Sep
29
29
Lahdeedah asked:
Why does everyone say to use up all government-funded student loans before getting private ones?
I can get a much better interest rate with NO origination fees with Wachovia, a private loan; while the government loan offered to me has 4% origination fees, higher interest rate, and is unsubsidized.
The only thing better about the government loan is it is fixed rate. Is that really that important? Do variable rates with private loans usually increase alot? It depends the going rate at the time in the economy right?
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Tags: Economy, Fixed Rate, Government Loan, Government Loans, Government Student Loans, Interest Rate, Origination Fees, Private Loan, Private Loans, Variable Rates, Wachovia
September 29th, 2008 at 2:10 am
The usual is to get the gov’t loans first, b/c of the lower interest rate and you have like 6 months after graduation to pay back, and you can pay the interest rate whilew in school of after you grad.
However, sometimes the private loans may seem more tempting and better deals may be out there. You knwo what freaks me out about the variable rates..? just like it happened to people with their homes… at first they were given an attractive IR then it went way up… they coulnd’t pay any more and lost their homes…thats scary….
you should pick the loan that BEST suits YOUR needs…think long term too…
September 29th, 2008 at 10:17 pm
Most college students don’t have good enough credit and sufficient income to do private without a cosigner. Unless you have a full time job and plan on keeping the full time job your interest rates and terms they quote on their sites won’t always be what you actually are offered.
Read their materials very carefully… does it say “as low as 4% interest” then has asterisk by it saying a disclaimer like… “your interest may be more depending on creditworthiness” or something similar? Just be cautious.
Variable rate loans are VERY scary. Have you been hearing all the talk about the mortgage crisis? Those folks took out variable rate loans and now their payments are double what they were paying. Variable rates also may include them being able to spike the rates if you miss a payment deadline. One auto draft miscalculation or mistake by even a day might make your interest spike for whatever reason they want. What once was 10% is suddenly 32%.
Also, federal loans have mandated deferment, forgiveness and forbearance policies. If you were to die or become disabled that private loan (remember they are not regulated by anyone so it could be anything) may STILL have to be paid back. Kind of a bummer for your cosigner or your children!! Some private loans also have “Prepayment Penalties”. Meaning even if you pay it off in a year you are still responsible for the interest for the rest of your term. Can you imagine having to pay 14 years worth of interest even though you paid the original loan off? It’s crazy.
What happens if the school suddenly closes and you can’t finish your degree? You become pregnant and can’t pay for a year. Federal loans REQUIRE your lender to give you mandatory relief from paying for certain situations. I think it’s a total of like 3 years if you add it up. Private may do whatever they want.
October 2nd, 2008 at 5:45 am
It amazes me of how much knowledge our country really does have, that previous person has it down pact, she knows what she’s talking about. i assist students with private and federal loans EVERY DAY, private loans can screw you over depending on what type of private loan you have most likely you have a variable rate that changes every quarter or even every month, and you may have gotten a deal with no origination fees but with private loans, it not always forgiven, and it’s not subsidized. plus you don’t have many deferments and forbearances options available to you.
trust me when i say, federal loans are the way to go!!! they may currently have a slight higher interest rate but it’s fixed and your private loan rate can sky rocket up. read into it.
check out that webste the link, it goes into details of what we’re talking about.
if you still want private loans after reading our comments and the web page i provided, then go for it.
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