More loan questions

audiobliss

I'm a little perplexed at a new discovery and would appreciate someone who knows a bit about the workings of student loans enlightening me.

Over the summer I applied for and accepted a loan from Discover for just under $8,000 at a rate of prime+1%. I was pretty happy when I found that, with a cosigner, the interest rate was so low. This was after applying to several places and finding this to be the lowest.

Fast forward to this semester, and I'm applying for student loans to cover this school year, fall and spring instead of just one semester. Loan amount is just under $17,000. I applied to three places, and just checked in with Discover to see what kind of interest rate they would offer on the loan. It was so low for the other loan, I like working with them on the phone and through their website, and I imagine repayment would be simplified if all my loans were from the same place, so I was hoping Discover would prove to be the best option again (hopefully at prime+1%). However, I got off the phone with them while ago and they're only offering me prime+4.25%. That seems to me to be a pretty big jump, and I can't imagine what has changed over the last three months since I applied for my summer loan.

I checked my credit report just a week ago, everything seems to be in order, and my score is 720. Not that it should matter since my parents cosigned. They have great credit, though I don't know a number. The only things they owe any money on are two loans for relatively new cars they bought in the last year or two, everything else is paid off, very low balances on their credit cards, always paid off in full, etc. Now, Dad is retired, so income is really low. And when I applied to SunTrust for a student loan they originally declined because of his "income to debt ratio" was too low. Could that have anything to do with the jump in interest rate from Discover?

I'm just kind of stumped at why this would be. Maybe it has nothing to do with me or my folks but is just the way of the world. Can anybody shed any light on this?

Much thanks!!

audiobliss

And just to throw it out there, I don't yet know what interest rate the other lenders are willing to provide, as they're closed over the weekend. Will call them first thing Monday and find out.

Demiurge

$17,000 is more than twice your original loan of $8,000. Is the $8,000 paid off already?

You're (and co-signers) a bigger risk at that amount of money. Plus, interest rates change.

Did you ask them?

Either way, look around for something better, too.

audiobliss

I didn't know if the amount of the principal would affect the interest rate or not. And no, the $8000 is not paid off and won't be until I graduate.

I asked the lady I talked to, but the only thing she would offer was "it's based on credit history and your credit report"; that was very helpful.

Does this mean that I can look forward to the interest rate constantly going up from year to year as I continue to get more loans? Really, from a student's perspective, that makes no sense.

I guess I was naive to even hope I could get away with close to prime+1 throughout my college career. Boy, I can't wait to be taking out loans for grad school!

Thanks for the reply, Demi.

TORI3

I've never applied for third-party student loans, so this might be irrelevant...But, have you tried FAFSA?

I know this is probably a stupid question, but it's always good to make sure.

In regards to your interest rates, the fluctuation may be attributed to the amount of the loan and the national interest rates (which independently fluctuate).

After you're done with school, I highly suggest consolidating your loans at a low fixed rate. Right now, my undergrad loans are around 2.8 - 3.0 percent for the next ten years.

Just something to think about.

howie777

All I can say is stay away from private student loans as much as you can! they blow monkey chunks, what ever that is. Those should always be used as a last resort as they accrue interest from the day you get them. Where as government loans often won't accrue interest until after you graduate plus are usually lower interest rates when the economy is bad. Also, remember if prime jumps to 7-10%, for the money your talking about, your going to be hurting after school. Most of your money will need to go to student loan payments. Which if your good with money, you maybe able to handle.

I'm speaking from $80,000 worth of experience in student loans , think house payment sized monthly payments (they start at 10 year loans usually I think). So if you want to by a house after school, you basically need to be able to afford two houses just to get one. I think my loans started at $1,300 a month when I started paying them back so long ago. And then I made the mistake of not sinking every penny I made into paying them off. I hate to think of the tens of thousands of dollars I have paid in interest. oh well, live and learn I guess.

Or just write a killer iphone app and make millions and pay cash for school. Just an option to think about.

Oh and take as many classes at a community college as you can, well, classes not directly related to your major. It will help a lot with $$$ and you still get the degree from the main school your going to.

Oh and don't get bad grades, a 2.52 GPA doesn't help with the job hunt, not that I'd know from experience or anything.... hehehe. a 3.0 or better will help a lot, with 3.5 and above being a good target depending on if your good at school or not. I was a horrible student but have done very good in the real world. Even got a masters eventually.

Howie

Demiurge

audiobliss wrote: »

I didn't know if the amount of the principal would affect the interest rate or not. And no, the $8000 is not paid off and won't be until I graduate.

I wasn't saying that as a fact or anything, it was just a thought. I never had a student loan, so I don't if they're different than any other loan. It seems weird that if the credit was as good as it was 3 months and they're still offering lower rates that there would be some other factor other than the size of the loan.

kawizx9r

Could be the fact that he already has an unpaid loan.

Just a thought

audiobliss

Demiurge wrote: »

I wasn't saying that as a fact or anything, it was just a thought. I never had a student loan, so I don't if they're different than any other loan. It seems weird that if the credit was as good as it was 3 months and they're still offering lower rates that there would be some other factor other than the size of the loan.

Yeah, your reasoning certainly sounds solid. I don't know what other variables there would be either. She did tell me the range of the interest rates they're offering, and while I did forget what the low end was, it was lower than prime+4.25.

kawizx9r wrote: »

Could be the fact that he already has an unpaid loan.

Just a thought

Certainly makes sense. But then again, it's a student loan. Whether financially sound or not, how many people going through college today only have one student loan at a time? I'd be willing to bet a very fortunate few.

exalted512

Maybe its because you've applied for $25,000 in 3 months?
-Cody