In an earlier post this week, I indicated the high level results of my recent on-line private loan shopping trip with starting interest rates ranging from 7.0% to 12.125% (remember that private loans are variable rate and change monthly or quarterly based on an underlying index). Remember that private loans should only be taken out as a last resort and borrowers should exhaust all federal grants (e.g., Pell), federal loans (e.g., Stafford, PLUS or Grad PLUS), work-study and scholarship aid before considering private loans.
A quick recap on the process: Last week, I completed 6 private loan applications as a co-signer for a $5,000 private education loan for my nephew, who is currently attending a 4-year private non-profit institution. For those concerned that so many applications might harm your credit score, read this latest announcement from Fair Isaac. This study is not intended to have statistical validity but rather is intended to show one person's journey through the private student loan process. Given the lack of transparency in rates offered by private lenders, I thought this would at least provide a limited window into the variability in the rates that are out there. Remember that lender's make credit decisions based on the creditworthiness of the individual student and the co-signer as well as the institution the student is attending and other factors ("the secret sauce).
For those wondering, my FICO score is considered Average by the credit agencies. That 8 year old bill from the San Carlos city government for a false alarm on our security system on a windy night seems to have taken its toll. I also must admit that I am a bit debt-averse having gotten that trait from my Dad, who was born across the pond just as the 1929 Crash hit Wall Street.
So, drumroll please...., how did the rates and fees that lenders offered to me in their conditional approval letters stack up:
|
Starting
|
|
Advertised |
Lender |
Interest Rate |
Fees |
Interest Rate Range |
Discover |
7.00% |
0% |
2.75% to 8.00% |
SunTrust |
9.13% |
3% |
3.63% to 12.13% |
Citibank |
10.25% |
5% |
4.25% to 10.75% |
Chase |
11.57% |
0% |
6.07% to 13.57% |
Wells Fargo |
11.74% |
0% |
5.75% to 12.74% |
Sallie Mae |
12.13% |
3% |
4.63% to 13.13% |