With the active debate in Congress on returning the Direct Loan interest rate to 6.80% and the PLUS rate holding at 7.90% and noting that both programs have originating fees, school financial aid professionals are wondering if families will prefer a private loan to a federally sponsored program, particularly a PLUS loan. We have even seen the topic addressed at breakouts in recent Financial Aid conferences.
iHELP’s position has always been for families to first consider all scholarships, grants and Federal loans prior to pursuing a private loan and even then only borrow the amount necessary. However, securing a federally sponsored PLUS loan first is a decision best left up to informed students and families after consulting with their school’s financial aid office.
Consider:
• Interest rates – fixed on PLUS loans at 7.90% and generally variable, but sometimes much lower on private loan programs. Variable rates are near all time lows and may increase over time.
• Credit checks – lower requirements on PLUS loans
• No grace period on PLUS, repayment begins immediately
• Cosigners are generally required on private loans, some parents may prefer to cosign a private loan to taking out a PLUS loan
• Many private loan programs now offer cosigner releases
• FAFSAs are required for all PLUS programs
• 4% Origination fees are charged on PLUS loans, many private loans do not charge Origination Fees.
• Deferment, forbearance and repayment options may be different
There certainly is a great deal to consider as schools guide families. On one thing we all can agree – a well-informed family considering all of their options can be satisfied with their final decision.
Please contact us or your school representative to learn more about the iHELP Private Loan Program and help with any questions you may have on comparisons to federally sponsored programs.
In college, I’ve met people from diverse ethnic, religious, and socioeconomic backgrounds. I’ve made friends from all over California, and sometimes, even all over the United States. The majority of people I spend time with are first or second generation Americans. Yet despite these supposed differences, we all seem to share a similar outlook on life.
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