going private the ins and outs of alternative loans

Going PrivateGoing Private

The Ins and Outs of Alternative Loans

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What you will learnWhat you will learn

How private loans differ from federal loans How to maximize your financial aid

sources What to ask when shopping for a private

loan

How Private Loans Differ from Federal Loans

How Private Loans Differ from Federal Loans

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Credit qualificationsCredit qualifications

Private loans– most lenders will require a credit check

Federal Stafford loan– not required

Federal PLUS loan– credit check required– all approved borrowers receive same interest

rate, regardless of credit rating

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Interest ratesInterest rates

Private loans– interest rates vary based on market

conditions, borrower’s credit, lender

Federal Stafford loan– fixed at 6.8%

Federal PLUS loan– fixed at 8.5% (FFEL) or 7.9% (Direct)

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Repayment optionsRepayment options

Private loans– vary by lender– may not have a grace period

Federal Stafford loan– several choices (standard, extended,

graduated, and income-sensitive)– grace period

• Stafford: six months• PLUS: no grace period

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Hardship assistanceHardship assistance

Private loans– differ by lender

Federal Stafford and PLUS loans– deferment– forbearance

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FeesFees

Private loans– vary by lender

Federal Stafford and PLUS loans– origination fee:

• Stafford - 2%• PLUS - 3%

– 1% default fee– fees are not always passed on to the

borrower; varies by lender/guarantor

Maximizing Your Financial Aid Sources

Maximizing Your Financial Aid Sources

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GrantsGrants

Sources:– federal government– state governments

Eligibility criteria:– financial need– mostly for undergraduates

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GrantsGrants

Funds available:– generally as academic terms begin

Repayment:– not unless you drop out

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ScholarshipsScholarships Sources:

– private donors– your college

Eligibility criteria:– academic or athletic excellence– community involvement– course of study or career choice– employment or membership– financial need

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ScholarshipsScholarships

Funds available:– generally as academic terms begin

Repayment:– generally not unless you drop out– may have to repay if you don’t fulfill certain

conditions

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ScholarshipsScholarships Fastweb

– www.fastweb.com College Board’s FUND FINDER

– http://apps.collegeboard.com/cbsearch_ss/welcome.jsp

SRN Express– www.srnexpress.com

Scholarships.com– www.scholarships.com

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ScholarshipsScholarships

Peterson’s scholarship search– www.petersons.com/finaid

NextStudent– www.nextstudent.com/scholarship_search/

scholarship_search.asp Broke Scholar

– www.brokescholar.com

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Work-studyWork-study

Sources:– federal government and your college

Eligibility criteria:– financial need

Funds available:– earn by working part-time while in college– paid weekly to monthly

• no up-front money for tuition and fees

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Work-studyWork-study

Repayment:– no

Other advantages:– on-campus job– usually 10-15 hours per week– work experience in your field

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Best to worst typesBest to worst types

Grants and scholarships Work-study Loans

– federal– private educational loans

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Additional sources of incomeAdditional sources of income

Part-time job– do not work too much

Education tax credits and deductions

What to Ask When Shopping for a LoanWhat to Ask When Shopping for a Loan

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Who to go to for private loansWho to go to for private loans

Your school’s financial aid office Banks or other lenders

Private loans may affect your eligibility for other forms of financial aid—be sure to check with your financial aid office first!

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What to askWhat to ask What is the interest rate on the loan and

how is the rate calculated?

At what point, and under what circumstances, might the rate change?

Will I need a co-signer to qualify for a loan or to receive a lower interest rate?

What fees are associated with the loan?

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What to askWhat to ask When do I begin making payments and

what are my repayment options?

Can I defer or reduce loan payments during tough times?

How will this loan affect my eligibility for other forms of financial aid?

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What you have learnedWhat you have learned

How private loans differ from federal loans How to maximize your financial aid

sources What to ask when shopping for a private

loan

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Now what?Now what?

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More informationMore informationSharon CabeenVice President of Financial Literacysharonc@nslp.org

Brenda VaughnDirector of Financial Literacybrendav@nslp.org

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More informationMore informationMel StephensMoney Management Consultantmels@nslp.org

Nic Ourso, CPA, CFPMoney Management Consultantnicourso@bellsouth.net

Pauline BaltaFinancial Literacy Coordinatorpaulineb@nslp.org