My DD is starting a 2-year program at a local business university this fall. We are starting this process late, as we weren't sure she would even graduate HS due to earlier troubles. She has totally turned her life around and will continue her education in a 2 year Vet Tech program.

We applied for financial aid and she recieved some Pell grants, a state grant and a small student loan, but there is still a deficit. I see lots of commercials and recieve lots of ads for private student loans, but I am wondering if anyone has experience with the companies.

What type of interest rate can she expect on her own (no credit history), does interest accrue right away or after graduation, etc etc.

I am reluctant to co-sign for her, just due to past problems..........

__________________
"It's not about how much baggage you have, it's about whether or not you can carry your own baggage with grace and dignity."

How much is her total cost? Most student loans for the first year is $2600. Check if she can take more of a loan, my ds did but that was several years ago and I don't remember how we did it (It was in his name).

Jeeplady,
Your child's school should be able to explain your options to help you figure it all out. But I'll do my best to explain our situation in case it helps.

With our oldest son, we were able to pay as he went while he also contributed some money. He is going into his senior year and the only debt he will have at graduation is some subsidized (where the government pays his interest until 6 months after he graduates) Stafford loans and those will hopefully be paid off with money his grandparents plan to give him. If a loan is not subsidized, the interest accrues from the moment the funds are disbursed.

Our younger son is only 17 and will be a freshman aviation major....which means on top of tuition, room and board, he will have approximately $10,000 per year in flight fees. He did qualify for the $3,500 (maximum for freshmen - used to be $2,625 max which read52 mentioned) in subsidized Stafford loan this year which he would also hopefully be able to pay off with money his grandparents would give him later. But because this is his brother's last year in college, I am betting this will be the only year our younger son will qualify for the subsidized loan so other un-subsidized and private loans will have to be pursued if he can't make enough money over the summer to cover his share of the tuition cost. But we have also decided he has to take out loans to pay the flight fees because there is no way we can pay those as we go and because we want what we are paying for college to be fair between our children.

Our problem is that he is only 17 (won't be 18 until the end of October) and CAN'T get a loan on his own. So we have to co-sign or he can't borrow the money. But I did find out that many banks do require a co-signer the first year, so you may not have many options if you aren't going to co-sign.

Our decision on what loan to use was based on:

1) getting him the best rate using our good credit
2) getting out of the loan with him as quickly as possible

So this is how we made our decision from some of the options presented to us on his college's website:

- Various banks were presented with interest rates as low as prime minus 0.50% and all based upon credit worthiness - but how many college freshmen really have established a good credit rating? You'd almost have to have a co-signer to get a decent rate. But for all banks I contacted the co-signer could not be released from the loan until there had been 48 months of continuous on-time payments. That means we'd be on this loan for the next 8 years (4 years of college + 4 years of payments after graduation) or more if he misses a payment. I love my son, but I don't want to be tethered to his financial life too long!

- Nellie Mae Student Excel Loan is a government backed loan which seems to be more for students with no one to co-sign for them or whose parents don't have good credit. At first I thought freshmen could borrow without a co-signer, but I just read that MOST freshmen need a co-signer. It is NOT credit based but there are fees of up to 5% at disbursement (could be 0% with a co-borrower) and the interest rate is higher anywhere from prime+1.25% (monthly variable) to prime+2.50% (annual variable). Co-signers can be removed from this loan after 24 months of continuous on-time payments. We have good credit and could get a better interest rate, so we crossed this one off of the list.

- Sallie Mae Signature Student Loan is a government backed loan which is credit based. The disbursement fees range from 0% - 4% for co-signed loans and 0% - 6% for no co-signer. A co-signer is required freshman year and the interest rate is based on credit history. The interest can be as low as prime minus 1.00%. And co-signers can be removed after 24 months of continuous on-time payments. This is the one we chose because after we did the initial application, we qualified for the 0% at disbursement and the lowest interest rate of prime-1.00%. No other bank could match that. Even if they did, the 48 months of continuous on-time payments to the private banks seemed too long. OH! And in this one during the on-line application process, they presented two possible banks we could have service our loan and it would have no bearing on interest rates - so we chose the bank that has a local office convenient to our home in case we needed to have any in-person discussions about the loan.

The websites for the government loans are Nellie Mae—Undergraduate and Graduate Student Loans and Student Loans for Parents and Sallie Mae - Private Student Loans, Stafford, PLUS, Student Loan Consolidation and the online process for the Sallie Mae loan was quick and easy- maybe 20 minutes from start to finish and we knew our interest rate right away...if you don't like the interest rate, you don't have to continue with any disbursement and then just find somewhere else to borrow money. Maybe if she wanted to try the Nellie Mae loan on her own she could start the application process and stop once she knows the interest rate or it tells her she needs a co-signer. You can also call them (number is on their website) and ask questions.

My suggestion to you, not knowing the whole situation, is to co-sign a loan but put a limit on how much you are willing to borrow with her and make sure she gets a job with enough hours that she can come up with enough money to cover the remainder. Then you can reassess the situation next year to see if you will still co-sign for her second year.

One other thing...with this whole Privacy Act situation where we don't have access to our 18 year old children's grades and other school information, I'd have a serious talk with her and explain that you expect to see each and every report card or the funds are cut off. I understand the premise behind the Privacy Act, but any child whose parents are helping to finance their education should be more than willing to share their grades with their parents - even if the grades are less than expected. My boys know they have to be open and honest with us so we haven't had a problem, but my niece has yet to show her parents any grades and she has already completed two years of college. She and my brother have somewhat of a strained relationship, but her parents are still helping her pay for college so I can't understand why they aren't insisting that she share her grades with them. My dad found out from her that she failed one class (he is giving her money, too, so he is asking a lot of questions) but he plans to ask to see the next report card before giving her any more money. As it should be.