Three Master Promissory Notes later, my edumakaytion is funded.
The best way I can describe the experience of signing away a good 10-20% of my income for the next 25 years? Well, it’s probably a lot like playing with a baby bear in the wild: it’s all cuddly and you play catch with it and go la la la la all the time.
Awww, lookit the cute widdle baby bear!!
But then, mommma comes around. And if she sees you flirting with her child, you will die. Fun’s over, kids.
I am your loan collector. I am trained to eat you.
So I have 54 more months before I actually have to start paying off this thing and I’m gonna make the most of it. Let me break down, oh so briefly (because m@ doesn’t quit his job until the bitter end, unlike all the other slackers 😉 ) the order of importance on each loans to come down to the big winnah:
1. Maximum loan amount – This is sort of a no-brainer, but it’s important to make sure you’ll be able to fund all your educational costs. The financial aid office (P.S.: Ross has an AWESOME one) provides you with an estimated cost of attendance, so make sure your loan(s) cover(s) this amount. If you decide to pursue a dual-degree option, this requires even more scrutiny.
2. Disbursement Fee – Most government loans have a 1-5% fee tacked onto the premium used for default protection; if you have good credit, some private lenders offer you a loan with zero fees. If you’re taking out $150K in loans, that fee can add up. Always compare the loan rates and determine if a lower interest is offset by a high initial fee.
3. Co-signer incentives – I was able to drop my loan rate by a good chunk (and the disbursement fee) simply by asking Father of Rainierisms to co-sign. If a parent doesn’t, bribe someone. Er, I didn’t say that.
4. Interest rate reduction offers – Does your loan offer a drop in your total interest rate if you do automatic debit? Will they allow you to drop the co-signer after a certain number of on-time payments? These are all opportunities to reduce your payback period and total payment per month. Plus, boasting about your current loan rate is sexy.
5. Payback Period – It’s not fun to loan out $150K with a 5-year payment plan (unless you’re really really confident and really really successful. In that case, why aren’t YOU paying back MY loan for me?). There’s the trade-off between a shorter payback plan (less interest, higher payment per month) and a longer one (less %age of income going toward your loan, but more interest being paid in the long run) to consider. So if you end up getting that $200K/yr with $30,000 signing bonus starting out of college, your plan should be clear: pay it off in five years; and fund my broke-ass nonprofit lifestyle.