How to get best student loan deal
Wading through the hype makes it tricky to choose a lender
Where do you find generous deals on federally sponsored loans? Schools that participate in the Federal Direct Loan Program give you direct access to Uncle Sam's largesse; the government funds the loans, and the school administers them.
The majority of schools, however, leave it to you to choose a lender, and that's where the process gets tricky. Commercial lenders vie for your business by offering to waive processing fees, pare the fixed rate and bestow rebates on borrowers who pay electronically or on time for, say, 24 or 36 consecutive months. Comparing those sweeteners can drive you crazy, says Thom Hunzicker, a college financial planner in San Dimas, Calif. "There should be a way to quantify the moving parts."
Financial-aid offices try to do just that by vetting deals and sending families a list of preferred lenders. "In most cases, the price the student gets through the preferred-lender list is better than what the student would get directly from the lender," says Keith Landis of Collegiate Advisors, which provides technical backup to college financial planners.
Cover your bases by checking a few other programs (you can find a list of lenders and their discounts at www.finaid.org). Investigate nonprofit lending agencies in both your state and the state where your child will attend school. Such agencies use low-cost loans to encourage students to study — and stay — within state borders.
Wherever you shop, look for up-front benefits, such as an interest-rate reduction at the start of repayment, rather than future perks — say, for making 36 on-time payments. "That's like saying, if I make the 260th through the 290th payments on my mortgage on time, I'll get a discount," says Landis. "No one does that." Plus, many students consolidate their loans early in repayment, rendering future discounts meaningless.
If you're a homeowner, you've probably already considered using home equity to cover some of the college bills. Borrowing against home equity makes sense if you earn too much to qualify for the student-loan interest deduction. You can deduct interest on up to $100,000 of home-equity loans.
Some college financial planners recommend going with a home-equity line of credit, which lets you borrow money as you need it, rather than taking a second mortgage and paying interest on the whole amount. But the line of credit's variable rate, currently at almost 9 percent, puts you at risk, says Hunzicker. He prefers second mortgages with fixed rates, lately about 8.2 percent.
One more consideration: A home-equity line of credit can enhance your chances for financial aid, whereas a second mortgage can hurt them, depending on whether the school counts home equity as an asset.
By ; Jane Bennett Clark
Via : deseretnews.com
Where do you find generous deals on federally sponsored loans? Schools that participate in the Federal Direct Loan Program give you direct access to Uncle Sam's largesse; the government funds the loans, and the school administers them.
The majority of schools, however, leave it to you to choose a lender, and that's where the process gets tricky. Commercial lenders vie for your business by offering to waive processing fees, pare the fixed rate and bestow rebates on borrowers who pay electronically or on time for, say, 24 or 36 consecutive months. Comparing those sweeteners can drive you crazy, says Thom Hunzicker, a college financial planner in San Dimas, Calif. "There should be a way to quantify the moving parts."
Financial-aid offices try to do just that by vetting deals and sending families a list of preferred lenders. "In most cases, the price the student gets through the preferred-lender list is better than what the student would get directly from the lender," says Keith Landis of Collegiate Advisors, which provides technical backup to college financial planners.
Cover your bases by checking a few other programs (you can find a list of lenders and their discounts at www.finaid.org). Investigate nonprofit lending agencies in both your state and the state where your child will attend school. Such agencies use low-cost loans to encourage students to study — and stay — within state borders.
Wherever you shop, look for up-front benefits, such as an interest-rate reduction at the start of repayment, rather than future perks — say, for making 36 on-time payments. "That's like saying, if I make the 260th through the 290th payments on my mortgage on time, I'll get a discount," says Landis. "No one does that." Plus, many students consolidate their loans early in repayment, rendering future discounts meaningless.
If you're a homeowner, you've probably already considered using home equity to cover some of the college bills. Borrowing against home equity makes sense if you earn too much to qualify for the student-loan interest deduction. You can deduct interest on up to $100,000 of home-equity loans.
Some college financial planners recommend going with a home-equity line of credit, which lets you borrow money as you need it, rather than taking a second mortgage and paying interest on the whole amount. But the line of credit's variable rate, currently at almost 9 percent, puts you at risk, says Hunzicker. He prefers second mortgages with fixed rates, lately about 8.2 percent.
One more consideration: A home-equity line of credit can enhance your chances for financial aid, whereas a second mortgage can hurt them, depending on whether the school counts home equity as an asset.
By ; Jane Bennett Clark
Via : deseretnews.com
posted by auto at 2:44 AM
0 Comments:
Post a Comment
<< Home