Grad Student Loans = Complete and Utter BS. Required reading for all those going to graduate school. ---- Ladies and gentleman, after doing some research with my good buddy Jackie Dan, I must tell you that the state of America’s educational lending is complete bull****. Now listen closely as I will quickly explain the situation and save YOU a ton of money while doing so. I am not receiving ANY money of any kind by disbursing this information. I just want to pass the knowledge along. There are three types of graduate student loans: Federal Stafford loan (subsidized and unsubsidized), Graduate Plus and Private loans. That IS the order in which you should be looking at loans. Federal Stafford Loans come in 2 flavors – subsidized and unsubsidized. Subsidized (capped at $8,500 a year) is where they pay your interest on the loan until you graduate. Unsubsidized (capped at $12,000 a year) is where you still pay interest while attending school, but the rate is set at 6.8% by the US Govt. Graduate Plus are loans that you will want to pursue if you need to borrow more than the Federal Stafford Loans will give you ($8,500 + $12,000 = $20,500 a year). The rate for these loans is currently set at 8.5% by the US Govt. The only cap on these loans is that they have to be less than the total cost of attendance (as determined by your school) subtracted by the $20,500. Private loans are made by private companies and can have any type of rules/caps. They are generally more expensive interest and have variable interest rates based on the PRIME or LIDOR indexes. Okay you understand all that? Now you ready for the Complete and Utter BS? Wait for it… The VAST majority of schools do not tell you that SET rates of 6.8% for Federal Stafford Loans and 8.5% for Graduate Plus loans are set MAXIMUMS. In fact, if you look at the financial aid FAQs for a large number of universities… under “who should I select for a vendor?” they tell you “since the rates are the same, it doesn’t really matter… you should go off our preferred vendor list.” But that’s precisely the problem. Many universities and banks have been accused of being in bed with one another. You give me a huge present and I put you on the preferred vendor list. I make it really easy for students to choose one of the preferred vendors so they don’t look elsewhere. They make money. The big banks make money. They’re both happy. And guess who gets SCREWED? YOU DO. In fact, 90% of graduate students pay the MAX rates for college loans because they don’t know any better. They don’t know any better because no one tells them! WTF is that crap? WHY are you screwing over the students? Graduate schools – don’t you think you’re taking ENOUGH of our money? Now you want more? F*cking BS. So Huy, now that I know, oh wise one, what do I do? The answer is simple – educate yourself. There are a number of good lenders out there. In my brief research I have found a few: (www.myrichuncle.com , www.edamerica.com , www.allstudentloan.org ) that I would consider. I will be using the All Student Loan service myself. Under About Me on their website you will see: “ALL Student Loan is a nonprofit student lender dedicated to increasing access to education by offering innovative, affordable and seamless student loan products to students and their parents.” You GO BUDDY. Get this – they are offering me a 4.55% rate on my Stafford Loans (vs a 6.8% set rate) and a 6.25% rate (vs the 8.5% set rate) on my Grad Plus Loans. These rates are contingent on a few factors (kicks in after 12 months of on time payment, direct payment out of my bank account, starts during repayment period etc). To illustrate the savings here, I will borrow about 3 x $20,500 = ~$60,000 in Stafford Loans for the 3 years I am in school. The difference in interest there (6.8% - 4.55% = 2.25%) equates to a savings of about $10,000 over 10 years of repayment. Similar story for the Grad Plus Loans. I JUST SAVED YOU OVER $20,000!!! You are WELCOME. Buy me a drink the next time you see me. AND SCREW YOU CORPORATE AMERICA!!!
i already knew about this. im just hoping within two years i get to the point where i can take advantage of it.
Good post huy. I'll be entering my second year at McCombs this fall (woohoo). Since I'm one of the VP's of the GFA, I've been working with some outside guys on this very topic. We recently had Jeff Wanic from Graduate Leverage on campus a couple of months ago to go over this very topic. They gave me a 5.8% rate for Stafford, which I'll be using this fall (taking out $9250/semester). For the UT financial aid office, I had to fill out a form saying that I'm changing lenders from BofA to GraduateLeverage, as well as sign a new MPN. www.graduateleverage.com
I have received most of my loans from EdAmerica. Is this a good place? After graduating I want to consolidate my loans to save money. How will this work?
MBA? UT is a good school. But DAMN $20k a year sounds like a lot of money for a public school, assuming you have a steady source of income or work at all while you get your degree.
The cost of my education alone (without housing) is about 55K per year, for 4 years...I dont think it matters what lender I choose...Im effed. Throw in the cost of living in Boston...and were looking at 30 years before I pay back my grad loans.
Just graduated 6 months ago, and I'm being billed as if I'm earning $80k a year fresh out of school. And it's not as if the government is giving out jobs at a high enough rate for me to even pay them back. I had to push it back a whole year. This isn't even grad school, which I currently have no plans of attending. I don't even have a f'in car yet.
Good work people. Unfortunately it's 2 years too late and I never paid much attention to this stuff until last week when I reconsolidated my loans. Oh well...at least comparatively it seems like I didn't borrow that much and I figure I'll have my loans paid off in the next 5 yrs max.
It's too late for me.. I am having the 6.8 % I wish I knew this earlier. It's gonna to take me forever to pay back my loans.
The trick is to go to grad school in science or engineering. I'm a grad student at Harvard and I get paid by the school almost as much as my wife makes as a full time teacher.
arbitrage.... hmm... let me sleep on that the problem with grad school is that law, business and medicine is expensive. you're right, grad school in science/engineering (and almost anything else) pays for itself in TAs, fellowships, grants etc. next year i will be at Northwestern getting a JD/MBA... so i'm doubly screwed. haha.
Costs of getting a MBA are ridiculous these days. Out of state/international students are paying ~ $38k a year, so my tuition is a bargain. As far as financing my education, the loans pay for the tuition and my personal savings from 4 years as an engineer pay my living/personal expenses. Full-time MBAs don't work since the classwork/projects/recruiting process is a full-time job in and of itself. So ya, education costs are expensive.
