Private loans w/ parent cosigner vs PLUS loans -- and it pays to shop around

Paying for College
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<p>The conventional wisdom that "it's always better to exhaust all federal loan options first before getting a private loan" does not hold for everyone, particularly those families where the parents have excellent credit scores and anticipate being able to pay off the loans in just a few years - either now while the child is in school, or within a few years after graduation. The PLUS rate is high (7.9%) and there are hefty origination/guarantor fees (published as 4%, but - from what someone posted here - in actuality 2.5% if payments are made on time).</p>

<p>See schooner's current "What am I not getting?" thread. <a href="http://talk.collegeconfidential.com/financial-aid-scholarships/972592-what-am-i-not-getting.html%5B/url%5D"&gt;http://talk.collegeconfidential.com/financial-aid-scholarships/972592-what-am-i-not-getting.html&lt;/a>
In that thread, I posted links to some of last year's very good discussion of this issue.</p>

<p>Yes, the private rates are variable, and yes, they will go up in time. But, IMHO, this economy is on such shaky ground that it will be a while before the prime rate (or LIBOR) goes up enough to close the current gap between private and PLUS rates. Plus there are those darned origination fees with PLUS -- we saved $500 or so in origination fees right off the bat last year by cosigning a private loan and got a 5.75% interest rate. (If the private goes sky high in kid's jr or sr year, we could take out the maximum amount in a PLUS loan that year, and use some of the proceeds to pay down our highest interest rate loan.</p>

<p>Others here got a 4.25% rate last year. Quoted base (lowest) rates on the various lenders' websites are lower this year.</p>

<p>Which brings me to the second part -- "It pays to shop around":</p>

<p>Last year, one CCer (I'll call her poster A) got the lowest 4.25% rate from Discover. Poster B applied w/ Discover and was quoted a rate of 6%. She then applied w/ Wells Fargo (or was it Chase) and got their 4.25% rate. We applied first w/ Discover and, while I don't remember the exact rate quote they gave us, it was at least 7.5%. Then called Wells Fargo and got a rate of 5.75%, which is what we went with. Someone else here got a very good rate with Chase, I think. </p>

<p>Fast forward to this summer -- called Wells Fargo first (did it over the phone, since we have TWO kids we need to borrow for this year and thought it would be easier to combine the two applications that way). They offered a 4.75% rate -- 1% lower than last year! Called Discover last night, just to be sure we're getting the best deal -- they said 9.5%. NO THANKS, says we. (I may call Chase today, since some here have had good success w/ them and they have our car loan. Then I'm done.)</p>

<p>Any others here successful in getting a good rate? And with which lenders?</p>

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<p>bump for you</p>

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<p>Good job on your part.</p>

<p>Sometimes it takes alot of perseverance to get the best deal. I know I’ve been tempted to accept the first offer on something like this because it’s EXHAUSTING doing all the emailing, calling, waiting on hold, asking for for a higher up in the chain of command to verify something, etc etc.</p>

<p>Yet, I always make out better when I do wade through it all. And our family doesn’t have enough income to squander it unnecessarily on higher loan rates, cable bills, car prices, etc.</p>

<p>Hope that your post will see some other families to better rates for their kids as well.</p>

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<p>I have already learned a lot from this thread. I am a newby. I am in the category that MomCat2 is talking about. I am learning that we will have to shop around for a private loan four our daughter. We have excellent credit and can afford payments, but I need to rapidly keep stashing funds for retirement since I am already 56. I don’t think we will qualify for PLUS loans or anything else, yet I don’t see much ‘extra’ money flowing in each month. I feel like I exemplify the sandwich generation to a T!!!</p>

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<p>Briarcliff -if you have excellent credit, you will certainly qualify for the PLUS loan. The question is, can you get a better interest rate with a private loan, how quickly will you be able to pay off the loan (shorter time frame decreases your risk re: rising interest rates), etc.
If you read the “What am I not getting?” thread linked in the OP, then go to the links I gave in post #9 of that thread and read <em>those</em>, you’ll get a pretty good grasp on the pros/cons of private loans, as well as the personal experiences that some CCers have had with private lenders in the past 2 years. Good luck!</p>