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 https://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.

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prashok

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12 Feb 2009, 15:26

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liubhs02

I read this article talking about financial aid and loans are down this year. This hasn't hit me yet, since I applied in R2. For those of you that applied in R1 and got admitted, have you guys started looking into how to finance the education? Is financial aid and loans really down? I think Kry said his loan jumped to 11%, that's crazy, my credit card rate isn't even that high. Any anecdotes you would like to share?

https://news.yahoo.com/s/ap/20090125/ap_ ... PCw_Gs0NUE

Going through the private loan process right now, and my experience has been similar to kryzak. No cosigner needed, but my rate is looking like LIBOR + 9.75% = 10.25%.

Loan amount is the cost of tuition for LBS and my FICO score was just above 800 last time I checked. I'll probably just use the full amount of the HSBC loan scheme instead.

svrider

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13 Feb 2009, 14:54

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prashok

Going through the private loan process right now, and my experience has been similar to kryzak. No cosigner needed, but my rate is looking like LIBOR + 9.75% = 10.25%.

Loan amount is the cost of tuition for LBS and my FICO score was just above 800 last time I checked. I'll probably just use the full amount of the HSBC loan scheme instead.

Did you file the FAFSA? Or does it not apply for schools outside US?

prashok

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14 Feb 2009, 03:09

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svrider

Did you file the FAFSA? Or does it not apply for schools outside US?

Yep, though I'll need more than the $20,500 yearly limit for Stafford loans, which is available. LBS is not certified for the other federally-administered loan programs though, thus the need for LBS HSBC Loans Scheme.

For American schools though, I guess the GradPLUS loans may be a better supplement until the private rates have less of a premium over LIBOR.

solaris1

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14 Feb 2009, 07:27

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That's a ridiculously high rate, prashok. You should probably try get a quote with another lender too if your FICO is 800+.

I don't know if a lot of lenders don't like offering private loans to finance an MBA at a non-US school but at my school CitiAssist and SallieMae have been advertising rates of Prime+100bps and 1mLIBOR+450bps for students with "top" credit (and a FICO of 800+ would almost certainly qualify as "top" credit IMO). In fact SallieMae claims it's highest rate on private MBA loans is 1mLIBOR+1075bps, presumably for students with lower credit scores and no co-signers. According to my school's financial aid page, SunTrust has MBA loans that range from 1mLIBOR+300bps to 1mLIBOR+775bps even. So 1mLIBOR+975bps is a shockingly bad deal.

Are you sure the credit score you were talking about was your FICO and not your VantageScore obtained through a credit reporting agency such as Experian, Equifax or TransUnion? There's no way you should be considered as having "mediocre" credit. I'm assuming since you're eligible for Federal Stafford loans, you're a US citizen?

prashok

Going through the private loan process right now, and my experience has been similar to kryzak. No cosigner needed, but my rate is looking like LIBOR + 9.75% = 10.25%.

Loan amount is the cost of tuition for LBS and my FICO score was just above 800 last time I checked. I'll probably just use the full amount of the HSBC loan scheme instead.

prashok

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15 Feb 2009, 20:44

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solaris1

Thanks for the input, solaris1. I was a bit surprised myself as well, since Sallie Mae is advertising private loan rates as low as 5-6% on its website. I would have figured I'd at least get something close to 7-8%, if not the best rate.

I had thought my score from a few months ago was FICO (it was the optional score offered through the free reports with annualcreditreport.com), but it may have been a VantageScore. However, I just checked my FICO through myfico.com (from Equifax), and it's reading 810 now. So I'll definitely check with other lenders as well (I am a US citizen). In addition to Sallie Mae, LBS has relationships with AMSA, so I'll check with them perhaps.

solaris1

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15 Feb 2009, 22:21

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Thanks for the update, prashok. That doesn't bode well for those of us who'd been anticipating turning to private education loans and avoid GradPLUS loans to make up for expenses not covered by savings and Stafford loans.

810 is a fantastic FICO score, and it's very disturbing that the best rate you've been offered so far is in excess of 10% APR!

Hopefully "shopping around" will bring that rate down a bit, but you probably don't want to do too much of it since every credit inquiry for an education loan will affect your credit score negatively (unlike multiple inquiries within a short period of time for other loans).

Let us know how it goes. I'm sure there are a lot of people here who'd find that sort of information useful.

prashok

prashok

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16 Feb 2009, 04:59

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Thanks solaris1, will do!

Rubashov1

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16 Feb 2009, 11:45

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So how do you go about actually talking to these various lenders (both gov't/stafford and private)? Does a school provide info on how to apply for the federal loans after you've been applied or is up to you to figure that out? I'm yet to be accepted anywhere, so I don't know if there are things I can do now in advance (I've already submitted FAFSA) or if it's okay to wait to see what info/programs the schools have.

prashok

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16 Feb 2009, 18:51

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rca215

Depends on the type of loan, but this is how it worked for me. For Stafford (and I assume other federally-supported loans like GradPLUS), you first file the FAFSA and forward the information to your school. Then you find a lender to administer the loan (generally, schools have preferred lenders -- for LBS, it's Sallie Mae and AMSA), who will create the Master Promissory Note, which you forward to the school. The school then certifies the subsidized/unsubsidized loan amount (based on your FAFSA Student Aid Report and Expected Family Contribution amount), and it's disbursed later in the year.

The private loan process is similar (minus the FAFSA) for school-certified loans, where the school has to approve the amount and is paid directly from the lender. You can also get direct-to-student private loans, though the amounts for those are typically much lower. Overseas schools are a bit tougher (as LBS only works with Sallie Mae or JPMorganChase), but for US schools, I think you can probably approach most lenders for rate quotes/approvals.

Jerz

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17 Feb 2009, 05:57

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Plus the school's financial aid office should be able to help you make sure you are completing all the paperwork you need, especially if you use one of their preferred lenders.

Rubashov1

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17 Feb 2009, 07:12

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Thanks for the follow-up input guys. One other question - any idea how long this process takes if you go through your school's financial aid office? I ask because right now the Kellogg 1Y program is my target. I won't hear if I get in until as late as 3/30 but school starts in June! Do you think two months is sufficient time?

prashok

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17 Feb 2009, 08:35

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That's a short timeframe, but I think the FAFSA is the most significant step, as most schools recommend that you start that sometime in February for the term beginning in the autumn. Once the SAR is complete, the process for Stafford loans was pretty straightforward, IMO. I would check with your program's Financial Aid Office for recommended timeframes, though.

Also, a quick update on my loan application process as well -- it doesn't look like JPMorganChase offers private loans for LBS anymore, so that doesn't leave much for the private option (CitiAssist, Discover, etc. are not available for London). On the plus side however, LBS is now certified for the federal GradPLUS loans. At 8.5% fixed, it's a better deal than my private loan quote, so I just called Sallie Mae to cancel their private loan offer and start a GradPLUS loan disbursement instead. :-D

It'll have to do for the first year, and then I'll see in '10 what the private loan environment looks like for the second year.

Jerz

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17 Feb 2009, 09:35

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rca215

I'm sure the Kellogg financial aid office is used to R2 admits into the 1Y program, so it shouldn't be a problem to get financial aid in place in time. One point the financial aid office made at DAK (and I'm sure this is consistent for all schools) is that student loans are not disbursed until the first day of classes (not at the start of orientation, KWEST trips, etc), so no matter how you're financing school make sure you have a plan in place to cover expenses up until the first official day of school.

Rubashov1

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17 Feb 2009, 10:27

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Jerz

rca215

Good thing to keep in mind, thanks Jerz.

getmeouttahere

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24 Feb 2009, 21:10

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Not sure if 1 year 0% APR offers still exist, but assuming I can find one, would it be a smart idea to finance a part of my tuition (let's say $10k) using this method? I would collect probably 1% cash back in rewards points and save 1 year of interest (take out a loan after 1 year to pay this back).

Jerz

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25 Feb 2009, 05:59

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getmeouttahere

The only 2 potential downsides I see to this would be 1) having to make payments on the credit card advance during school (probably not a huge deal since credit card minimum payments are lower than other loan payments), and 2) your maximum student loan borrowing in year 2 would be limited to cost of attendance for year 2, so assuming you need the full amount of student loans to pay for your second year, you'd have to find non-student personal loans to pay off the credit card debt (or get stuck paying 16% interest or so on the balance).

If neither of these are a problem for you, I can't think of any other reason not to do it. Free money is always a nice thing to have.

getmeouttahere

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25 Feb 2009, 08:26

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Yes I fully intend to fully pay off the credit card debt as soon as the 0% APR (for 1 year hopefully) is over. Perhaps through the internship or I can liquidate my 401 next year (gives time for it to hopefully recover a little plus I'd pay less taxes taking it out next year vs. this year since I'm still getting paid at work).

laymeoff

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25 Feb 2009, 23:18

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I will be attending an international MBA in the fall (I'm a US citizen). I'm working hard to be laid off from my current position. I should be eligible for 6 months of pay. Would anyone know if I applied for unemployment checks once I'm in school? I figured if I don't apply for any federal aid, it'd be easy for me to slip under the radar and collect unemployment for 12 months. Will this work?