ignoring the 6 mos)
=total interest cost=$3,553.7
total cost of loan (w/2%)=3753.7 </p>
<p>I think the amount borrowed from the loan with the 'better' payback terms would only be 9800 +accrued interest because of the 2% reduction in the loan amount due to fees. I don't think they charge you interest on the amt they withheld from paying you to begin with</p>
<p>Not sure where you are getting 723.67 interest for 2 years. At 6.8% a year 2 years of interest will be more like $1380. Actually a little more because the interest is added to the loan and you pay interest on the interest. So your starting debt not allowing for the 6 months grace period is @ $11400 after 2 years.</p>
<p>If you plug those numbers into the loan calculator you get the following:</p>
<p>$11400 with No fee & 6.8% interest rate for 10 years after repayment begins:
Monthly Loan Payment: $131.19
Number of Payments: 120</p>
<p>Cumulative Payments: $15,743.07
Total Interest Paid: $4,343.07</p>
<p>$11400 with 2% fee & 6.05% interest rate for 10 years after repayment begins:
Monthly Loan Payment: $129.44
Number of Payments: 120</p>
<p>Cumulative Payments: $15,532.57
Total Interest Paid: $4,132.57</p>
<p>I was just looking at Discover Student loans and they also give a .25% interest rate reduction for automatic withdrawals. So the Discover calculations s/b:</p>
<p>$11400 with No fee & 6.55% interest rate for 10 years after repayment begins:
Monthly Loan Payment: $129.73
Number of Payments: 120</p>
<p>Cumulative Payments: $15,568.43
Total Interest Paid: $4,168.43</p>
<p>Which makes it a lot closer to the Citibank.</p>
<p>The fees are deducted from the loan before you get it so he would be getting $9800. The difference in monthly and total repayment is fairly small - where will the $200 he will be short now come from?</p>
<p>One other thing....keep in mind that only about 10% of students actual qualify to take advantage of their repayment benefits. The reasons vary greatly from student to student and lender to lender.</p>
<p>Thanks again,
Swimcatsmom-I got the 723.67 by plugging in 10,000 to be paid off in 2 yrs. I realize now that's not calculating the interest accured- in 2 yrs-it's the interest if I was paying over 2 yrs. Thank you so much for the correction.</p>
<p>I am not a fan of promises later either, I couldn't think of right questions to ask Citi bank this morning. Except to find out if they sold off their loans and therefore their promises-said no loans sold in 50 yrs. Think I will call school tomorrow and make sure that we enter everything correctly with Discover who does not appear on Redlands "lender of choice list". Frankly "lender of Choice" doesn't give me any extra confidence. We actually used Discover credit card to pay tuition in past-then paid before due and received their cash back bonus. I am sure son would love the good old undergrad days when mom and dad paid the bills.</p>
<p>Another vote for no upfront fee in this situation:
If you keep the loan for ten years, the total interest is pretty close. But what if you pay off the loan earlier? The 2% is essentially prepaid interest which you won't get back, whether you keep the loan for two years or five or ten. More expensive the earlier you pay it off.</p>
<p>I would imagine all of the lenders will make very nearly the same amount of money on the loan. It has been our experience and of history that inschool loans will convert from a 10 yr amortization (stafford,etc) to a consolidated program with longer amortization but lower interest. </p>
<p>We may be nearing a period again when interest rates are near the bottom and a analysis of consolidation loans may be a better money saver.</p>
<p>Oh, I would consider immediately payment on the graduate stafford rather than letting the interest capitalize. Having the interest capitalize is really how the lenders make the big $$-nothing like interest on interest. We took the fee and repayment discounts but maintained the payment amount as if there was no discount. Reasoning was that the fee was applied once and only on principle but the discounts is applied to on going interest. </p>
<p>Reverse the thinking. If you had a savings account, would you want a cash bonus up front on principle deposit or would you want a higher interest rate compounding.</p>