Tackling Your Tuition Bill: More Tips on Student Loan Shopping

September 14, 2013 | posted by College Money Insider.

It’s that time of year when tuition bills will be showing up in mailboxes across the country! To ensure you are covered, here are some things that students and parents may want to consider.

Today is the last of three guest posts by Overture Technologies’ Ben Carey. You can check out his first post about the FAFSA here and his second about private student loans here.

Co-signing a private student loan MAY be a better option than taking out a Parent PLUS!

As a student/parent, you’ve filled out the FAFSA, taken advantage of every federal option, gift aid, college work study and tuition payment plan available, and STILL there’s a gap in funding the cost of education at the school of your students dreams!?? Let’s consider the options:

1. A Parent PLUS loan.

2. A private student loan.

First, the Parent PLUS loan offers a fixed rate option of only (7.9%) with great deferment/forbearance/repayment options available. The Parent PLUS loan is in the parent’s name only!  The student is not responsible for the PLUS debt, nor will this debt be listed on their credit report.

The private student loan, however, is the responsibility of the student, with the parent acting as the co-signer if the student cannot meet their repayment obligation!  The loan will be primarily in the student’s name and listed on the student and co-signer’s credit report.

One recently new twist to the private loan offering is a “Co-signer Release” option.  Yes, the co-signer can be released of his/her financial obligation on the loan “if/when” a certain time period elapses (usually 24-48 months)… AND the maker is able to qualify on their own in the credit tier that matches their current interest rate.  NOTE: Please read and understand the conditions of any co-signer release agreement. Not all lenders offer co-signer release programs nor are their terms alike!

Yes, there are “Caps” available on some private student loans.

Please check with your lender as to the rate “cap” (a set limit to how high they will allow a variable rate) they may offer.  Not all lenders have rate caps on private student loans, but many do!  Rate caps are generally set at about 18%.  Please check with your perspective lender before borrowing a variable rate loan!!

Don’t sign ANYTHING you don’t understand!!!

We see and read the horror stories in the papers, on-line, and on TV.  Students who graduate with $100,000+ in student loan debt who say they had “no idea” or “weren’t fully aware” of their debt until after they graduated.  Most of the time they are struggling to find a job, or worse, have a low paying job in their field of study that pays far less than the cost of getting their degree!!  Yes, student debt is, and will continue to be, of serious concern to students. In fact, our economy as whole will be in trouble if debt is not fully respected…or understood! I always counsel that debt is like fire. Fire can warm your home if used respectfully and with care…it can also burn your house down if not used properly!

Bottom-line:  If you don’t need it…Don’t borrow it!  If you don’t understand it…DON’T sign it!!!

Ben Carey is currently the Vice President of Sales at Overture Technologies.  He is a 23 year veteran of the student lending industry with extensive experience working with colleges and universities.  Ben served in both sales and sales leadership roles helping schools and families make informed decisions about the best ways to finance higher education.

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