MDF wrote:
Can some current or past students provide me with some insight on this...
Wouldn't it make the most sense to combine a GradPlus loan with a private loan in order to pay for school?
Then you'd owe half of the amount at a 7.9% fixed rate and the other half to a much lower variable rate. So if interest rates skyrocket 5 years from now, you could pay down your private loan first. But if interest rates stay low, you'd pay down your grad plus loan first.
This makes the most sense to me, but after speaking to the Financial Aid Director at Booth, she advised against doing this. Her reasoning was that it would be too complicated to keep track of 3 loans (Stafford + GradPlus + Private). I pressed her for a more thorough explanation, but didn't give one. I don't see why this would be a bad idea and I'm looking for some advice.
I wouldn't bother using private loans under any circumstances. I would go with only Stafford and GradPLUS for these reasons:
1. Federal loans give much easier consolidation optionsAfter you finish school, you can combine your loans together for one payment. A private loan won't do this unless you have multiple private loans with the same lender (ie - Sallie Mae)
2. There are much better safeguards with the federal loans than the private loansIn today's economy and work environment and for the foreseeable short and long term future, you can't guarantee what kind of a job you're gonna get. Federal loans offer Income Based Repayment (IBR) where you combine your loans, and then only pay up to a certain percentage of your monthly income (usually no more than 10% for folks making under 100K/year). After 25 years, if the borrower still qualifies for IBR the whole time, and there's still a balance, everything is forgiven. If the borrower pays loans for 10 years and is in public service, then his whole loan balance is forgiven too. In a standard repayment plan of 10 years, if someone owes $200K in loans, he or she is paying $2500/month for them, and IBR and income contingent programs help ease that burden.
Private loans may create some contingent plans based on income, but forget about getting any balance forgiven.
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In short, private loans are more risky, and yet, are still non-dischargeable, if god forbid, you had to file for bankruptcy. The lender protections are still there but you have no borrower protection. So just take the fed loans and if you pay them off sooner, then great! But if not, then at least the protections are there.