Find all School-related info fast with the new School-Specific MBA Forum

It is currently 18 Sep 2014, 08:16

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Good Credit in US. Private Loans vs. Stafford / PLUS?

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
1 KUDOS received
Manager
Manager
User avatar
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] New post 22 Apr 2010, 13:48
1
This post received
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%

Federal Direct Graduate PLUS Loan
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?
1 KUDOS received
Manager
Manager
User avatar
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] New post 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.
2 KUDOS received
Current Student
avatar
Joined: 05 Jan 2010
Posts: 377
Followers: 9

Kudos [?]: 89 [2] , given: 3439

GMAT Tests User
Re: Good Credit in US. Private Loans vs. Stafford / PLUS? [#permalink] New post 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
LIBOR4.jpg [ 40.75 KiB | Viewed 3712 times ]

Manager
Manager
avatar
Joined: 18 Nov 2009
Posts: 58
Followers: 0

Kudos [?]: 10 [0], given: 2

Re: Good Credit in US. Private Loans vs. Stafford / PLUS? [#permalink] New post 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
    Similar topics Author Replies Last post
Similar
Topics:
2.25%(var) private loan VS Unsub Stafford Loan (6.8% Fixed)? mandyee 11 14 Apr 2012, 07:46
Experts publish their posts in the topic Student Loan is Greater than Credit Card Debt in the US! bb 1 12 Sep 2011, 22:43
Grad Plus Loans vs Private Loans gilbert7 2 01 Jun 2011, 19:01
Graduate PLUS vs private loans goBears 2 13 May 2008, 18:23
choosing a lender for stafford & gradplus loans polobrute 2 12 Jun 2007, 22:42
Display posts from previous: Sort by

Good Credit in US. Private Loans vs. Stafford / PLUS?

  Question banks Downloads My Bookmarks Reviews Important topics  

Moderator: threestripes



GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.