<p>Lives in CA (but not high COL like Bay Area or Southern CA) in major trauma/burn unit. It has extremely high turnover. I think she has the most seniority there, having just a few yrs exp (total) first job there. She does work some OT and that # includes it.</p>
<p>Perkins is scheduled to expire in 2013 (not 2012 as I may have mistakenly written elsewhere). All of the money controlled by the colleges is scheduled to be returned to the Feds at that tie. Obama wants to replace it with a new program with 6.8% interest rates, but there is no guarantee that will happen. </p>
<p>Yes, after you have maxed out federally subsidized loans, for a person or family with great credit, then a variable rate private loan may make sense for a few thousand dollars that you know you can easily pay off quickly. However, interest rates may be extremely violatile over the next few years. I would feel much safer with a fixed rate.</p>
<p>Yes although it has already been stated, it bears repeating. </p>
<p>Looking BACK at prior year interest rates (esp the last 3 yrs) is almost meaningless as this is an atypical situation for the US. It all depends on the economy. If it stays in the hole, yes the int. rates may not move much. If it starts a strong recovery, those rates will not be this low again. How fast? Probably not skyrocket if you’re done paying the loan off 3 years from today. </p>
<p>So while variable rate loans are normally risky (just ask all foreclosed-on homeowners who took out ARM loans and mortgage went from 1k to 3k per month) if you are <em>absolutely</em> sure you will have it paid off in 3 yrs you are probably not making a bad decision. The upside? Your loan is a great decision if the rates stay low. The economy (and interest rates) have already stayed low for much longer than most analysts/people expected (or hoped).</p>
<p>The Federal Reserve is committed to not raising interest rates for TWO YEARS. However, the third year may be a killer, particularly if there is a modest recovery and if oil prices spike upwards for some reason. Oil prices can zoom upwards just from demand in China alone. Plus the private lenders may come up with an interest measurement that is not tied to the Federal Reserve.</p>
<p>My son will be a freshman this year at a top-notch $57K/year college.</p>
<p>We applied for a co-signed Sallie Mae Smart Option student loan to cover part of the first year’s tuition. Our thinking was this:</p>
<p>Parent Plus student loan = 7.9% fixed plus 4% origination fee.
Sallie Mae Smart Option student loan = LIBOR + 2%-10% variable plus no origination fee.</p>
<p>With LIBOR expected to remain low for quite awhile and with ways to pay off the Smart Option loan if LIBOR pops up before we can naturally pay if off, it seemed like a much better deal, assuming we’re at the 2% end of the spread.</p>
<p>We (i.e. the parents) make a lot of money with correspondingly high expenses, we have little debt outside our mortage, and our credit score is around 800. We both have long-time stable jobs and we have significant home equity.</p>
<p>Sallie Mae just offered us a loan at 8.625% (LIBOR + 8.375%)! It was an AFLAC moment. I wasn’t able to draw any kind of sensible answer out of the customer service rep about how that could be and why ANYONE would take a variable rate loan that exceeds the fixed rate Parent Plus loan. Her only comment was that they take into account our son’s credit too (which is almost non-existent much like almost every other kid going to college).</p>
<p>Has anyone on this thread received a private college loan anywhere near LIBOR + 2% and if so, where did you get it? I suspect the “LIBOR + 2%” quote doesn’t actually happen in real life.</p>
<p>wlvrns (and others) -
See my post #3 in this earlier thread <a href=“Plus Loan vs Private Loan - Financial Aid and Scholarships - College Confidential Forums”>Plus Loan vs Private Loan - Financial Aid and Scholarships - College Confidential Forums;
which contains links to earlier threads - if you read all that (the threads aren’t too long) you’ll get a good feel for the reasoning and experiences of others here concerning private loans vs PLUS loans over the past two years (going back to summer 2009). Some of us have had good luck at getting low rates, but you may have to shop around a bit - those previous threads should help.</p>
<p>Just got off the phone with Wells Fargo - this will be our 3rd year taking out a private loan w/ parent cosigner from them.
1st year was 5.75%
last year was 4.75%
this year will be 3.25% (!!) - this includes a discount (.25 or .50% -not sure which) for current customers who are borrowing again.</p>
<p>Others here -last year and the year before - have received better rates from Discover vs. Wells Fargo - see my post above for previous threads.</p>
<p>MomCat2;</p>
<p>Thanks for the reply and pointers.</p>
<p>I also visited Wells Fargo today (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. That includes a .25% discount for automatic payment. I may press them for a better deal, given your success today!</p>
<p>One question - With the Wells Fargo loan, repayment begins immediately, but it can be interest-only for 24 months. I would prefer that it be interest-only for 48 months, which is roughly when he’ll graduate (he’ll be a freshman this fall). Do you have similar terms?</p>
<p>I may also take a run at Discover to see what they will do.</p>
<p>MomCat2;</p>
<p>One other thing…</p>
<p>I ran some numbers and even if PRIME goes to 7.5% in 24 months, it stays there for 10 years, and we take 10 years to pay off the loan, we will have paid 47% less in aggregate interest over that time and our monthly payment during that time would be 29% less.</p>
<p>PRIME would need to go to 14.5% for those 10 years to break even with the Parent Plus loan. We would all have a lot bigger problems if that happens!</p>
<p>hmmm - I’m wondering if maybe they signed you up for their PARENT loan (which has a similar interest rate as their student loan) instead of the student loan with parent cosigner. I know that w/ the student loan payment is deferred until 6 mos post-graduation - this is what we have, since in 2009 they didn’t offer the parent loan option and we started with the student loan w/ cosigner that year. We stuck with the student loan last year (at which time they had started the Parent Loan option) for the precise reason you mentioned - deferred payment. We see these loans as OUR obligation (even though they are in our children’s names), and have told our kids as such -we are going this route just for the payment terms. We have been paying interest as we go.
As you and others have noted, once they graduate it will be easy to pay the loans down quickly, since we we no longer be paying out our EFC each year.</p>
<p>Maybe you should do what we did and take out their Student loan w/ you as cosigner (the Wells Fargo Collegiate Loan), not the “Wells Fargo Student Loan for Parents”
This chart compares their different loans:
<a href=“https://www.wellsfargo.com/student/loans/[/url]”>https://www.wellsfargo.com/student/loans/</a></p>
<p>our rate is 1/4 or 1/2 a percentage point lower than it would otherwise be because we are continuing customers - you should get a similar offer next year. :-)</p>
<p>Yep - with the hefty origination fee on the PLUS loan, you save a bundle right off the bat, to say nothing of the differential in interest rates! It’s a good deal, and the prime or LIBOR would have to go up quite a lot to wipe out the advantage - and with the economy in the crapper the prime ain’t goin’ anywhere any time soon.</p>
<p>MomCat2;</p>
<p>You’re exactly right - I applied for a Student Loan for Parents. I’ll switch and apply for a Collegiate Loan and become a co-signer. It appears that I’ll save another .5% in the process. Thanks much!</p>
<p>One question though - the features tab at <a href=“https://www.wellsfargo.com/student/loans/undergrad/collegiate#eligibility[/url]”>https://www.wellsfargo.com/student/loans/undergrad/collegiate#eligibility</a> says this:</p>
<p>“If you’ve received all the federal loans you’re eligible for and still need additional funding, you can use a Wells Fargo Collegiate Loan to borrow up to the entire cost of your education. Or you may use this loan instead of a federal loan if you enrolled less than half-time or did not complete the FAFSA.”</p>
<p>An unsubsidized Stafford loan ($5,500) is available to us, he will be a full-time student, and we completed the FAFSA (back in the wishful-thinking days!). Does that requirement force us to take out the Stafford loan with it’s high fixed rate and 4% origination fee?</p>
<p>I don’t think you have to take out the Stafford - and since it’s UNsubsidized and at 6.8%, you might not want to (the subsidized Stafford, though, is a good deal).<br>
Our oldest had a subsidized loan as part of the FA package. When the school found out we were taking out a private loan, they assumed we would want to take out some UN-sub Stafford to maximize the Stafford eligibility. We said “No, thanks, we have good credit and are getting a private loan at a better rate than the unsub loan, so we <em>don’t</em> want that, thank-you-very-much for asking though”.</p>
<p>on edit - although the PLUS loan has a huge origination fee, the unsub Stafford’s origination fee is only something like 0.5% - not bad.</p>
<p>Momcat2 / wlvrns: This is all very encouraging. I’ll be calling Wells myself tomorrow. Thank you for sharing.</p>
<p>I just closed on a Wells Fargo Collegiate Loan at 3.5%. The loan is in my son’s name, but I co-signed, so it’s not much different than the Student Loan for Parents, which is at 4%. I guess having two fish on the hook (me and my son) is worth .5%.</p>
<p>There’s a .25% reduction once it’s in repayment (i.e. 6 months after he graduates) if payments are automatic plus there’s another .25% reduction for graduating. So, assuming no change in PRIME, that’s a 3% loan. And there’s no origination fee. Not bad.</p>
<p>Once the loan is disbursed, I can also set up any kind of monthly prepayment I want. I plan to pay interest only while he’s in school so that when he graduates, the outstanding loan is exactly what was borrowed. Then we can share the pain of repayment. :-)</p>
<p>One thing to be careful about - they ask for the “Enrollment Period” on the loan application. If you indicate the whole year and the school is on a quarter system, then 1/3 will get disbursed each quarter. We wanted it disbursed in the first quarter because we have other payment sources for the other quarters, so we had to go back and get the loan modified to indicate just the first quarter.</p>
<p>One reason for the mortgage crisis was people went for ARM’s so that you could buy a bigger house then afford based on a fixed rate loan and no one thought rates could go higher. When the rates went up, many could not afford the loan payments any more and you know the rest of the story. </p>
<p>It is is exactly the same issue here. Private loans are like ARM’s (adjustable rate mortgage), yes they are very low today, they were not low a few years back and will not be low few years from now. Does that mean you should not take an adjustable loan? NO, it depends on the circumstances.</p>
<p>If the loan is small and the earnings potential suggest that it could paid off in a short period of time, an adjustable may be better. If you expect that 5 years from now you will still have a loan, then it may not be better.</p>
<p>Again, I think this one size fits all statements are not correct. Each person needs to weigh their situation and determine what makes most sense under their circumstances. It is an educated guess, and one person’s choice may not be right for the person next door.</p>