Private Student Loans

[~FutureNurse~]

Hi everyone. I am thinking that I am going to have to take out a private student loan, to cover the cost of childcare while I attend Nursing school. The total cost I would need is $14,000 for 2 full years of care. I am looking at some private loans, but am very afriad of the variable intrest rate. I do not like knowing exactly how much my payment will be.

So, for those of you that do have private student loans, how often does your payment change, and how much does it ususally change?

[Asherah, BSN, RN]

So, for those of you that do have private student loans, how often does your payment change, and how much does it ususally change?

I'll speak to this question as I have recently applied for private loans and am very familiar with many of the terms and conditions that may apply. (That being said, loan terms vary a lot by the lender, so you have to check it out for yourself).

In short, whether your interest rate is based on the Prime Rate or LIBOR, many lenders look at the 3-month (or quarterly) average of these rates. For example, the 1-month LIBOR rate now is based on the average of the Jan, Feb, and March individual rates. The next applicable rate will be posted in early July, after 2nd quarter ends. So when Prime or LIBOR adjusts down, as they have been for awhile, we cannot take advantage of these decreases immediately, they do not take effect right away. However, quarterly adjustments also are favorable if the rates adjust up, as they also do not take effect overnight.

In the process of applying for private loans, be sure to ask every specific lender how and when the rate adjusts. They are required to list these details on the promissory note that you sign before the loan is disbursed. Read all of the fine print and ask them to clarify if there is something you do not understand.

Good luck!