<p>Hey all!</p>
<p>I've read up on how both of these loans work, and the only major benefit I can come up with regarding Stafford loans is that they have a concrete interest rate of 6.80% (unsubsidized).</p>
<p>I will be attending OSU next year, and my personal cost, after scholarships and parental contribution, will be $12,600. I was, of course, offered $5,500 in unsubsidized Stafford loans, which leaves $7,100 in private loans, which I will be getting through USAA with a guaranteed fixed interest rate of 3.40% with payments beginning six months after graduation.</p>
<p>This leads me to my question:</p>
<p>Since the USAA loans have such a low interest rate, would it be better for me to go ahead and take out all $12,600 in private loans and disregard my Stafford loan offer? Or have I overlooked some enormous benefit to the Stafford loan?</p>
<p>Thanks!</p>
<p>Staffords have flexibility in repayment schedules.</p>
<p>If you are personally able to get a better deal on a loan, that is great, but if this loan has to be cosigned by someone else, that person is going to be on the hook for it with his/her credit record. Also that person will be stuck with the loan if you die. Most students coming right out of high school can’t borrow that much without a cosigner. Stafford are extending this credit to kids who are 18 years old with no credit check, no credit record. </p>
<p>Are you being asked for a co signer for the loans? If that is the case, it might be better for your parents to take out the loan themselves rather than cosign for it so that both of you are not on the hook for the amount and so that they can deduct the interest on it.</p>
<p>Did you already apply for this loan and get an approval, or is this some special rate through your school or other organization? If you and your cosigner haven’t been approved, that rate is probably not guaranteed.</p>
<p>“guaranteed fixed interest rate of 3.40% with payments beginning six months after graduation” sounds too low to be true.</p>
<p>I just searched USAA on line and their ad said fixed and variable loans starting as low as 3.4% and subject to change. Also co-signer needed until 24 months of repayment achieved.</p>
<p>We’ve already been approved.</p>
<p>Are your sure that 3.4% is a FIXED rate? It would be very unusual.</p>
<p>Subsidized Stafford loans are the single best source of money you can borrow.
The interest is picked up by taxpayers while you’re in school. </p>
<p>Once you exhaust your subsidized Stafford stockpile, you want to move on to unsubsidized Stafford loans. </p>
<p>As a third option, parents can take out PLUS loans.</p>
<p>One category of loans to avoid is private student loans.</p>
<p>Finally, remember the consumer champ’s rule of thumb when it comes to determining what level of borrowing you can comfortably handle: Do not take on loans that exceed the likely first-year earnings in your field.</p>
<p>“WE” is what I am focused upon. If by “WE” you mean parents and you, that means you AND they may be on the hook for the loan. Might be worth it for that interest rate, especially if it is fixed. However, bear in mind that you are BOTH on the loan, and they will go after BOTH of you for repayment and if either of you pass away, the other is still on the hook for the loan. Can your parents get the loan without you being involved? Who gets the deduction on such a loan when YOU, the student is the borrower with parents down only as cosigner, but probably making the payments? All of these issues need to be taken int account.</p>
<p>If they can deduct the interest for the loan and get the tax breaks for college payments as well, it would be better for your parents to borrow and have a private loan agreement with you. If they have reason not to want more loans on their credit record,–and they will go on their credit record as co signers, a Stafford might be a better way to go, keeping them out of the picture. </p>
<p>Just look at all of the angles before making a decision.</p>