novian18 wrote:
Well, somehow despite having very few assets, the government believes that I, personally, should be contributing $35,000/year to my education. I would love to, if I actually had that money. Instead, I am choosing which loans to take. Here is my dilemma:
Overall tuition, fees, etc...at Columbia comes out to $84,882. I will be taking the $20,500 of subsidized/unsubsidized Stafford loans, leaving me with 2 options for the remaining $64,382.
Option 1 - Graduate PLUS:
Amount: $64,382
Fee: 4% ($2,575) which reduces to 2.5% ($1,610) assuming timely payments
Rate: Fixed at 7.9%
Term: 10 years
Option 2 - Private Lender
Amount: $64,382
Fee: 0%
Rate: Floating @ 3-mo. LIBOR + 650bps (currently 6.875%)
Term: 20 years
If the average 3-mo. LIBOR is 1.40% for the term of the loan, the rate is equivalent, and the presence of a fee for GradPLUS loans gives the edge to the private lender. Historically, however, 3-month LIBOR has far exceeded 1.4%, and if you really wanted to bend the numbers, you could hypothetically amortize the GradPLUS fee over the life of the loan. That said, what would you do? I'm leaning towards GradPLUS, but just wanted to get some input.
Thanks!
Graduate Plus all the way, given that you are able to pay it off in the next 10 years. Amortize the fee over 10 years, it's minuscule, say 160 a year? As you said, the 3-mo. LIBOR far exceeds 1.4, so what's good about Option 2? 20 year-term? you don't need 20 years.