The LIBOR is the London Inter-Bank Offered Rate (what British banks use when they lend to each other) and the Prime Rate is what major banks charge their most credit-worthy customers. Thus the Prime Rate is usually around 2.5 to 3.5% higher then the LIBOR. Currently the LIBOR is at 0.53% and the Prime Rate is 3.25%.

Looking at our past decade or so, the Prime and LIBOR have never exceeded 10% so chances of extremely high interest rates (approaching the 18% ceiling) are quite slim. However, during strong economic times like 2001 or 2006 the rates might increase up to 5% from what they currently are. At this point you would be paying a premium of 2%, 3% or even more over the GradPLUS loans fixed rate.

I believe private loans are a good option for a certain group of people

These costs are basically balanced by the fact that you have not paid an origination fee and that you have had a lower interest rate for sometime. Also, given that the economic climate is still unstable and that the Federal Reserve has expressed no interest in raising rates, we can expect payday loans near me Ekalaka MT relatively low rates for the near future.

Still, due to the fact that your loan terms are for 10, 15 or 20 years, you should have some back up plans to help pay down your private loans in case you face prolonged high interest rates. As every student has a significant portion of federal loans due to Perkins and Stafford, one method is to focus larger payments on your private loans, paying these off quickly while leaving loans that are at very low, fixed interest rate terms. Finally if your family or parents with access to certain 401k funds, you can ask about the possibility of borrowing the money from their funds and repaying interest to them directly.

Further, if you save assets or cash, you can have this as a backup and consider contributing more to your private loans if you face the prospect of rising interest rates

For most people, GradPLUS loans are the easiest options to go with, and hopefully the information here will help you manage your loans and know the terms, costs, and benefits you have for your loan package. However, for a certain group of people private loans can be a helpful supplement that will lower your total costs. If you meet the criteria outlined above and your total supplemental loans needed are not too high, I would recommend at least getting rate quotes to see if a private loan would be a good option. Keep in mind that these quotes will slightly lower your credit score, but will not affect it too much.

Finally, if you want further information about rates and trends for the LIBOR and Prime Rate you can look at these sites:

Extra Information: Has Forbearance (no need to make payments) for up to 36 months due to financial hardship. Forgiven upon death or permanent disability.

So with the benefits listed above, why would you want to consider private loans? First you need to review the benefits of GradPLUS loans and make sure they do affect you greatly or be willing to forego them. Secondly you must be willing to accept some risk and/or have backup loan options or assets to help in case interest rates rise greatly. If you can handle those terms, private loans can be much lower in initial costs and interest rates over the term of your loan, thus saving you money especially due to the fact that interest accrues while you are in school.

If you have decided to consider private loans then you will need to know about the possibility of your interest rate increasing and what you can to do handle this. For one, many private loans have interest rate caps, but these are so high (usually around 18%) that they shouldn’t really affect your consideration. Instead we need to look at the trends and future possibilities for the LIBOR and Prime Rate (as this is what your private loan interest rates depend on).