I'm going back to school for a post-graduate degree in the Fall of 2009. I've been granted federal aid through FAFSA - but the interest rates (which accrue from date of granting - though repayment does not begin until 6 months after graduation) seem extraordinarily high for an education loan Unsubsidized Stafford loan - 6.8% Subsidized Stafford Loan - 5.6% Graduate PLUS Loan - 8.5% (98% of the loans come through the Unsubsidized Stafford & Graduate PLUS) I was always under the impression (through discussion with peers over the years) that education-based loans were supposed to be attached to super-low interest rates. My bank (BoA) doesn't offer educational loans. Everyone says Citibank used to be the to private educational loan provider - but when I go to their website i get a "404 error" - so that's gonna be a no go. Anyone with any insight or experience in the arena have any thoughts? Or am I really stuck with these interest rates from the U.S. govt?
Stay away from the private loans if at all possible. It is essentially like getting a credit card. They can raise the rates whenever they want and then you are screwed.
well you probably know this, but it wasn't implied in your post. The whole point of "Subsidized" is that your interest is essentially paid for by the government while you're in school. So whatever portion of your loan is subsidized (and you can accept the subsidized and refuse the unsubsidized if you so choose, once it's granted), THAT interest doesn't actually start to accrue until 6 months after graduation. Or maybe it was the graduation date--I forget. Either way, it's almost like free money if you pay it off as soon as you get out of school.
Yeah - that's why I said (painfully) that only about 2% of my loans were through the subsidized stafford loan. I'm really surprised to hear that a private loan wouldn't be better than these (what seem to me) high interest rates. Nevertheless, thanks for the feedback. Looks like I'll accept my FAFSA offerings this week.
I got a private student loan from Sallie Mae to finish up my Bachelor degree and it is not so bad but of course the sum of money borrowed wasn't huge either.
would you mind sharing what kind of interest rates you were given? i assume there was no grace period - payment began immediately?
Up until 2006 federal Stafford loans had a 3.4% rate. During the fall of 2006 and onward, the government froze those rates at 6.8% unfortunately. This is exactly when I started grad school. Grad Plus loans are at 8.5% and variable but I don't see them jacking those rates any higher. Stafford loans only cover $9,250/semester, so the Grad Plus loans are designed to cover the balance. I didn't take any Grad Plus loans out since I had adequate savings before I went back. But many of my classmates did take those out, particularly those from out-of-state.
My interest rate was 6% and it stayed that way until I paid it off. There was a grace period, six months after the graduation date was when I started paying the loan back.
You don't have to pay any interest on subsidized stafford loans while you are at least a half-time student or until 6 months after you graduate. The govt pays for your interest during that time period. When it comes to unsubsidized stafford loans, you do accumulate interest that you have to pay back as soon as you take out the loans. However, you can choose to NOT pay the interest while you are in school and allow the interest to be capitalized. For ex. if you take out a $15,000 unsubsidized loan and you choose to capitalize your interest for 1 yr at a rate of 8.25%, you will now have to pay back a total of $16,238 (your new principal). If you choose to pay this back over a 10 yr period (120 payments) at an interest rate of 8.25%, you will be paying monthly payments of $199 and a grand total of $23,900. Now, if you decided to pay the interest while in school, you would be paying monthly payments of $184 and a grand total of $23,315. To summarize, it is a difference of $15 every month and $585 total. These are just hypothetical numbers and the interest rate i chose is artificially high. Remember, you will be presented with the option to pay interest/not pay interest while in school when you go to the TG Loans by Web website. Good luck!
