Private loans vs Federal loans

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PharmDeez

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My question is this: With the economy doing so badly now, the prime rate is at 5%, let's say you have good credit and qualify for loan at (prime rate - 0.5%) 4.5%.

Unsubsidized stafford loan is 6.8% fixed
Grad plus health prof loan is 7.9% fixed Yikes!

Wouldnt it be more economical to take out private loans since the interest rates are lower and even though it is variable, it seems like the prime rate is going to decrease more in the next year to come.

I am just confused because it usually was always better to take federal loans before looking into private loans, but the recent fixed rate on federal loans now make it better to take out private loans first?

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Its never a good idea to take out variable interest loans, especially if you are planning to pay back the loan over a long period of time (like 15 to 30 years), because while the variable may be say 5% percent today, in a year it can be 10%, etc etc etc.

Unless u can pay back 100k really fast, then take the private loan, otherwise, take the fixed loan.
 
My question is this: With the economy doing so badly now, the prime rate is at 5%, let's say you have good credit and qualify for loan at (prime rate - 0.5%) 4.5%.

Unsubsidized stafford loan is 6.8% fixed
Grad plus health prof loan is 7.9% fixed Yikes!

Wouldnt it be more economical to take out private loans since the interest rates are lower and even though it is variable, it seems like the prime rate is going to decrease more in the next year to come.

I am just confused because it usually was always better to take federal loans before looking into private loans, but the recent fixed rate on federal loans now make it better to take out private loans first?

Federal loans have some advantages in that

they can be eligible for consolidation through other federal programs. Private loans are not eligible for most consolidation programs.

If anything should ever happen they are much easier to defer.

They as you mentioned have a fixed rate. I had a small private loan and it ended up changing from 4.9 to 9.5% over 1 year. I paid it off by taking more federal loan money as quickly as possible. Private loans will adjust their interest rate upward regardless of the prime. They are in it to make as much money as possible. Personally, I would stay away.
 
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I'll worry about it when it's time to start paying them off!
 
I am planning to consolidate the private loans while in pharmacy school to lock in the low interest rates. Wow, I didn't know they could continually raise the interest rates over the prime just because they feel like it.

So what do you think? Should I take out the Grad Plus loan at 8% or private loan? I need about 20K more to fulfill tuition costs.
 
In my opinion you should maximize all the money from Stafford Loans, Grad Plus, MedCAP Alternative, Grants, Scholarships and then private loans. Look for all the fixed interest rates you can. Ask yourself why the economy/housing market is so bad... Adjustable or Variable Rate Mortgages. Apply the same thing to your loans. The repayment might be small in the beginning but can shoot up at anytime. I have some undergraduate loans at 6.8% but as I have paid them off the rate has gone down on one of them to around 3%. So there are some loans/lenders that will reward you for paying consistently over time by reducing your rate by a half percent or so.

Also I'm not sure but have heard there are penalties (higher interest over time, origination fees, hurt credit rating, etc.). So be careful with consolidation loans. Plus I do not think you can consolidate private loans only federal. So it is still your choice, but make sure you understand all the terms and conditions.
 
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