Subsidized loans?!

[frootloops]

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Subsidized loans are no longer offered starting 7/1/2012?! Also, the interest rate is so high on the unsubsidized...

Wow, well... any idea if private loans have a better interest rate? I should have taken a more elaborate economics class, because financial aid is so overwhelming when you have to google every other term to determine what is actually being said.

Does anyone know how interest rate is compounded/capitalized? Or what these words mean? Does it compound daily? Are there any student loan online calculators available where I can estimate the amount of interest on an unsubsidized loan I will accrue?

 

[New Start]

Hi Frootloop,
Interest compounded on student loans is not like how interest is compounded on a credit card or on a house payment. Student loan interest is compounded quarterly.

Unfortunately we will all miss subsidized loans bc the fed gov picked up the tab on accruing interest while in school. Unsubsidized loans interest accrues when we first receive our first disbursement, thus were playing interest upon interest and principle until the loan is paid off.

Another note to add, unsubsidized loans is capped at 20,500 per year as many of us will be using a fed gov loan called GradPlus in addition to unsubsidized loans. GradPlus is similar to unsubsidized loans in how interest is accrued yet w/ no cap and w/ a little higher interest rate.

Please support HR 4170 "student loan forgiveness act" as if it goes into law a student is only require to pay 10% of his or her discretionary income (income after taxes) each month for 10yrs. Following 120 payments or under the 10/10 rule all remaining student loan balance is forgiven.

Hope this helps 🙂

 

[Blargy9]

If you go to the webside https://studentloans.gov/myDirectLoan/index.action there is a calculator on there that shows what your payments are likely to be depending on which of the repayment plans you choose. I know they have it for the unsubsidized loans, they might have it for the grad plus ones as well. Have you received an award letter from your school yet? Mine had me do an entrance loan counseling exercise on the above mentioned website. It had a lot of the same info that you can find by googling each term, but it was all presented in a nice organized manner.

Keep in mind, if you can afford to, you can pay the interest on your loan while you are in school to try and keep your costs down later. That makes it so that you are not paying interest on interest once you graduate at least.

Hope the website helps you!

 

[STHERE]

I brought up the same subject about a month ago. If you have good credit and can take advantage of a co-signer with good credit too, then private loans are the way to go. I was recently given an interest rate of 3.55% (variable) at PNC bank. The market has not changed in the last 3 years and it not predicted to go up, so I am not worried about the variable interest rate too much. Plus there is always refinancing after you graduate! Basically my accountant told me why pay 9% now when you can pay it later..? Makes a lot of sense!!!

 

[Karine]

I brought up the same subject about a month ago. If you have good credit and can take advantage of a co-signer with good credit too, then private loans are the way to go. I was recently given an interest rate of 3.55% (variable) at PNC bank. The market has not changed in the last 3 years and it not predicted to go up, so I am not worried about the variable interest rate too much. Plus there is always refinancing after you graduate! Basically my accountant told me why pay 9% now when you can pay it later..? Makes a lot of sense!!!

Do you know if the rate goes up if the student (me) has good credit but the co-signer has bad credit?

 

[lbsubstylee]

My guess is yes.

 

[lizzo76]

In my experience with loans for undergrad and another masters, government loans are still the way to go, regardless of the credit issue and the interest rate issue. One big difference is how forgiving the government is when it comes to inability to pay. They have tons of different options, with deferrals, forbearances, graduated-repayment and income-sensitive repayment, which private lenders often do not have. (I was happy to have unsubsidized loans in the past, but alas, I wouldn't be eligible for them now, anyway.)

One other thing to consider - these are real debts and often high ones at that. I know parents will often co-sign, but all co-signers should seriously consider the wisdom of doing so because payment will be on them if you are unable to pay.

To answer an earlier question - if you (student) have good credit, you may not need a co-signer. The co-signer is used to strengthen your application for a loan, usually for young students who do not have an established credit history, but also for students with poor credit. Depending on certain factors, you might not need that "strengthening," and a co-signer with bad credit is certainly not going to strengthen the application but will instead harm it. That is to say - having them on the application is not going to reassure the lender that if you default the loan will be repaid.

 

[New Start]

I agree w/ Lizzo76, the federal government is not in business to turn a profit on loans or any educational programs that are introduced to its citizens.

USAtoday: "Private Student Loans vs. Federal Student Loans"
http://www.usatoday.com/money/perfi/columnist/block/2011-06-06-private-student-loans_n.htm

 

[eagle88]

so wait, lets say it will cost a person around 60,000 a year for all expenses (tuition, books, living expenses, transportation, etc.) With no more subsidized loans, we can only receive 20,500 in unsubsidized loans thru fafsa?! Does that mean private loan(s) has to be taken out to cover the other 40,000? And how do I apply for the Gradplus? how does that work?

 

[STHERE]

so wait, lets say it will cost a person around 60,000 a year for all expenses (tuition, books, living expenses, transportation, etc.) With no more subsidized loans, we can only receive 20,500 in unsubsidized loans thru fafsa?! Does that mean private loan(s) has to be taken out to cover the other 40,000? And how do I apply for the Gradplus? how does that work?

You are only entitled to 20, 500 per year. So if school costs 30k for 1 year, then you still left with financing the other 10k either through private loans or grad plus loans, but grad plus has an even higher interest rate.

 

[STHERE]

Do you know if the rate goes up if the student (me) has good credit but the co-signer has bad credit?

You wouldn't use someone with bad credit, the purpose of a co-signer is to get an even lower interest rate on a private loan. There are student loans designed specifically for medical type students that do not need a co-signer. Wells Fargo has one called the Med Cap Loan and doesn't require a co-signer.

I am not worried about forgiveness of payment w/ federal. The job market is very promising for OT's and it's a matter of preference. I know a PT that went with all federal and has since graduated. She now is seriously considering refinancing it all on to a 4% interest credit card because federal is whacking her with interest. Risky, but she has a stable job and very good with being prompt on payments.

 

[Karine]

You wouldn't use someone with bad credit, the purpose of a co-signer is to get an even lower interest rate on a private loan. There are student loans designed specifically for medical type students that do not need a co-signer. Wells Fargo has one called the Med Cap Loan and doesn't require a co-signer.

I am not worried about forgiveness of payment w/ federal. The job market is very promising for OT's and it's a matter of preference. I know a PT that went with all federal and has since graduated. She now is seriously considering refinancing it all on to a 4% interest credit card because federal is whacking her with interest. Risky, but she has a stable job and very good with being prompt on payments.

Thanks about the tip. My co-signer doesn't have bad credit per-se I should have said fair credit/good credit (in other words, not excellent). But I will definitely keep the Med Cap Loan in mind!

 

[skchb]

so wait, lets say it will cost a person around 60,000 a year for all expenses (tuition, books, living expenses, transportation, etc.) With no more subsidized loans, we can only receive 20,500 in unsubsidized loans thru fafsa?! Does that mean private loan(s) has to be taken out to cover the other 40,000? And how do I apply for the Gradplus? how does that work?

What is a Direct PLUS Loan for parents?
What is a Direct PLUS Loan for graduate/professional students?
Direct PLUS Loans are unsubsidized loans available to graduate/ professional students to help pay for educational expenses up to the cost of attendance minus all other financial assistance. Interest is charged during all periods.

How do I apply?
First time borrowers must submit a Master Promissory Note (MPN). Your school also may require you to complete a Direct PLUS Loan Request. You can complete both the MPN and Direct PLUS Loan Request at this site.

Parents completing a PLUS eMPN or Direct PLUS Loan Request must use their own PIN number, and not their child's PIN number.

What are the Direct PLUS Loan eligibility requirements?
Parent Borrowers of a Direct PLUS Loan:

Must be the biological or adoptive parent of a dependent undergraduate or the spouse of the parent whose income and assets were reported on the Free Application for Federal Student Aid (FAFSA), or would be reported if a FAFSA were filed.
Must not have an adverse credit history or must obtain an endorser. (An endorser is someone who agrees to repay a Direct PLUS Loan if the borrower does not repay the loan.)
And their dependent child:
Must be a U.S. citizen or eligible noncitizen
Must not be in default on any federal education loans or owe an overpayment on a federal education grant
Must be enrolled at least half-time at a school that participates in the Direct Loan Program and meet the general eligibility requirements for the Federal Student Aid programs, including filing a FAFSA
Graduate/Professional Student Borrowers of a Direct PLUS Loan:

Must be enrolled at least half time at a school that participates in the Direct Loan Program and meet the general eligibility requirements for the Federal Student Aid programs, including filing a FAFSA.
Must be a U.S. citizen or eligible noncitizen,
Must not be in default on any federal education loans or owe an overpayment on a federal education grant.
Must not have an adverse credit history or must obtain an endorser. (An endorser is someone who agrees to repay a Direct PLUS Loan if the borrower does not repay the loan.)

https://studentloans.gov/myDirectLoan/faqs.action

 

[lizzo76]

so wait, lets say it will cost a person around 60,000 a year for all expenses (tuition, books, living expenses, transportation, etc.) With no more subsidized loans, we can only receive 20,500 in unsubsidized loans thru fafsa?! Does that mean private loan(s) has to be taken out to cover the other 40,000? And how do I apply for the Gradplus? how does that work?

But you were only ever able to take out a TOTAL of $20,500 per year in Stafford loans, anyway, subsidized and unsubsidized combined. When I did my first masters I just missed the bump up to $20,500 - the total used to be $18,500 per year. But, no matter how poor you were, the TOTAL was always $18,500, with the subsidized portion capped at (I think) $10,000, and $8,500 unsubsidized. It's always been that a portion was subsidized (if you were eligible) and a portion was not, with the total not exceeding a certain amount. Most people have always had to supplement with private loans (not sure about Grad Plus... that's either new or not applicable in my last program). But, it is still better to make as much of your total loans as you can be government loans.

Edit... ah, looking at the post above mine, I see that the plus loans are government loans BUT credit-based (unlike Stafford loans.)