Financing Your MBA

I am not a finance expert (please chime in if I am totally off base here) but I think it makes sense to mix a fixed & variable rate loans. You can pick which one you want to pay off first and take advantage of either scenario. (e.g. economy does great, so your variable loan shoots up - you can pay it off first; or economy is in the crapper, hopefully you can find a job, and then you pay off the federal loan first).

Another strategy to consider is that if the economy does go down, your chances of finding a high paying job out of the gate, will be slimmer than if the economy does well and in that case, having a private (variable interest loan is better) but it is definitely riskier. Perhaps you can get a 5/1 ARM?

If you have good credit, this may be very tempting. The LIBOR Rate has been pretty low the last 10 years, even at it's highest before the 2008 crash, it was at 5.5%, which is still much lower than the 7.9% from the federal loans. From graph below, LIBOR seems to fluctuate less than the US Primate Rate as well.

Customers who sign up for automatic electronic payments may qualify for an additional rate reduction of .25 percentage point, and there is no prepayment penalty.

Also, Sallie Mae and Wells Fargo have a Total and Permanent Disability Discharge policy. You never know what your health will be like in 10 years or an unexpected event to happen.

https://www.businesswire.com/news/home/20110516006405/en/Sallie-Mae-Lowers-Rates-Education-Loans-Adds

NEWARK, Del.--(BUSINESS WIRE)--Sallie Mae, the nation’s No. 1 financial services company specializing in education, today introduced new lower interest rates on student loans for the 2011-12 academic year. The Smart Option Student Loan, designed to supplement federal financial aid, now offers degree-seeking students the lowest rates in the country and the most choices to help customers save money and pay off faster than a conventional private loan.

“With the Smart Option Student Loan, I make a small $25 a month payment,” says Jaclyn, a senior special education major from Pennsylvania. “It’s a good money-management tool because it encourages me to pay monthly. You pay a little now and you owe much less when you get out in the real world.”

With zero origination or repayment fees, Sallie Mae’s Smart Option Student Loan is available at degree-granting institutions at variable rates ranging between 2.25 percent and 9.37 percent APR, based on today’s LIBOR index. Students can also earn back 2 percent of their scheduled monthly in-school payments simply for making their payments on time.

Sallie Mae also added a new Tuition Insurance Benefit to the Smart Option Student Loan, which reimburses up to $5,000 of tuition, room, board and other covered fees not refunded by the school if a student is forced to withdraw for eligible medical reasons. Sallie Mae’s Tuition Insurance Benefit, for loans first disbursed between July 1 and Oct. 31, provides 12 months coverage at no charge to the student, giving families peace of mind and safeguarding their college investment.

The program was a financial lifesaver to tuition insurance customer Margaret after her daughter had to withdraw from college for medical reasons. “My daughter should be able to get back to school for the summer or fall session, and it certainly makes it easier knowing that her college fund is now replenished and waiting for her to get back to college,” she says.

With the introduction of the Smart Option Student Loan, Sallie Mae revolutionized the private student loan marketplace with a powerful idea: empower families to pay interest while in school and repay over a shorter time period. In fact, customers to date who continue to make on-time payments are on track to save more than $1.7 billion in interest charges over the life of their loans. Three-quarters of customers say they would recommend the loan to a friend or family member.

Today, customers may choose from three in-school monthly repayment options. Depending on the option selected, the typical freshman can save an estimated 17 to 49 percent in interest charges and pay off the loan three to eight years faster after graduation, compared to a conventional payment-deferred loan with a 15-year term:

Interest Repayment Option: Under this option a student, often with the assistance of a cosigner, pays only the monthly accruing interest while in college. After school, the loan’s repayment period is typically eight years shorter, resulting in an average savings of 49 percent in interest charges.

Fixed Repayment Option: With the Fixed Repayment Option, students pay a simple $25 per month regardless of loan balance or interest rate. With the average loan’s five-year-shorter repayment term, a typical customer can save more than 30 percent in interest charges over the life of the loan.

No in-school minimum payment or Deferred Repayment Option: No minimum payment is required while in school, though students and cosigners receive monthly statements on accruing interest, an updated balance, and information on how to make a payment.

After graduation, the average term is three years shorter than the traditional 15-year repayment term, enabling a typical customer to save an estimated 17 percent in interest charges—or more if the student made any in-school payments.

The best rates are offered to those who opt to make payments in while in school. Applying with a cosigner may increase the likelihood of approval and access a more favorable interest rate. Customers who sign up for automatic electronic payments may qualify for an additional rate reduction of .25 percentage point, and there is no prepayment penalty. More details are available through a savings example.

Customers automatically receive Sallie Mae’s unsurpassed consumer safeguards designed to reward students for establishing responsible financial habits. Students and their cosigners receive easy-to-read disclosures when they apply, when they are approved, and upon acceptance of the loan. Applicants have 30 days to compare competitors’ rates before accepting an offer and have three days after accepting the loan to cancel with no obligation. In addition, the company was the first national lender to provide loan forgiveness for cosigners of its Smart Option Student Loan in the tragic circumstance of the death or permanent disability of the primary borrower.

To learn more about Sallie Mae’s Smart Option Student Loan, visit https://www.SallieMae.com/choosesmart.

wow thanks for posting your experience, I was just wondering if I would be able to get much better than the GRAD plus rate and if it would be worth my time if to shop around or take the risk of a variable rate if they are close to the same. My credit is above average, but I would not say great, so this makes me think I will most likely just go with the GRAD plus

I just heard back from Sallie Mae and got the same as you and I have a very high 700 credit score across all three credit rating agencies. I think the way to get that low 2% + LIBOR loan is to have a co-signer. I'm going to try one more application and choose to pay the interest while in school and have my dad (800+ credit score) added to see if that will get me that 2% rate. If I don't get it, I'll just go with the Federal Loan.

Back in my day, I did get a co-signer for my loan to get the private one (had no credit history in the US when applying). Here are my current interest rates - hopefully helps and hopefully you can get find a good private alternative.

Is your variable portion LIBOR?

Yes, and the T&C are something along these lines (i copied from their site right now, but mine are the same as far as I remember).
I also got the 0.25% reduction after paying on time for 1 year or smth like that. Now they are offering 0.25% reduction for auto-pay enrollment.

The variable rate is determined quarterly on the first day of January, April, July, and October based on the published LIBOR Index 15 days prior to those dates. The Annual Percentage Rate (APR) for a loan will increase if the 3-month LIBOR Index increases and would result in higher monthly payments, an increase in the number of scheduled payments, or both.

Citi also gave me the best rate. In the high 3.xx

Has anyone found a good single website to get rates, almost like a marketplace of lenders perhaps, such as lending tree or zillow?

https://www.finaid.org/loans/privatestudentloans.phtml

This website has a fairly comprehensive list of private lenders and their current offers.

maybe I'm I don't know enough about this topic, but if you're going in-state, why would you get a private loan over a Federal Loan? NC coves 20K a year and that covers most public and private universities here (I say most). Are we all talking about colleges that cost more than that?

I'm asking curiously because I'm depending on the fact that I get Federal Loans - which the Financial Aid office said I'm eligible for if I'm accepted.

@carosemena - 1. Your sense of tuition and total cost of attendance are way to low 2. most top programs people are applying to on this forum are private (though some are public{darden, ross, UC schools), 3. The NC program is news to me and i can assure you very unique, particularly if it offers aid for private institutions

It was last week and it was with a co-signer.

I thought I would share my very recent (this month) experience in financing my MBA:

1) I received 20.5K in Stafford Loans
2) I received the difference in Grad Plus Loans
3) I was approved for the same difference in private loans through Citizens Bank and Wells Fargo

My decision:

- IMO, it is a no-brainer to take on any UN-subsidized Stafford Loans: You can't beat no interest for 2.5 years and 6.8 % fixed rate isn't half bad. I will get $8,500 from the Federal loans for this academic year.
- I had some scholarship which reduced the amount a little
- Private Loans: I used the same link that was posted earlier to go through the private loan options before deciding on Citizens Bank since they cut off another 0.5% if you deposit payments from a Citizens Bank account. I have excellent credit and was approved for a good interest rate, but not the best (5.25% plus Libor). Fortunately, I had a cosigner who was willing to sign the loan with me. Upon re-applying, I was approved for a 3% + Libor interest rate. This means that, with the depositing from a CB acount, I will be paying interest at 2.5% plus Libor. I am lucky to have a cosigner but I know that my own credit made my interest rate strong as well and made my decision to go with a private loan all the more easy. If your school qualifies for the CB TruFit Student Loan, I would recommend it. If not, the other one I considered was Citi Bank's and it seemed to be a good option. However, I have to point out that it is possible for a cosigner to decrease your interest rate by 2+% (someone above said this is not likely)

Good luck in your financing ventures!

I think the key here is to have good credit and make sure your co-signer has good credit too to get the best rates. My efforts have been mostly focused on Sallie Mae and Wells Fargo because they have forbearance for death and permanent disability. Call me paranoid but it's a nice policy to have. The question I have is how is the implementation of this policy different than the one for Federal loans (ie what's consider permanent disability).

Thanks, this helps! I noticed on the TruFit loan they specifically say the disbursements are sent directly to the school, the Citi site didn't specify. How does this work since the total cost of attendance the school provides you with includes more than just tuition? If disbursements are made directly to the school, does this mean you cannot use funds from this loan to cover living expenses, books etc that must be paid independent of the school?

Mich,

That is a good question. I have not received the final disclosure for my private loan (Citizens verifies that I will be a student with my MBA program), but I believe that all funds flow through the school's financial aid office. Then, a portion is allocated to cover your tuition and the rest is dispensed to you for general use.

Each school may vary in the exact disbursement process so it's best to call your school's financial aid office and ask them how it will work.