<p>My S is an incoming Freshman. I just got an approval for a Plus loan with a fixed rate of 7.9% plus a 3% origination fee. At the same time, I also applied a private student loan with a bank and got a 5.9% (variable rate: 3m LIBOR + margin) and zero origination fee. </p>
<p>Assuming (and that's a big assumption) 3 month LIBOR is not going to increase by 2% in 4 years, any reason I should not take the private loan over the Plus loan? Any advice is much appreciated.</p>
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<p>That is a big assumption. That’s also assuming that you’re going to be able to pay off these loans in the next four years as well.</p>
<p>I think private loans should be kept for smaller expenses, if possible. Like if you need an extra $1000 to cover the rest of the tuition cost or something. Not for most of the tuition. So I think it depends on how much you’ll be taking out, if you’re going to need to take that much out in private/plus loans for the next four years, and when you’re going to be able to pay these loans back.</p>
<p>See this recent thread: <a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1176522-private-loan-rates.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1176522-private-loan-rates.html</a></p>
<p>In my post #2 in that thread, I link to some previous threads on the topic, some of which also contain links I posted to other threads - If you read all that (the threads aren’t all that long) you’ll have a good grasp of what several CCers have thought about this issue, and what lenders they have used, over the past 2 years.
IMHO, with the economy in such awful shape, I don’t see the prime rate or the LIBOR going real high any time soon. That hefty origination fee for the PLUS, in addition to its high interest rate, really makes that a pretty crappy loan if you have a good credit rating, and especially if you anticipate being able to pay off the loan within a few years (see those previous threads for my reasoning and that of others here).</p>