Apply for Private Loan Each Year? Or One Loan for all 4 years?

<p>I know this is a borderline dumb question, but I can't find the answer to it anywhere: </p>

<p>I want to have the option to rely on funds from a private loan to help pay son's tuition. Do parents and/or students apply a loan each year? Or can we get approval for a set amount that would cover our (projected) need for all 4 years and then get the funds dispersed as requested each year (with only the one initial application).</p>

<p>In the college loan universe, you apply each year as eligibility needs to be determined (is son actually in school, how much are costs at that school, etc.)...</p>

<p>Further, private college loans should generally be your LAST option -- check out Stafford, PLUS and your state college loans, if any, first...</p>

<p>Thanks for the reply. I am curious.....and I posted in another thread about this.......with Parent Plus Loans at 6.8%, I wonder why everyone is saying that they should be favored over the MUCH lower rates of private loans. I think I am missing something....what is it?</p>

<p>^ You'll have to enlighten us. Where can you get unsecured loans <6.8%?</p>

<p>
[quote]
Thanks for the reply. I am curious.....and I posted in another thread about this.......with Parent Plus Loans at 6.8%, I wonder why everyone is saying that they should be favored over the MUCH lower rates of private loans. I think I am missing something....what is it?

[/quote]
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<p>The only thing that you're really missing is the assumption that everyone can get loans for a lower rate. Basically, the ONLY reason a Parent Plus loan should be favored is because 1) It can be forgiven upon death and 2) if you CAN'T get a better interest rate (non-variable, and below 6.8%). If you CAN get a better loan, then you should take THAT instead if you need it. But if you CAN'T, then you should take the Parent PLUS loan instead if you need that.</p>

<p>Does that help?</p>

<p>All of the private student loan rates I found (Chase, Charter One, Citizens, and the Sallie Mae back loans) ranged from 2.875 to 3.5%, assuming payments are automatically deducted (a .25%-.5%) discount for that. I have read much of the fine print, but I am wondering if there is something I am missing about the way the interest accrues, or the terms, since on the surface, they seem to be much better than the Parent Plus loan rate</p>

<p>Another problem is the qualifying each year, because after you borrow for the first or second loan, your credit score is hurt by all the outstanding debt.</p>

<p>This is a problem for many parents. They can't qualify for more loans after borrowing - say $20k per year for the first two years. With $40k in debt, they can't borrow more so that their child can finish school.</p>

<p>So...if you will likely face a similar scenario, you may need to choose another option so that your child doesn't get halfway thru college and you can't borrow any more money.</p>

<p>"If you CAN get a better loan, then you should take THAT instead if you need it. But if you CAN'T, then you should take the Parent PLUS loan instead if you need that."</p>

<p>I guess that is what lead to my original confusion, because there are TONS of people who can qualify for the lower interest loans, but I haven't seen anyone mention that...everyone always just says that the Parent Plus loan is always preferable to private loans.</p>

<p>Well that's an unfortunate oversight. Anyway, most of people who come here appear to be students who are under the mistaken impression that they can get those awesome super loans every year for four years without a parent cosigner.</p>

<p>well this might not be fully related, but say your parents already have bad credit score? Their co-signment probably doesn't help, right? Or is it still better to try and go with the PLUS option instead of the private loan?</p>

<p>If your parents have bad credit, then they will get denied a Plus loan as well.</p>

<p>However, once they are denied, then you can borrow another $4k. But, that may not be enough.</p>

<p>Please see my post in the What am I not getting thread for a continuation of this discussion.........</p>

<p>yeah I figured they would get denied loans.
Is there another option? I dont NEED a co-signer, do I? Could I get more than 4K just on my own, through private loans without having my parents co-sign?</p>

<p>You don't need a cosigner for the additional $4K but you won't be able to borrow private loans without a cosigner. And a parent turned down for a Plus loan will not qualify for cosigning. What are your more inexpensive college alternatives?</p>

<p>How much money do you need?</p>

<p>How much were you going to borrow with a private or Plus loan (in addition to your regular student loans)?</p>

<p>What school is this? Did they give you much aid?</p>

<p>Schooner...those private loan rates you are quoting are VARIABLE rates pegged to short-term interest rates (currently extremely low) and are the BEST available with pristine credit....</p>

<p>Those loans typically end up averaging 10+% on average over time....check out the history of short-term interest rates and you'll see what I mean....</p>

<p>BE WARY!! But if one understands those risks, then a private could be a better choice for some....</p>

<p>Don't overlook the cheapest fixed rates available...a mortgage! But that's another thread in itself!!</p>