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SVP
Joined: 01 Nov 2006
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28 Jan 2007, 17:50
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All education financing is not created equal; there is a generally-accepted hierarchy that goes roughly like this:

1. First, the freebies: scholarships and grants. Obviously.

2. Next, your own cash savings - including Education IRAs and 529 plans.

3. Federal student loans - stafford loans - are your next best bet. These loans have fairly low interest rates (now fixed at 6.8%), you won't need to make payments while in school, the interest is tax-deductible, and there are very flexible repayment options once you've completed your education. With subsidized loans, the gov't pays the interest for you while you're in school. The interest on unsubsidized loans accumulates while during this period, and can greatly increase your prinicpal by the time you are ready to start repaying. (Hint: if at all possible, at least make a monthly interest payment while you're in school.) Maximum per year: $18,500. (Of which$8,500 can be subsidized. Subsidy is determined by need.)

4. Grad PLUS Loans. These are additional federal loans - PLUS used to mean Parent Loan for Undergraduate Students, but recent changes mean that grad students can use Grad PLUS loans to fund their own education. These loans have fixed rates, at about 8.5%. You can borrow as much of these as you want, up to the total annual cost amount (tuition, fees, and cost of living) determined by the school, less any other aid received. Unlike stafford loans, eligibility for these loans is not just based on your FAFSA - lenders will also consider your credit history. Your payments are derred as long as you are enrolled at least half-time. However, interest will be accruing. Nice repayment options.

4. Private student loans - these loans offer some of the benefits of federal loans, but not all. The interest will not be subsidized (again, do try to make payments to avoid capitalized interest), but you should not be required to make payments as long as you are enrolled at least half-time. Rates can be variable or fixed, and will vary a great deal. Maximum loan amounts will also vary. Your credit history will certainly be used to determine eligibility. Repayment options will vary.

5. Non-student loans: home equity, personal loans, credit cards. Yikes! Use wisely! No special repayment options, and payments due within 1 or 2 months after disbursement.

Generally speaking, you should always shop around for federal student loans. While the government sets the rates and many other features, different loan companies offer different kinds of borrower benefits, including rate reductions. Since new laws went into effect last summer, the word on the street is DEALS DEALS DEALS, so look for the lender that can offer you the best package. And care for your soul - lenders make money off your loans; think about who you want to have your money. While schools may have preferred lenders, you can borrow from ANYONE, no matter what line they school feeds you. At my credit union, we've been referring people to http://www.MyRichUncle.com for private loans. Private loans especially deserve lots of scrutiny as they can vary so much from one lender to a next.
Intern
Joined: 30 Mar 2007
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31 Mar 2007, 02:16
Where do Perkins fit into this scheme? (Are they even offered at the Grad level?) How do they differ from the current subsidized Stafford aside from the longer grace period?
CEO
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31 Mar 2007, 07:23
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Yes, Perkins loans are available at the graduate level. These loans often have more restrictions on them than other loans, in part because the school itself acts as the lender and the loan is based on financial need. The University of Chicago's GSB, for example, states "the Federal Perkins loan is limited to full-time second year campus students only." Because most business school students have been employed for at least a few years before attending graduate school, they do not meet the "exceptional need" requirement of the Perkins loan.

Carnegie Mellon/Tepper provides the following information:

The Perkins loan program is a federal loan program that provides low interest (5%) loans to students who demonstrate exceptional financial need. No interest accrues on the loan and repayment does not begin until nine months after the student graduates or is no longer enrolled on at least a half-time basis. Perkins loans are administered through the Tepper School of Business and funds are limited.
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05 Apr 2007, 11:35
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Aaudetat,

Are Grad PLUS loans only offered for certain Universities? I was looking for Rice and could not find it. I then decided to look for Vanderbilt and it too was not on the list?
SVP
Joined: 01 Nov 2006
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05 Apr 2007, 12:05
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No, GradPLUS is available anywhere that stafford loans are available.
Current Student
Joined: 04 Dec 2006
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05 Apr 2007, 12:10
aaudetat wrote:
No, GradPLUS is available anywhere that stafford loans are available.

Maybe it is just the online application that is omitting those universities for some reason? Thanks for the info.
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18 Apr 2007, 20:48
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aaudetat,

I was doing my homework on this lately.

Here is my conclusion.

1. Take the Sub Stafford Loan only $8500 per year. sucks. 2. Instead of the usual Unsub Stafford Loan for$12000 @ 6.8%, take the Graduate PLUS Loan all the way. but Must go with College Founction of NC.
After I compared numberous lenders, I realized that this one is actually slightly better than the Fed's Unsub Stafford Loan.
It is at 5.5% plus 3% automatically credited back to principal loan balance. The only thing that can beat this is the Perkins loan.
Current Student
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19 Apr 2007, 07:30
Hjort wrote:

The Perkins loan program is a federal loan program that provides low interest (5%) loans to students who demonstrate exceptional financial need.

Auudetat or anybody else happen to know where the cutoff point for "exceptional need" is defined? <60K annual salary? 40K? 10K??
Senior Manager
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19 Apr 2007, 10:48
yeah,

I want the Perkins Loan. what is the qualification?
GMAT Club Legend
Joined: 10 Apr 2007
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19 Apr 2007, 15:37
I am dreading the financial aid issue. If I end up attending school in Boston my wife wants to keep our house and have me commute. Plus she has an excellent salary...I am afraid that we wont qualify for subsidized loans and that we wont get much in the way of aid. I haven't determined if owning a house at this point is going to be good or bad when it comes to qualifying.
SVP
Joined: 01 Nov 2006
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19 Apr 2007, 19:06
riverripper wrote:
I am dreading the financial aid issue. If I end up attending school in Boston my wife wants to keep our house and have me commute. Plus she has an excellent salary...I am afraid that we wont qualify for subsidized loans and that we wont get much in the way of aid. I haven't determined if owning a house at this point is going to be good or bad when it comes to qualifying.

Owning your home is a neutral factor. Your primary residence is not reported in any way on the FAFSA, which is what is used to determine if you qualify for unsub or sub, Perkins or no. They also don't look at retirement accounts, but do consider checking/savings balances and investments.
SVP
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19 Apr 2007, 19:08
died4me wrote:
yeah,

I want the Perkins Loan. what is the qualification?

I dunno. I am waiting for Duke to come out with those dollars, which is supposed to happen sometime in May. If I don't get it, you have to be unemployed, flipping burgers, or have 10 kids.
SVP
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19 Apr 2007, 19:10
died4me wrote:
aaudetat,

I was doing my homework on this lately.

Here is my conclusion.

1. Take the Sub Stafford Loan only $8500 per year. sucks. 2. Instead of the usual Unsub Stafford Loan for$12000 @ 6.8%, take the Graduate PLUS Loan all the way. but Must go with College Founction of NC.
After I compared numberous lenders, I realized that this one is actually slightly better than the Fed's Unsub Stafford Loan.
It is at 5.5% plus 3% automatically credited back to principal loan balance. The only thing that can beat this is the Perkins loan.

Hmmm. Interesting. Is the 5.5% fixed?

Also, you are allowed to borrow PLUS loans up to the cost of attendance, minus other aid. Obviously, you can turn down any loan they offer, but I bet it's not very common that someone would turn down the staffords in favor of the Plus!

Senior Manager
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19 Apr 2007, 19:28
aaudetat wrote:
died4me wrote:
aaudetat,

I was doing my homework on this lately.

Here is my conclusion.

1. Take the Sub Stafford Loan only $8500 per year. sucks. 2. Instead of the usual Unsub Stafford Loan for$12000 @ 6.8%, take the Graduate PLUS Loan all the way. but Must go with College Founction of NC.
After I compared numberous lenders, I realized that this one is actually slightly better than the Fed's Unsub Stafford Loan.
It is at 5.5% plus 3% automatically credited back to principal loan balance. The only thing that can beat this is the Perkins loan.

Hmmm. Interesting. Is the 5.5% fixed?

Also, you are allowed to borrow PLUS loans up to the cost of attendance, minus other aid. Obviously, you can turn down any loan they offer, but I bet it's not very common that someone would turn down the staffords in favor of the Plus!

1.75% immediate interest rate reduction at replayment
1.25% interest rate reduction for automatic debit.

It turned out that the Duke Chart had a typo. CFNC said that it is actually .75% not 1.75%.

Well, this changes everything. The Stafford is slightly better than the PLUS then.

Still, CFNC is the best PLUS out there.
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23 Apr 2007, 18:10
what about govt financial aid? Since I am no longer a minor, although still living at home, does my parents income still play a role in how much money I can get?
GMAT Club Legend
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23 Apr 2007, 18:32
Tuneman wrote:
what about govt financial aid? Since I am no longer a minor, although still living at home, does my parents income still play a role in how much money I can get?

On the FAFSA there is a whole section on what makes you a dependent or not. If you were born pre 1984 (2007-08 form) you are not a dependent...even better no matter how old if you are getting an advanced degree like an MBA, you are on your own no matter where you live.

So you can qualify without needing to put any of their info on there.
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23 Apr 2007, 19:55
damn, i was born in 84', but I dont have much income at all, maybe ill still qualify.
GMAT Club Legend
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23 Apr 2007, 20:01
Tuneman wrote:
****, i was born in 84', but I dont have much income at all, maybe ill still qualify.

You are talking MBA right? Cause if you are then you qualify.
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23 Apr 2007, 20:52
oh no, im doing the masters of finance
SVP
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16 Nov 2008, 19:15
Guys, I decided to bump this. As folks start hearing about decisions, they start thinking about money....

Keep in mind, this info is from a bit ago, but still a good place to start.

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