<p>Finaid.org has a list of private student loans here: FinAid</a> | Loans | Private Student Loans
Rates are always listed with a range, so I'm curious if anyone with good credit has applied for one of these and gotten approved with a rate at the low end. If so, can you tell me which lender?</p>
<p>My son applied for a Sallie Mae Smart Option loan--rates are supposed to range from 1-month LIBOR + 2.0% to 1-month LIBOR + 8.875%. LIBOR is currently at .19, so that would be 2.19% to 9.065%. I applied as the co-signer, and it's his first semester, so other than Stafford loans, there's no other debt.</p>
<p>We were approved, but at a rate of 8.25% (and it's variable, with no limit--i.e., not a good deal). My credit is excellent (I ran another report, in case there was an error), we have lots of home equity, no debt other than the mortgage, and assets in retirement accounts. When I called, they said their formula was proprietary, but that it was mostly based on my credit. I asked for a general description of who would get a low rate, but they wouldn't tell me. So who gets that 2.19% rate, or is it fictional?</p>
<p>I did see all of those threads (your post was where I found the Finaid link–thank you!), and I will definitely shop around. But those quotes were all from a year or more ago, and I notice that nobody mentioned Sallie Mae.</p>
<p>I’m trying to understand why with excellent credit I was quoted a rate at the high end of the scale–is there something I’m missing about student loans that’s different from other loans (where I’ve always been able to get the best rate)?</p>
<p>If they are quoting a range that starts at 2.19% and not giving it to anyone, then that’s a problem (and, I assume, illegal).</p>
<p>If you saw my “it pays to shop around” thread, you’ll see that for the SAME potential borrower, the rates quoted by different lenders can vary widely, so it’s worth trying 2 0r 3 different lenders.
I’d definitely check out Discover and Wells Fargo, as we and others here seem to have done pretty well with one or the other.</p>
<p>We did check out Chase last summer, after I started that thread - their application process was utterly bizarre - they said they wouldn’t tell us the interest rate UNTIL AFTER THE PROMISSORY NOTE WAS SIGNED (and it took a long time, via snail mail - Discover & WFargo give you the rate w/in an hour or two at most) - we said forget it!</p>
<p>If you have a credit score in the 700s you should be able to do better than 8.25%. Mid 700s or slightly above may even get you the very best rate at one of these places. I never did get around to checking Sallie Mae - after the Chase fandango last summer we gave up “shopping” and went with Wells Fargo’s 4.75%</p>
<p>(the “loan shopping” season is just heating up, so others may check in with their experience. I was just laying in bed last night thinking that we need to apply with Wells Fargo soon… ah, insomnia…)</p>
<p>You described our situation almost exactly.</p>
<p>We have great credit, own a home with lots of equity, high income, and high expenses (ugh!), no significant debts beyond our mortgage.</p>
<p>Sallie Mae quoted LIBOR + 8.375%, which actually made me laugh out loud. Why would ANYONE (even an Ohio State alum) take a variable rate loan at 8.675% when they can get a Parent Plus fixed rate loan at 7.9%?</p>
<p>Fortunately, I visited my neighborhood Wells Fargo (they don’t hold our mortgage but they service it), and they quoted PRIME + .5%, which works out to about 3.75% currently and there’s no origination fee.</p>
<p>Once he’s out of school, it will free up a bunch of money to pay down the loan quickly, so I don’t see the variable rate as a big issue.</p>
<p>So as MomCat2 said, it pays to shop around. I also think NOBODY gets LIBOR + 2%. It’s a bait and switch.</p>
<p>The potential issue with Sallie Mae is not the inconvenience of a few individual parents; you and I should, can, and have applied elsewhere with better results. But that’s not the point.</p>
<p>Sallie Mae has the lowest advertised rates in the market, as far as I’ve seen. But they can’t advertise something that’s fictitious, and if no parent is actually getting LIBOR + 2% from them, that’s not just annoying, it’s illegal.</p>
<p>Unfortunately, they don’t have to tell us who would qualify for that magical rate, so we don’t know if they ever give it out. But I’m skeptical, so I’ve filed a complaint with the FTC, and am also filing a complaint with my state banking division, since Sallie Mae is licensed in our state. (The FTC doesn’t investigate individual complaints, they just look for patterns, but my state does.) You might want to do the same. Whether anything will come of it, I don’t know, but I feel better having reported the issue. What about parents with lower credit scores, who aren’t used to getting the best rate and don’t realize that maybe they can do better than Sallie Mae?</p>
<p>I’m assuming from your name a Michigan connection, but don’t be badmouthing OSU! I’ve got Ohio connections, and my son applied there. We all liked it a lot when we visited.</p>
<p>They don’t give it out, ever. As you said, it’s all proprietary. Not only that, you’ve found out what we found out last year – if you apply, they will not give you any clue as to why you got the rate you got. </p>
<p>I have a bad taste in my mouth about private loans. D’s first year, we went with Discover and got one of their best rates (4.25%). That made perfect sense to us; DH has fantastic credit. Second year, we applied again and they came back with a whopping 9.5%, which I believe was their highest rate. </p>
<p>So someone made a mistake somewhere, or a computer hiccuped; it happens. But what infuriated me was that trying to get information about what went wrong and how to correct it was like hitting my head against a wall. They would not tell me why the rate more than doubled, or what they need to see on a report to get a good rate. They wouldn’t agree to have a human being review it (this is all processed electronically). They wouldn’t agree to re-pull the credit report and re-process it. (I suspect they used the wrong SSN and pulled someone else’s report.) The only thing they would tell me was that they used Transunion, so we promptly checked and confirmed what we already knew – DH’s credit was stellar. It will remain forever a mystery why Discover suddenly considered us to be high risk borrowers.</p>
<p>Everyone advises shopping around, but that is a bit of a Catch-22. Since the advertised range is totally meaningless, the only way to know what rate *you *would get is to apply. And of course, all of those applications are hits to your credit. </p>
<p>I also wonder who gets the good rates, and I wish you well in your pursuit of this. It seems to me that if someone is turned down, or receives a rate that’s ridiculously high, they should be entitled to know why.</p>
<p>There IS now some help for consumers in this arena. It won’t answer the “why” part of the proprietary lending formulas, but at least lenders can no longer imply your high rate is because your credit score isn’t good.</p>
<p>I’ve applied as a cosigner with two student loan lenders since the law took effect. One, Sun Trust Bank, immediately gave me my credit score and other information electronically, as part of the application process, before the loan was even approved. (Unfortunately, the rate they offered was so-so, LIBOR + 4.75.)</p>
<p>The second lender, Citizens Bank, offered a very good rate–though not their absolute lowest advertised (LIBOR + 3.75, with .5 less with auto-pay from a Citizens account), but their customer service people do not seem to know about the new law yet. I’m working on educating them :-)</p>
<p>As for multiple applications, my understanding is that if you rate-shop for a loan within a 30-day period, it’s considered one inquiry as far as your credit score is concerned. See this from myfico.com:</p>
<p>“Will my FICO score drop if I apply for new credit?
If it does, it probably won’t drop much. If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.”</p>
<p>MomCat2: I’m a little confused by your posts. Although Wells Fargo in particular is not clear on their website, nor are other lenders, if you read the fine print there is no 5.75 or 3.25 “rate”–these loans are always Prime or LIBOR plus a margin. The important number to compare is what that margin is (LIBOR is historically lower, so the loans using LIBOR have a correspondingly higher margin).</p>
<p>That’s why threads from past years may not be useful if the rates are mentioned in absolute terms–without looking up Prime or LIBOR from two years ago, it’s hard to know what they mean. What was your margin two years ago? </p>
<p>Wells Fargo says they give a discount for previous customers, and maybe you get scored higher for on-time payments to them? Who knows, since these lenders tell you neither the good news nor the bad. But I haven’t heard of any better deal than what you’re getting!</p>
<p>MomCat, I’d love that rate at Wells Fargo, and based on everything I know about credit, we should get it. In fact, I contacted Wells Fargo last year thinking that because they hold our mortgage (with a perfect payment record), they might be a bit more forthcoming than Discover was . Same thing, though: The man emphasized how low the lowest rate is, but of course wouldn’t tell me if we’d get it. Nor would he give me any guidelines about what kind of credit score would get what range of rates. I told him what rate Discover had offered based on DH’s credit score, and asked if that sounded right to him, or if we could expect something similar from Wells Fargo. No help. He also said that, like Discover, if they came back with a ridiculous rate, there would be no review and we’d have no recourse.</p>
<p>buenavista - yes of course I (and others here) know that these are variable rate loans. But, as you can see from the chart you linked in your OP, both Discover & Wells Fargo base their rates on the Prime Rate, which has been 3.25% since Dec. of 2008. Therefore, the loans that my family and others here took out in the summer of 2009 and since have had no changes in rate so far.</p>
<p>Well Fargo recently began offering a fixed-rate priivate student loan - the rate they quoted us the other night for this was 7.5%. I’m not sure if any other private lenders have followed suit.</p>
<p>MomCat2 - I doubt everybody here understands how these rates work, even though we do–I was just trying to be precise, that’s all (I realize I wasn’t in my original post!) :-). And unlike Prime, LIBOR has fluctuated a bit recently, though not much.</p>
<p>I don’t think the lenders help much to make things clear, and student loans aren’t like other loans most parents may have had. Wells Fargo lists only absolute numbers for their variable rate loans on their website, for example (rather than the margin), and as with your experience mentioned above with Chase, SunTrust also omitted the interest rate on the promissory note they sent us. In our case it took a supervisor on the phone to get it, too–the customer service rep just kept saying my rate was 5%, and did not seem to know what a “margin” was (LIBOR had bounced around a bit–I didn’t know what day they’d used for the rate)! I’m sure some people just sign these things, thinking they understand.</p>
<p>I’ve seen other lenders offering fixed rates–but again, they are quoted within a range, so until you apply you don’t know what you’ll actually get. Wells Fargo’s website says their fixed range is 7.750% - 14.250%, so you did better!</p>
<p>I ran some numbers and even if PRIME goes to 7.5% in 48 months, it stays there for 10 years, and we take 10 years to pay off the loan, we will have paid 39% less in aggregate interest over that time and our monthly payment during that time would be 20% lower.</p>
<p>Now, if we pay interest-only while he’s in school, then we will have paid 53% less in aggregate interest over that time and our monthly payment during that time would be 30% lower. That’s our plan.</p>
<p>There are four sources of interest savings:
Delta between PRIME (currently 3.5%) and 7.9% for 48 months (major contribution)
Delta between PRIME in 48 months (assumed 7.5%) and 7.9% (minor contribution)
Difference in origination fees - 0% vs. 4% (major contribution)
Interest-only payments while in school - better not to capitalize the interest (major contribution)</p>
<p>PRIME would need to go to 14.5% for those 10 years to break even with the Parent Plus loan. PRIME at 14.5% is Jimmy Carter territory so we’d have a lot larger problems as a nation if that happens! </p>
<p>And yes, I’m a Wolverine, so I couldn’t help myself with the Ohio State crack. All in fun!</p>
<p>wlvrns: Thanks for running these numbers! We also will be paying the interest during college, and we aren’t borrowing a lot (though there will be more in home equity, which has similar trade-offs). In our case the plan is to take my name off the loan once our son has graduated and has a job, which we couldn’t do with Parent Plus.</p>
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