Unsubsized Stafford Loan

[My5Mouseketeers]

DD will be taking out some loans for College. She "qualifies" for an unsubsidized Stafford loan of $5500. Is there a good reason to take this partial loan vs. taking the whole thing from our bank or NJClass? The interest rates seem about the same. I'm just trying to see if we are missing something.

TIA

 

[wdwnomad]

You should always max out any Stafford/Direct loans before taking out any private student loans. There are a couple of reasons. One is that federal loans are eligible for certain programs that assist with payback. For example, there are loan forgiveness programs for teachers who teach in qualifying school districts. There are some other programs for other professions as well. It might be worth looking into them. Second, if for some reason she has trouble paying back her loans the federal loan program can be much more flexible in arranging a different payback arrangement (i.e. deferment, extending the loan period, etc..) Private loans aren't so accommodating.

 

[clh2]

The Stafford loans are a loan "TO-THE-STUDENT". You do not cosign those loans. They are the responsibility of the student to pay back.

Other loans - most likely - you will need to co-sign, and then you will be responsible for repayment.

Now - just so there are no surprises - our DD has just finished up her freshman year of college, and took out $5500 in the unsubsidized staffords. The accrued interest right now - before her second year kicks in is at just over $200. So DH and I are going to try to pay the interest off, as well as keeping up with interest for next year...we'll see how that goes. It is important to me that DD's student loan total when she graduates will be ONLY the loan amount, and not a ton of accrued interest in addition to the student loan.

 

[sillysmom]

Also, those loans, are not payable until I believe 6 months till the student finishes school. One of the loans is interest free, and the other isnt, but again they do not need to make payments until school is finished.

 

[jennab]

Correct - federal Stafford loans do not require payments while in school at least part time and personal loans through private banks do.

As someone else mentioned I would pay off the interest monthly if possible as that will keep the payments down for your daughter when she enters repayment.

This is also a fixed interest rate (6.8%). So will not rise, however it is a bit high…

 

[everythingALICE]

You should always max out any Stafford/Direct loans before taking out any private student loans. There are a couple of reasons. One is that federal loans are eligible for certain programs that assist with payback. For example, there are loan forgiveness programs for teachers who teach in qualifying school districts. There are some other programs for other professions as well. It might be worth looking into them. Second, if for some reason she has trouble paying back her loans the federal loan program can be much more flexible in arranging a different payback arrangement (i.e. deferment, extending the loan period, etc..) Private loans aren't so accommodating.

This. I am currently in a graduate program earning my MSW and have Stafford Loans and one Direct GradPLUS Loan. There are a number of programs available for federal loans.

As the PP mentioned, there are loan forgiveness programs for certain professions, which incentivize working in public agencies, nonprofits, etc. There are also different payment plans to help ensure that monthly loan payments are affordable (Income Based Repayment, Income Contingent Repayment, etc.). While some private loans may also be eligible, not all of them are.

Also, it will likely be beneficial for your daughter to sign for the loan herself - loans are less likely to qualify for these programs if they are under the parents' names. For example, GradPLUS loans are eligible for the programs mentioned above, while the parent loan equivalent is not eligible.