Government vs private loans

Started by Rocky922
Veterinary Science Graduate Programs from U. of I.
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Rocky922

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So I have been researching different loans and have a couple questions that hopefully someone on here knows the answer to. The Stafford loan has 6.8% interest, which seems ridiculously high to me, and a 1% origination fee. Because of this, I went on to look at some private bank loans and found one offered by Discover that has 0-3.5% interest and no origination fee. Discover offers a 20 year pay-off, while the government loan offers 25. I don't think 5 years would make that much of a difference, but I don't know a lot about loan pay-off so maybe I'm wrong. I know that the Discover loan does NOT offer income based repayment (IBR), which I see as the only real downfall. So i guess my question is if the significantly lower interest rate or the IBR is more important? I feel as though almost everyone takes out the government loans and not the private loans, so there must be a reason to not take a loan with much lower interest....
If anyone has any input on why one is better/worse than the other, please let me know!
 
i thought everyone was guaranteed the maximum $40,500 from the stafford loans? that's what my financial aid thing from penn said. isn't this without a credit check?

AFAIK, i thought private loans did credit checks, etc. so that it's harder to get the $$ you need? correct me if i'm wrong 🙂
 
I think you are correct. However, if you have a co-signer with the private loans (or at least with the ones I've looked at) then you can probably get the whole amount. My parents would be willing to co-sign, so I think that I would receive the full amount with the government and with the private.
 
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Rocky922 said:
No, you do not have to start paying them back until 6 mnths after you are done with school, which is the same as the Stafford loans. Also, I do not think there is a maximum. Here is a comparison chart:
https://www.discover.com/student-loans/private-student-loans/compare-health-loans.html
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This chat also tells about Federal Direct Stafford Loan: "Includes subsidized and unsubsidized loans up to $20,500 (certain programs for health professions may qualify for higher loan limits)".
Parers that i got from Missouri also indicate $20,500 for Stafford Loan, but i read about $40,500 here on the forum. 😕 Could someone explain this difference please?
 
anutam said:
This chat also tells about Federal Direct Stafford Loan: "Includes subsidized and unsubsidized loans up to $20,500 (certain programs for health professions may qualify for higher loan limits)".
Parers that i got from Missouri also indicates $20,500 for Stafford Loan, but i read about $40,500 here on the forum. 😕 Could someone explain this difference please?
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It "certain programs for health professions may qualify for higher loan limits" and that is pertaining to us....so $40,500 is correct. I am almost positive that it means you will get $40,500 if that is what tuition will cost you, meaning that if your in-state is $10,000 a year then you will NOT get the whole $40,500 but if you are somewhere out-of-state that is costing you $40,000 a year, then you WILL get the whole amount.

EDIT: I am a little confused too because the Discover loan says that it will pay 100% of cost of attendance, not just tuition. I am going to an OOS school and will be spending more than $40,500 per year on tuition alone PLUS living expenses...does this mean that the Stafford loan would only cover the $40,500 and then I would have to take out some other loan for the remainder of tuition and living expenses?
 
Rocky922 said:
It "certain programs for health professions may qualify for higher loan limits" and that is pertaining to us....so $40,500 is correct. I am almost positive that it means you will get $40,500 if that is what tuition will cost you, meaning that if your in-state is $10,000 a year then you will NOT get the whole $40,500 but if you are somewhere out-of-state that is costing you $40,000 a year, then you WILL get the whole amount.

EDIT: I am a little confused too because the Discover loan says that it will pay 100% of cost of attendance, not just tuition. I am going to an OOS school and will be spending more than $40,500 per year on tuition alone PLUS living expenses...does this mean that the Stafford loan would only cover the $40,500 and then I would have to take out some other loan for the remainder of tuition and living expenses?
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This is correct. You are allotted 40.5k from Stafford loans and generally will take out the remainder using GradPlus loans (a higher interest rate, unfortunately) up to the COA dictated by the school.
 
NStarz said:
This is correct. You are allotted 40.5k from Stafford loans and generally will take out the remainder using GradPlus loans (a higher interest rate, unfortunately) up to the COA dictated by the school.
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Ugh, I was hoping I had misunderstood that 🙁 Those interest rates are awful...
 
So before like 4 months ago I had no idea about any of this loan stuff (and my dad's a CPA). It's kind of sad that I'm so educated now (because I need to be...)
 
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Also for the private loans, be careful about the wording since some advertise very low MINIMUM interest rates. I applied for a private loan last year that had rates "Starting at 3.25%" but even with a credit score over 740 I still only qualified for 9.8% . (Something about having undergrad loans, an almost underwater mortgage, and no other assets besides my trusty '02 corolla may have played a part...). But yeah, watch out for the "Starting at" wording.
 
nuevaburra said:
Also for the private loans, be careful about the wording since some advertise very low MINIMUM interest rates. I applied for a private loan last year that had rates "Starting at 3.25%" but even with a credit score over 740 I still only qualified for 9.8% . (Something about having undergrad loans, an almost underwater mortgage, and no other assets besides my trusty '02 corolla may have played a part...). But yeah, watch out for the "Starting at" wording.
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I just did some research and am finding very similar for this discover loan.
The interest is PRIME + what your credit score qualifies you for.

The prime is variable and changes every quarter. For the past year its been in teh 3% range, but has gone as high as 7% in the past few years. Say you qualify for the 3.5% interest rate based on credit score- you could easily be looking at interest rates even higher than the federal loans 😱 Not sure thats a gamble I'm willing to take.
 
cowgirla said:
I just did some research and am finding very similar for this discover loan.
The interest is PRIME + what your credit score qualifies you for.
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Yes, exactly. Just because the economy is in the sh***er now and interest rates near zero, doesn't mean you won't see them jump up to 9 or 10 % in the next decade.

If it seems too good to be true, it probably is.
 
As others said, the Discover loan is not a fixed rate: "Variable based on credit evaluation, from Prime Index plus 0.00% to Prime Index plus 3.50%"

If the prime index went to where it was back in 2007 of 8.25% you could be paying a total of 11.75% in interest. Although if you have amazing credit now, and got the prime(3.25%) + 0% rate, you would be much better off.

With a 20 year repayment on $160,000 in loans you would be looking at:

Discover Best Case: 3.25% and $907.51 per month

Discover Worst Case: 11.75% and $1733.93 per month

With Stafford Loans: 6.8% and $1221.34 per month(if paid over 20 years)

So I would say most people pick Federal loans for their predicability, easy of getting(no credit check and no need for a cosigner), and their flexibly payment options after graduation.
 
So I know most people choose to go with federal loans for the reasons mentioned in previous posts (stability, no co-signer, etc.), but it looks like I will be ineligible for federal loans, so I may have no other option.

Does anyone have experience taking out a private loan? How hard was it to get funded? To what extent did your previous credit history affect your ability to do so?
 
Awendela said:
So I know most people choose to go with federal loans for the reasons mentioned in previous posts (stability, no co-signer, etc.), but it looks like I will be ineligible for federal loans, so I may have no other option.

Does anyone have experience taking out a private loan? How hard was it to get funded? To what extent did your previous credit history affect your ability to do so?
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Extremely and scarily easy. Granted this was before the recession hit but my husband had no problems getting tens of thousands of dollars in private loans. 🙄 Talk about predatory lending... but that is a whole 'nother argument.

My only other advice as someone who is currently helping to pay back private loans: DON'T DO IT. Unless there is really, absolutely zero other possible way to fund your education. From personal experience I can tell you that private loans suck. They suck a lot. My husband would love to go to grad school right now but his loans are no longer eligible to be deferred. You may like your bank and they're really nice when you get all the paperwork signed and hand over your big check but know that your loan will get sold to a faceless company and they will not work with you when you lose your job or don't make enough to pay your bills every month. Yes, there are deferments and forbearance but there are limits to these. If you have an extended period of unemployment you. are. screwed. There is no IBR and no forgiveness. After going through what we have over the past few years I wouldn't touch a private loan with a ten foot pole. 👎
 
I also believe that you can erase private loans through bankruptcy which is a huge positive. Check on that to be sure though. Bankruptcy reorganizatioon can be a back door to a lower ibr like payment.

Also....interest rates are at historic lows so the likelihood your variable rate loan will increase during 20 years is very high.
 
StartingoverVet said:
I also believe that you can erase private loans through bankruptcy which is a huge positive. Check on that to be sure though. Bankruptcy reorganizatioon can be a back door to a lower ibr like payment.

Also....interest rates are at historic lows so the likelihood your variable rate loan will increase during 20 years is very high.
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"Q: I thought private student loans were treated differently in bankruptcy than federal student loans. Is this no longer true?

This used to be true, but the law was changed in 2005. The new law is effective for bankruptcy cases filed on October 17, 2005 or afterwards."

http://www.studentloanborrowerassistance.org/bankruptcy/
 
Just bumping this thread to see if anyone else can shed some personal experience on private versus government loans. I'm in the process of weighing all my options, and would appreciate any personal experiences with either. I know any way I slice it, I'll still end up with a honkin' chunk of money to give back to someone. Thanks!
 
All of my loans are private loans. My dad co-signed for me so I have a very low rate (don't remember exactly what it is right now). This is from undergrad loans, where I was ineligible for most federal aid due to my parents' income, anyway. And I haven't started paying them back yet, so I don't have any experience with having trouble with that. But basically, I opted for the lower interest rate over the stable interest rate, largely because it has been fairly stable for the past several years.
 
equineconstant said:
All of my loans are private loans. My dad co-signed for me so I have a very low rate (don't remember exactly what it is right now). This is from undergrad loans, where I was ineligible for most federal aid due to my parents' income, anyway. And I haven't started paying them back yet, so I don't have any experience with having trouble with that. But basically, I opted for the lower interest rate over the stable interest rate, largely because it has been fairly stable for the past several years.
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👍 Thank you!
 
Scooter157 said:
Just bumping this thread to see if anyone else can shed some personal experience on private versus government loans. I'm in the process of weighing all my options, and would appreciate any personal experiences with either. I know any way I slice it, I'll still end up with a honkin' chunk of money to give back to someone. Thanks!
Click to expand...

I have dealt with paying back both government and private loans from undergrad. The bank I have my private loan from is not very forgiving of circumstances. So, if you don't have a job/are making piddly-squat/or otherwise can't pay as much as they want each month they tend to have an "I don't care attitude". Whereas the government loans are much more forgiving of this circumstances and situations and are much easier to deal with should something bad occur. This is just my own personal experience in dealing with each type. And not all private loans or private loan lenders are equal so just because the bank I got my private school loans from sucked, does not meant a different bank or loan lender will also be crap.
 
DVMDream said:
I have dealt with paying back both government and private loans from undergrad. The bank I have my private loan from is not very forgiving of circumstances. So, if you don't have a job/are making piddly-squat/or otherwise can't pay as much as they want each month they tend to have an "I don't care attitude". Whereas the government loans are much more forgiving of this circumstances and situations and are much easier to deal with should something bad occur. This is just my own personal experience in dealing with each type. And not all private loans or private loan lenders are equal so just because the bank I got my private school loans from sucked, does not meant a different bank or loan lender will also be crap.
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I appreciate your perspective. It certainly is something to consider. Just because I have a slight financial cushion now doesn't mean it will be available to me down the road...too many decisions right now!! I'm wishing I minored in finance now!
 
DVMDream said:
I have dealt with paying back both government and private loans from undergrad. The bank I have my private loan from is not very forgiving of circumstances. So, if you don't have a job/are making piddly-squat/or otherwise can't pay as much as they want each month they tend to have an "I don't care attitude". Whereas the government loans are much more forgiving of this circumstances and situations and are much easier to deal with should something bad occur. This is just my own personal experience in dealing with each type. And not all private loans or private loan lenders are equal so just because the bank I got my private school loans from sucked, does not meant a different bank or loan lender will also be crap.
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I will agree with this- I had a year off between undergrad and vet school- my federal loans were awesome about deferring them (because I didn't make anything worth calling a living). Private loans... nope- I had about a $300/month payment while I was making about $9.00/hour. It sucked. They weren't willing to work with me on it at all, either. Mine are through Sallie Mae- the sooner I get those payed off, the better.
 
Government loans also have the option of income based repayment programs (sorta essential if you're planning on going into one of the lower paying areas of vet med and have tuition as high as mine is) as well as some limited loan forgiveness programs (although who knows if those will still exist by the time we all get to that point).
 
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I'm currently paying under Pay As You Earn and it works the way it is supposed to. I took some initiative on my part to make sure I had turned all the right paperwork on time, but the result is I am making payments to keep the government happy(even though it doesn't even cover my interest).

I'm currently 3 payments in with 117 to go towards Public Service Loan Forgiveness. With 3 years of residency ahead of me it will be a while before I could make any significant payment beyond the minimum.
 
david594 said:
I'm currently paying under Pay As You Earn and it works the way it is supposed to. I took some initiative on my part to make sure I had turned all the right paperwork on time, but the result is I am making payments to keep the government happy(even though it doesn't even cover my interest).

I'm currently 3 payments in with 117 to go towards Public Service Loan Forgiveness. With 3 years of residency ahead of me it will be a while before I could make any significant payment beyond the minimum.
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What aspect of vet med do you work in? I've looked into PSLF but it looks like your only options are food animal, which I have zero interest in.
 
DO NOT DO PRIVATE LOANS IF YOU HAVE TO, I REPEAT DO NOT DO IT! Now that I have your attention, myself and dozens of other people I know are being bent over paying them back. Read all the fine writing. Try to get as many federal loans as possible. The interest KILLS you with private loans (they just do what they want it feels like). When you submit a payment like 75% of it goes to interest and the remaining 25% goes to the actual balance. The gov't loans had much less interest and were way more pliable with lowering payments based on income, deferment/forbearance, etc. I would definitely take out two separate loans (one for tuition and one for living expenses) just so there isn't just one huge loan with changing interest rates(I was expecting ~3% and it ended up being higher than 7%).
 
EdinBelle said:
I thought that you had to work for a organization that is a 501c non-profit organization to qualify for PSLF?
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There are a handful or large non-profit veterinary practices in that US that are 501.c and qualify(I submitted the paperwork for mine and it did). Also most of the veterinary schools in the US should also qualify as non-profits.
 
Another "I hate private loans" argument, a lot of them have a cap for how long you can defer. Mine from undergrad are capped at 5 1/2 years from disbursement, so I have to continue to pay on them even when I will be a full time vet student.
 
david594 said:
Also most of the veterinary schools in the US should also qualify as non-profits.
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That's weird... I'm pretty sure the Sallie Mae guy that came to talk recently made a big point about that not being the case.

This likely doesn't apply to you David, but for anyone who might be reading this and getting ideas... his advice was to consider it as a possible perk that may or may not actually happen. In other words, only go into non-profit work if you were going to anyway without the PSLF because there is absolutely no guarantees you will be grandfathered in if the gov't cuts the program even if you enter while it exists. The program was never intended to be for physicians and vets and such who have $200k+ loans.
 
Rwwilliams said:
What aspect of vet med do you work in? I've looked into PSLF but it looks like your only options are food animal, which I have zero interest in.
Click to expand...

david594 said:
There are a handful or large non-profit veterinary practices in that US that are 501.c and qualify(I submitted the paperwork for mine and it did). Also most of the veterinary schools in the US should also qualify as non-profits.
Click to expand...

Minnerbelle said:
That's weird... I'm pretty sure the Sallie Mae guy that came to talk recently made a big point about that not being the case.

This likely doesn't apply to you David, but for anyone who might be reading this and getting ideas... his advice was to consider it as a possible perk that may or may not actually happen. In other words, only go into non-profit work if you were going to anyway without the PSLF because there is absolutely no guarantees you will be grandfathered in if the gov't cuts the program even if you enter while it exists. The program was never intended to be for physicians and vets and such who have $200k+ loans.
Click to expand...

I was told by a financial adviser at Davis and by my contact at Great Lakes that universities also qualify, even private ones. I'm currently on IBR, and my payments made while working at UPenn count toward PSLF. I had already planned on staying in academia, so I'm really hoping the program doesn't get cut.
 
primatevetjess said:
I was told by a financial adviser at Davis and by my contact at Great Lakes that universities also qualify, even private ones. I'm currently on IBR, and my payments made while working at UPenn count toward PSLF. I had already planned on staying in academia, so I'm really hoping the program doesn't get cut.
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david594 said:
There are a handful or large non-profit veterinary practices in that US that are 501.c and qualify(I submitted the paperwork for mine and it did). Also most of the veterinary schools in the US should also qualify as non-profits.
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This. Is. Amazing. I had absolutely no idea.
So, in my situation, I want to do an internship and residency at an academic institution but I don't want to work there for the rest of my life. But, I would have to work there (or at some academic institution) for 10 years, then file for PSLF and that's that?
 
So it's my understanding that if a federal student loan goes into default than you are no longer eligible to take out federal loans until the defaulted loan is paid. Does anyone know how this applies when a spouse defaulted on their federal loan but I am in good standing (no student loan debt)?When I try to look this info up I can't find info about married students.
 
Minnerbelle said:
That's weird... I'm pretty sure the Sallie Mae guy that came to talk recently made a big point about that not being the case.
Click to expand...

There is actually a form that you can fill out and submit stating where you are currently working and signed by your HR department and you get confirmation back that your job is a qualifying non-profit under the program. In doing so it also transfers your loans to FedLoan Servicing, as all loans they are the one loan service that apparently ultimately handles PSLF. So it at least gives you some assurance that your job does qualify before you make 120 payments assuming it does.

This does not provide any guarantee that the program will still be around in 10 years though when we might file for forgiveness.
 
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