Private loans vs. Federal Plus Loans?

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I’ve already exhausted Stafford loan options and grants. To make up the rest of the money for school my parents and I are trying to decide between Federal Plus and private education loans. We sent in an application for a private loan with Chase and got conditionally approved for a interest rate of 8.5% which is about the same as the PLUS.

It would be really helpful if we weren’t forced to start making payments right away since I have a brother going to school at the same time and another brother who just graduated and my parents have a mortgage to pay as well. But is there anything I should be worrying about with the private loan?


  1. Reply
    May 14, 2011 at 1:14 am

    Personally, I would choose a better school. If your school can’t give you enough aid to fund with Stafford loans only… honestly, it’s not a very good school. Don’t resort to private loans… private loans are evil. You will need a cosigner, your parents. Jeopardizing both your credit if something terrible were to happen.

    You should want to have your parents do the PLUS loan. Your parents are responsible for paying this back, not you. Private loans have variable interest rates. Ever year of the sub prime mortgage crisis? This is caused by folks taking out variable rate loans who didn’t know any better.

    Private loans have MUCH longer payment terms.. so even if the rates are comparable… over the span of paying if off for 25 years instead of 10, they actually get MORE of your money…. and the delayed payments option at 8% just compounds the interest and makes it worse.

  2. Reply
    May 14, 2011 at 1:17 am

    Go for the PLUS loan. Congress passed legislation in May that allows parents (for the first time) to defer payments until after the student graduates. Repayment of a PLUS loan is much more flexible than a private loan. If they choose, your parents could even spread payments over thirty years to get a lower monthly payment.

  3. Reply
    May 14, 2011 at 1:59 am

    If you do enough research and want to pay the loan back yourself, the private loan may be your best bet. Just make sure that whatever loan you get is what you need. Interest rate, deferrment, etc. With a PLUS loan only your parent can pay for this and there is no way to transfer it into your name or consolidate it. You could do it if your parents would be willing to make the payments.

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