Student loan options: School-sponsored 7% deferred loan vs. lower-interest private loans that accrue immediately?

I actually just went through this exact decision with my son last year! The math definitely favors the lower interest rate in the long run DESPITE the immediate accrual. We ran the numbers and took a 4.75% private loan over the school's 6.8% deferred option and even with interest accruing during school, we'll save about $4,200 over the 10-year repayment period. One thing to consider: can your daughter make interest-only payments while in school? That makes the private loan option even better because it prevents the capitalization of interest. Also check if the school loan has any origination fees that the private loans don't - those can add up fast.

the school loan sounds better to me actually!!! no payments until after graduation is HUGE. my brother took private loans with "lower" interest and ended up having to work 30hrs a week just to make the payments while taking classes. he almost dropped out cuz of the stress. sometimes the "better deal" on paper isnt better in real life just sayin

Run an amortization calculator for both scenarios!! I was in this EXACT situation and the difference was over $7k in total interest over 10 years. The private loan at 4.8% STILL saved me money compared to the school's 7% even with immediate accrual. The math doesn't lie!

Something nobody has mentioned yet - with the school loan, have you confirmed there are NO payments until graduation? Some institutional loans require interest-only payments during enrollment periods. Also, check if there's a grace period after graduation before repayment begins. Federal loans give you 6 months, but some institutional loans don't have this feature. Also, see if the private loans have any prepayment penalties! I found a 4.2% private loan that seemed amazing until I read the fine print about penalties for paying early.

I work in financial aid and see this question often. Here's what you should consider: 1. Total cost comparison: Calculate both scenarios through final payoff 2. Cash flow during school: Can your family handle payments during enrollment? 3. Fixed vs. variable: Is the private loan rate fixed or could it increase? 4. Borrower protections: School loans often have better hardship options 5. Cosigner requirements: Private loans typically need strong credit/cosigner One crucial point - private loan rates are based on credit scores. That advertised 4.5% rate? Only applicants with 780+ credit scores qualify. Most students with cosigners actually get 6-7% rates, which eliminates the advantage. Get actual rate offers before deciding, not just advertised rates.

Has anyone else been trying to call Federal Student Aid to ask about how different loans impact future FAFSA eligibility? I've been on hold for HOURS trying to get this same question answered. My son has both institutional and private loan offers and we're trying to understand if one impacts next year's aid differently than the other.

ALSO CHECK IF THE SCHOOL LOAN CAN BE FORGIVEN!!!! Some institutional loans have forgiveness options if you work in certain fields or public service after graduation. My cousin had $12k of her institutional loan forgiven when she taught for 3 years in a low-income district. Private loans NEVER have forgiveness options.

After helping three kids through college, I've found that the best approach is actually a hybrid one. Take the institutional loan for part of the need (maybe half) and a private loan for the rest. This gives you some of the benefits of both - deferred payments on part of the debt while securing a lower interest rate on the rest. Also, make sure you've exhausted all federal loan options first through your FAFSA - Direct Subsidized loans don't accrue interest during school and have the best protections.

Update: After talking with the financial aid office, we discovered that the institutional loan actually has a 1% origination fee that wasn't clearly disclosed, which adds about $780 to the first year's loan cost. We've decided to go with a combination approach - taking the maximum federal Direct Subsidized loans first, then splitting the remaining need between the institutional loan and a fixed-rate private loan at 5.7%. This gives us some payment flexibility while controlling the total interest cost. Thanks everyone for your insights - they really helped us make a more informed decision!