Hi All,

I going to commercial operation school. I am authorized for sovereign unsubsidized loan, 6.8% fixed, and Discover Loan 5.25% variable.

I am meditative 5.25% is a great understanding vs. 6.8% fixed, even it is variable, is there anything else which I should think about?


Cherry KoolAid February 7, 2014 at 2:01 pm

Get a job.

nancy February 7, 2014 at 2:57 pm

Generally speaking, the federal loans are a better deal. Unless there is a cap, you can be fairly sure that your variable rate on the private loan is going to go up, so the difference in the interest rates will evaporate, and you could end up with an even higher rate. Also, federal loans tend to have more protections for the student–more flexible repayment plans, options for forbearance and deferment, forgiveness programs, dischage for death or disability, etc. However, some private loans now have similar features, so the differences are not as great as they used to be.

At 5.25%, your loans will cost you $10.73 per month for every thousand dollars you borrow. At 6.8%, it would be $11.50 per month. If your debt burden is small, the interest rate might not make much difference, but if you have large loans, the difference could be significant. So, you will have to weigh the benefit of the savings with the risk of losing the protections of federal loans and the possibility that the variable loan rate will rise.

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