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[Jason]

Hello all,

I have a question about private loans. My school has estimated my total
financial need to be around $30,000. (It amazes me that they expect me
to empty my bank accounts, but okay). Anyways, assuming that I am able
to obtain a Stafford loan, and I max out both (subsidized and
unsubsidized), I can only get a maximum loan of $18,500 / yr.
Therefore, I am short about $12,000. ($11,500, but let's round).

I assume that I now need to get the money from a private loan. When is
the best time to apply to reduce my cost? Should I apply now for a loan
of $15,000? Will they charge me interest on the money beginning now?
Say I work, and at the beginning of the third quarter, I find I only
need $1,000. Since I applied for $15,000, can I use only $1,000 of it?
I've been reading a bit about private loans and they state they
charge around 6% of the loan amount. Will I only be charged 6% of the
$1,000?
Also, will interest start only at the time I use the money?

I would rather find out now if I qualify for a private loan, rather then
get to the third semester, find out I need $12,000, and find out no one
will give me a loan. What could I do then? But I also don't want to
take out a $12,000 loan now and pay interest for the 6 months or so
until I need it (only to find out I overestimated the cost).

This also extends to the next year. I was lucky to be able to save
$20,000 before attending graduate school, but if I use all of my savings
now, next year I will need $32,000 in private loans. So should I be
applying for a loan now of $50,000? Or how do things work for the next
school year?

I keep questioning if graduate school is worth all this money. If any
of you calculate, you'll notice that by the time I get out, I'll be in a
mountain of debt. This is very disturbing for someone who up till now,
has never been in debt.

Thanks in advance!

-Jason

[Steve Blank]

The answers to your questions will depend on the terms of the specific
loan agreement.

However, assuming that you are talking about private educational loans,
also called "alternative loans,": the interest begins when the loan is
disbursed and only on the amount disbursed, it is disbursed on a per
semester basis, and you should have the opportunity to reduce the amount
for the next semester before it is actually disbursed.

Education loans are usually made for only one college year at a time, so
you'll need to obtain a new loan each year.

Read the loan agreement and ask all your questions of the lender before
you sign up - including interest rate (fixed or variable?), any
origination fees that will be charged, and what your repayment options
will be.

--
Steven B. Blank
College Financial Aid Consultants
29 Ives Hill Court
Cheshire, CT 06410
(203)250-7761

Jason wrote: