Good Credit in US. Private Loans vs. Stafford / PLUS? : Business School Life
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# Good Credit in US. Private Loans vs. Stafford / PLUS?

Author Message
Manager
Joined: 09 Jul 2009
Posts: 53
Schools: HBS
Followers: 0

Kudos [?]: 13 [1] , given: 2

Good Credit in US. Private Loans vs. Stafford / PLUS? [#permalink]

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22 Apr 2010, 13:48
1
KUDOS
I'm likely going to need to borrow the full cost of my MBA education. I took a look at some rates:

I have one sample point for a private loan:
SUNTRUST
Rates for graduate students as low as one-month London Interbank Offered Rate (LIBOR)4 + 3.50%, currently a 3.75% interest rate and 3.66%% APR

Federal Direct Stafford Loan Program
Loan Amounts: $20,500 per year (up to$8,500 may be subsidized, depending on need)
Loan Fees: Up front fee is .5%. An additional .5% loan fee will be charged in repayment only if you fail to make your first twelve repayments on time.
Interest Rates: Fixed Rate of 6.8%

Loan Amounts: $0 up to the student budget minus other financial aid and sponsorship Loan Fees: 4% (2.5% is charged up front. The remaining 1.5% will never be charged as long as you make your first 12 repayments on time.)* Interest Rates: The Direct Graduate PLUS Loan has a fixed 7.9% rate. So my question is, if I have good credit, why would I ever want one of these government loans? The Suntrust Private loan is less than 4% APR, so that seems like the best choice. But everywhere I look, it's recommended that students start by borrowing from the government loans. What am I missing here? Manager Joined: 09 Jul 2009 Posts: 53 Schools: HBS Followers: 0 Kudos [?]: 13 [1] , given: 2 Re: Good Credit in US. Private Loans vs. Stafford / PLUS? [#permalink] ### Show Tags 22 Apr 2010, 14:00 1 This post received KUDOS I think I figured it out. The private loan interest rate varies with LIBOR, so the interest from my private loan could change from month to month. And it could increase beyond what the Federal rates are. Current Student Joined: 05 Jan 2010 Posts: 377 Followers: 10 Kudos [?]: 92 [2] , given: 3439 Re: Good Credit in US. Private Loans vs. Stafford / PLUS? [#permalink] ### Show Tags 22 Apr 2010, 19:29 2 This post received KUDOS Not sure if you ever saw this thread on GMATClub, but I always thought it was super useful for those of us doing the MBA with loans (yes, I'm one also, and a dual degree at that). financing-your-mba-41568-120.html Also, I guess I don't know enough about interest rates slash finance in general to sound intelligent, but maybe someone else can confirm that the chart below would be the relevant one to learn a little more about Suntrust's terms? Attachments LIBOR4.jpg [ 40.75 KiB | Viewed 5168 times ] Manager Joined: 18 Nov 2009 Posts: 58 Followers: 0 Kudos [?]: 10 [0], given: 2 Re: Good Credit in US. Private Loans vs. Stafford / PLUS? [#permalink] ### Show Tags 17 May 2010, 19:32 Yes, most programs either use 1month LIBOR or 3month LIBOR or Prime as the basis. Say you get the option of 3month LIBOR+5%. At the current LIBOR of .35%, your total interest rate will be 5.35%. And there is NO ORIGINATION FEE. GradPlus is 8% interest+2.5% effective origination fee (assuming you pay on time). Now the LIBOR has to increase by 2.65% to be comparable to GradPlus. And I am a little surprised that no one talks about origination fees: even at 2.5%, it makes a difference of$4000 on 160K loan.
Re: Good Credit in US. Private Loans vs. Stafford / PLUS?   [#permalink] 17 May 2010, 19:32
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