When, and How, PA Students Should Use Private Student Loans
This post was brought to you in part by LeverEdge, an independent third party that negotiates with private lenders on behalf of student groups. They’ve helped thousands of students save millions of dollars, and you can join for free here.
I constantly hear from folks looking for information about the cobweb that is the student loan industry. There’s so much jargon and complication that it’s hard to cut through the noise. In this post, I’ll provide a brief overview of some of the things to consider when navigating this process.
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Federal Loans are usually only the best route for undergraduate students
Before you do anything, you should probably dig into PA scholarships and fill out the FAFSA to see what the federal government will offer you. For undergraduate students, the federal loans provided typically are a better rate than anything on the private market, and have perks like eligibility for forgiveness and income-based repayments.
The graduate market is more nuanced. The National Health Service Corps (NHSC) Loan Repayment Program could be a reason to consider federal loans as a PA, plus certain protections such as deferment if you are unemployed after graduation. However, it’s worthwhile to note that under Trump’s proposed budget,loan forgiveness (PLSF) is facing a sunset. Income-based repayments (IBR) are an option if you’re going to make a lower salary, but many PAs are not eligible due to high income.
There’s also a cap for how much you can borrow from the Federal Government, and nearly a million people hit that each year. In those cases, there are better options out there.
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Good credit or graduate student? Evaluate Private Loans
The private market excels in providing very competitive rates to “less risky” people – that is to say, people with a good credit score or graduate students.
If you’ve got good credit (you can check this for free at AnnualCreditReport), then you should at the very least shop around to see what sort of rates you might get.
Credible is a free comparison tool (not a sponsor) that helps you see some of your options. You can see by moving the slider how the interest rate varies depending on your credit score.
If you’re a graduate student, the interest rate on federal grad plus loans is ~ 7.5% versus ~ 5% in the private market. That’s the difference between thousands of dollars at the end of the day, so make sure to not leave money on the table.
Lower interest rates by making lenders compete
Once you have decided that you’re interested in potentially taking a private loan (and benefiting from the lower rates), there’s one more step: make the lenders compete for your business.
By adding your voice to a group negotiation pool, you’ll be able to get the best rates among all competing private lenders. Our partner, LeverEdge, is the first of these organizations, and is completely free, and when you join there’s no obligation to actually take their negotiated deal.
They use the power of collective bargaining to force lenders to give the group the best rates, and the application process only collects basic information (no credit checks or SSN required).
Take a look at their options for graduate & undergraduate students, along with refinancing, today at LeverEdge.org, and be sure to comment with any questions.
This post is educational in nature and should not be viewed as financial guidance. Please consult a financial adviser and do your own research.
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