11th hour confusion...

[choo301]

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So here's my deal:

I did not fill out a FAFSA earlier in the year because I believed that my parents made too much to qualify (i.e. my EFC was more than the tuition, even though my parents have told me that I'm on my own for anything after undergrad).

Thus, I decided to simply take out all my loans through Sallie Mae as a private loan (~60,000 for the first year). I got a really good interest rate (5.5%) with that 9-month grace period after graduation before repayment.

However, I just called my financial aid office to see if Sallie Mae had contacted them yet, and I the officer ended up telling me that since I am technically an independent student, I should fill out a FAFSA immediately and cover my costs via Stafford and Grad PLUS loans instead.

Here's my question: with interest rates of 6.80 and 8.50% respectively for the above two loan types, I fail to see the advantage of the federal loans over the private one I've already applied for. Can someone help me understand this??

 

[loved]

So here's my deal:

I did not fill out a FAFSA earlier in the year because I believed that my parents made too much to qualify (i.e. my EFC was more than the tuition, even though my parents have told me that I'm on my own for anything after undergrad).

Thus, I decided to simply take out all my loans through Sallie Mae as a private loan (~60,000 for the first year). I got a really good interest rate (5.5%) with that 9-month grace period after graduation before repayment.

However, I just called my financial aid office to see if Sallie Mae had contacted them yet, and I the officer ended up telling me that since I am technically an independent student, I should fill out a FAFSA immediately and cover my costs via Stafford and Grad PLUS loans instead.

Here's my question: with interest rates of 6.80 and 8.50% respectively for the above two loan types, I fail to see the advantage of the federal loans over the private one I've already applied for. Can someone help me understand this??

Is that 5.5% interest rate fixed? Is there a cap to it?

 

[Cymbidium]

Most likely that 5.5% rate is not fixed and it can easily adjust up to rates higher than the federally guaranteed rates - I saw a post in this forum that mentioned some private loan rates can get as high as 13%! I would call your lender immediately and find out more about your interest rate.

In the interim - fill your FAFSA ASAP. It can't hurt to fill out the FAFSA, you're not commiting to anything by filling it out.

 

[gopher22]

Good question. 5.5 sounds too good to be true. I'd like to hear the answer to this one

 

[TMP-SMX]

Do your FAFSA. Get your 40k or whatever of stafford loans. Then fill the gaps with Grad plus. Private loans aren't that great. It may be 5.5% now but when the economy improves say hello to high percentages.

 

[MassTransport]

^ Good advice.

I'm willing to bet that the 5.5% is variable. I don't see a lender offering that as a fixed rate, especially in this climate. OP, maybe it won't increase too much, but it's only a short hop to 6.8 and, over ten years of so of repayment, it's a risk I recommend you don't take.

 

[plauto]

Plus, on top of what everybody else has said, especially if you're married or have kids, if you die or become totally invalid you loans are forgiven.