Tag Archives: private loans

Releasing Your Cosigner from Private Student Loans

31 Aug

If you have a private student loan through a bank, credit union, or other lender odds are you will be part of the 90% of private student loans that require a cosigner. While the cosigner is meant to be an extra guarantee to the lender that the loan is repaid, it’s fair to assume that you’re no longer a risk for the lender not getting paid back after you’ve graduated, have a steady job, and have been steadily making on-time payments.Cosigner Release

Now that you’re on your feet, it would be nice to be able to release your cosigner from your private student loans. Releasing a cosigner from a student loan means that they are no longer tied to the loan and it won’t appear on any credit checks or leave them on the hook in the event of a catastrophic incident that leaves the student permanently disabled or dead. Not to mention, if your cosigner were to die or declare bankruptcy, it could automatically put your loan into default even if you are on-time with payments.

Remember, removing your cosigner from your loan won’t harm you as the student in any way! The loan will still have the same impact on your credit regardless of whether there is a cosigner or not. So whether your co-signer is a parent, or one of the 30% of cosigners who are a non-parent, releasing them of the liability is something nice you can do for them after they put their neck out for you.

Every lender has different methods to release cosigners, if they do so at all. There are, however, some standard things that most lenders like Sallie Mae or Wells Fargo will review when considering releasing your cosigner.

In addition to having graduated from college and being a US Citizen, they’ll take a look at your employment, income, payment history, credit score, and ability to assume full responsibility for the loan.

Remember that the release isn’t guaranteed, with the Consumer Finance Protection Bureau reporting a high number of rejections from lenders. But the opportunity to relieve you and your cosigner of the potential issues from unfortunate circumstances is worth contacting your lender and filling out some paperwork.

Financial Aid February: How to Accept Your Aid

13 Feb

After reviewing your award notice, all that’s left to do is to accept or reject your offers for the award year. The majority of grants — free money that does not need to be paid back — are automatically accepted on your behalf. However any loans offered will require your decision, and at this point you will need to report any private scholarships you received.

While no official deadline for accepting aid exists, keep in mind that financial aid will not credit to your Purdue invoice until aid is accepted. The Division of Financial Aid recommends you accept aid no less than four weeks before the start of the semester. Each type of aid has unique requirements for acceptance.


Federal Loans, Purdue Loans, and Work-Study

  1. Accept the offered aid on myPurdue under the “Financial” tab > “Award for Aid Year” > “Accept Award Offer.”
  2. Follow the directions based on type of aid below.

Subsidized/Unsubsidized Stafford Loans

You will need to complete a Master Promissory Note (MPN) and Loan Entrance Counseling at www.StudentLoans.gov. Sign into the website with the student information and click “Complete MPN” or “Complete Counseling.”

Purdue Loans

Complete a promissory note at ECSI — a third-party servicer Purdue uses for this loan. This is done each year you borrow a Purdue loan.

Federal Work-Study

  • Find a Work-Study job by searching through job postings for student life or other on-campus departments and contacting listed employers for the application process.
  • Once you have secured a Work-Study job, visit the Financial Aid office on campus for a Payroll Authorization Form (PAF). Give this form to your employer when you begin your job. Remember you can only work during the semesters you are enrolled and can pick up the PAF no earlier than the first day of the semester.

Parent PLUS Loans

  1. One parent needs to submit a Parent PLUS Loan application at www.StudentLoans.gov. Sign into the website with the parent information and click “Request PLUS Loan.”
  2. Once credit approved, the same parent, if a first-time Parent PLUS borrower, will complete a Master Promissory Note (MPN) at www.StudentLoans.gov. Sign into the website with the same parent information and click “Complete MPN.”
  3. If credit denied, the parent has several options: replace the Parent PLUS loan with $4,000-$5,000 Unsubsidized Stafford Loan and/or private loan up to the remaining cost, reapply for the Parent PLUS Loan with a co-signer, or reapply with a different parent borrower.

Graduate PLUS Loans

You will need to complete a PLUS Loan application at www.StudentLoans.gov. Sign into the website with the student information and click “Request PLUS Loan.”

Once credit approved, the student, if a first-time Grad PLUS borrower, will complete a Master Promissory Note (MPN) at www.StudentLoans.gov. Sign into the website with the student information and click “Complete MPN.”

Private Loans

  • Research your private loan options. Review our private loan information and search online for lenders. Complete a loan application with your lender. Most lenders have applications available on their website.
  • Once credit approved, contact your lender for the next steps necessary.
  • Your lender will contact the Division of Financial Aid for certification of your loan. Once certified, the loan will appear in your financial aid package on your myPurdue account.

Note that the private loan application process typically takes at least 30 days. Apply as early as you can so that funds arrive in time for the bill due date.

Private Scholarships

Report your private scholarship to the DFA on your myPurdue:

  1. Log in to your myPurdue account.
  2. Under the “Financial” tab > “Award for Aid Year” select current aid year from the drop down box.
  3. Select the “Resources/Additional Information” tab and report your private scholarships.
  4. Don’t forget to give your donor the Bursar address to send a paper check.

My Student Loan Journey Pt. 2: Climbing the Mountain of Debt

10 Feb

Casey Doten, Financial Aid Administrator – Purdue University

I knew going into college that I’d have to take out student loans to help finance my degree. While getting myself $48,600 into student loan debt was less than ideal for me, I was able to earn my degree. However thanks to the miracle of interest, my student loan debt had increased from the $48,600 that I had borrowed to $54,800 by the time that I began repayment.

The scary part? That $54,000 could have been even higher. Thankfully I had a couple of things going in my favor that helped to prevent that. A good portion of my federal loans are subsidized and did not accrue interest during school. I also had a loan which required me to make quarterly payments to help keep the interest from adding up (unfortunately these payments always hit me at the worst times in college). Had I not had either of those two factors, my loan debt would have been $59,900 when I finally started repayment.

So how have I gone about tackling this $54,800 debt? Being honest, it hasn’t been perfectly approached at all times but after a few initial mistakes I’ve come up with a plan and am paying it off as quickly as I can.

my student loan journey 2.jpgMaking mistakes early on

During my grace period of six months between graduation and my first payments becoming due, I had saved up a little money working two part-time jobs, but I never put anything toward my loans. As my grace period ended, I was able to get a full-time job along with working ten or so hours a week on the side.

So in November my repayment officially began. I had always heard people say “If you can afford to pay a little extra on your student loans, you should do it”. Getting rid of my student loans was a priority for me, so even though I wasn’t exactly swimming in money I paid extra on my loans. If my payment was $115 for a loan, I’d pay $150. The problem is that my approach of paying a little extra on every loan per month was one of the least efficient ways possible.

Pay more on loans with higher interest rates

What I should have been doing was approaching my repayment with a real plan rather than just tossing a few extra bucks at it.

I learned about the avalanche and snowball debt payment methods from some friends and after some research realized I could take my loans head-on with a plan. I started paying the minimum on every one of my loans except the one with the highest interest rate where I put all that extra money I had previously spread out between the other loans.

Using this avalanche method, I paid on the highest interest loan and then when that was finished up I took that money and started paying it to the next highest interest loan. This approach helps me pay the least amount of total interest possible.

Understand options & repayment plans

Despite the fact that I’ve been able to meet my monthly loan payments, I realized decided to enroll in an income based repayment plan. This brought my monthly payments on my federal loans down from over $300 to around $70 each month. Why did I choose an income based repayment plan when I wasn’t having troubles making my repayment? I found out that having a lower amount due each month could both help my repayment plan and allow me to be more flexible in my finances.

For my repayment, it allowed me to pay less on several of my loans and kept interest from my subsidized loans from accruing (the interest can be covered for up to three years). I took the $230 I wasn’t obligated to pay to all of my loans and rolled it into the extra I had already been putting toward my highest interest loan.

The other perk was that it gave me a lot more financial flexibility, so if unexpected events popped up I could just pay the minimum on my loans and use the money I would have paid to cover whatever emergency happened.

Luckily I never ended up needing this and I have been able to double down on my avalanche repayment and target my highest interest loan with the money I would have been paying otherwise been spreading out to my other loans.

Make payments right away… or make them automatic

Before I started making my loan payments, I felt like I was making just enough money to get by. I didn’t believe I could find $600 per month just for student loans, let alone money to pay ahead. The secret that I found was to make my student loan payments right away once I got paid. Rather than having to worry about what is left to make my loan payments, I prioritized them and made the extra payments part of my mandatory bill paying routine at the beginning of each month. I also found out that one of my private loans and my federal loans offered a small interest rate reduction for enrolling in automatic payments, which I promptly enrolled in to reduce the total interest I would pay over the loans’ lifetimes.

Roll over other debts

During my first year and a half of repayment, two things events had an effect on my debt: my college beater Jeep died on my commute to work forcing me to buy a different vehicle, and I got proposed to my then-girlfriend, now wife. This gave me another $450 per month in payments to make between the car and ring. This squeezed my personal budget to as thin as it could possibly get, but I still made sure to prioritize getting these payments in right away after getting paid. I realized I that I could make this new budget work, so after paying both off I took $350 of that and rolled it into my student loan payments helping me accelerate my impending pay-off even further.

Where I’m at Today

As of this moment, I still have $42,246.38 left to go. I’ve made great progress but I’m still paying over $200 every month on interest alone. It can be depressing to realize how much I’m losing every month to interest, but I know that my current life wouldn’t be possible without the degree I earned and the experiences I had. Rather than concentrating on how far I have to go, I prefer to reflect on how amazing it feels to know that I’ve paid my loans down more than $12,500 in student loan debt in 27 months in addition to over $9,000 between my car and wife’s engagement ring. The end might not be near but that doesn’t stop me from taking one step at a time toward being student debt free.

Financial Aid February: Applying for More Aid

7 Feb

The FAFSA registers you to be considered for aid from Purdue and the federal/state government. To be considered for additional Purdue/private scholarships or private loans, you need to take a few extra steps, such as completing a separate application. Additional information about eligibility and steps to apply for each type of resource are listed below:

finaical aid february 2 - applying for more aid.jpg

Purdue Departmental Scholarships

Incoming freshmen need to have a complete admissions application submitted by November 1 to be considered for Purdue’s merit scholarships.

In addition to having a complete admissions application by November 1, new students enrolling in one of the following colleges or schools should also complete the Purdue Supplemental Scholarship Application by January 1, 2017.

  • Agriculture
  • Health & Human Sciences
  • Krannert School of Management
  • Polytechnic Institute

The deadline for incoming freshmen to complete the Purdue Supplemental Scholarship Application is January 1st of the year they intend to enroll. The deadline for the 2017-18 school year closed on January 1st, 2017.

Scholarships awarded through the supplemental scholarship application are based on merit, need, or a combination of the two. If you wish to be considered for those scholarships with a need component you will need to file your Free Application for Federal Student Aid (FAFSA) by the January 1 deadline as well.

Current Students: There are different deadlines for different programs:

  • Agriculture — February 1
  • Chemical Engineering — April 1
  • Health and Human Sciences — January 1
  • Liberal Arts — February 15
  • Management — March 2
  • Polytechnic Institute* — March 1

*Polytechnic Institute Statewide students should complete the Supplement Scholarship Application and select Purdue Polytechnic as their school. Polytechnic Institute Statewide students may complete the application through August. 

What You’ll Do:

Go to the Purdue Supplemental Scholarship Application and follow the directions.

Other Purdue Departmental Scholarships

Some schools and departments use applications other than the Purdue Supplemental Scholarship Application. Find your department below to see if you qualify, and also check to see if you qualify for any other scholarships offered at Purdue.

Click here or on the chart below for access to clickable links!1page-0

Private Scholarships

There are many private scholarships available — especially for incoming freshmen — and you should definitely be applying for these as early as possible. Scholarship opportunities can be found in your local community and nationwide and will have different application processes. However, it is important to be wary of scholarship scams. You should not pay a fee to an organization to find scholarship opportunities for you or to complete an application for a scholarship that is offered.

We recommend talking to a guidance counselor or checking out free resources like FastWeb or scholarships.com to learn about opportunities you may be eligible for.

The Bursar’s Office provides details about mailing checks from donors, how they are applied to your bill, and other processing information for private scholarships that you receive.

Remember to thank the sponsor of your scholarship. Learn more here.

Parent PLUS Loans

A Federal Parent PLUS Loan can be taken out by a parent in the parent’s name to help their dependent undergraduate student help pay for college. This loan has the same interest rate for everyone regardless of credit. For more details and information read about Parent PLUS Loans here.

Private Loans

A large number of private education loan options are available to assist you and your family in meeting college costs. Loan applications are completed with your lender of choice and require good credit or a co-signer with good credit. We recommend applying at least 30 days prior to the date you need the funds and complying quickly to information requests from your lender. Read more about student loans.

Which Private Alternative Loan is Right for You?

29 Apr

Leo Hertling, Associate Direct Financial Aid Services and Operations – Purdue University

As we progress through the semester, some students are getting a bill asking for the next payment on tuition or for a payment in full.  This financial headache on top of living expenses, cell phone bills, etc.  When there isn’t enough in your checking or savings account to pay off everyone that you owe, how will you make it through the semester without working a full-time job and going to school full-time?  Oh and you have to maintain at least a 2.0 cumulative grade point all at the same time.Migraine

Before you begin looking at private loans, you should consider exhausting all of your federal eligibility for grants and loans. If you have not exhausted your federal eligibility or do not know what your federal eligibility is, you may want to contact your institution’s Department of Financial Aid. If you have fully maximized your ability for aid with the Federal and state assistance programs, and still have a sizeable balance due, then you may need to consider the use of a private alternative loan.  But which one is right for you?

If you search the internet for Private Alternative Loan, you will get about 4.5 million hits on Google in a little under ½ second.  I don’t know about you, but I don’t have the time to look at all those pages to see what is out there.  Not to mention that I have no idea who is reputable and who is not.  So how can you tell what lender to choose to satisfy your needs?

Let’s go back to basics:  Who does your family bank with?  What lenders do you know and trust?  Are there lenders that you don’t trust?

If none of the banks your family works with have a private student loan program, you may want to take a look at some of the online resources for lists of student loan lenders.  Purdue offers a list of lenders that our students have used in the past.  You can also receive a list of national private student loan lenders from finaid.org.

Why choose a private loan?

pockets inside outPrivate loans may be a financial alternative after all other sources of aid have been explored and found to be lacking.  If you find yourself in a situation where you are unable to cover the rest of tuition, living expenses, are unable purchase educational supplies, and borrowing is not possible through a Parent or Graduate PLUS loan, then a private student loan may be right for you. There are times when a private loan may have a lower interest rate than the current Parent or Graduate PLUS loan options.  Usually these loans have variable interest rates.  Be sure to review the borrowing conditions of the loan to determine the amount of variability in interest rates over time.  With variable interest a loan can start low and affordable, but the interest rate could increase significantly making payments unaffordable in the future.  A loan of this sort could adversely affect your future and wreak havoc on your finances.

A private loan may be the proper route for you to follow if you have been denied federal assistance due to a lack of progress toward your degree.  Many private lenders will funds to you regardless of how well you are currently doing in school.

Things to look at before choosing:

A private loan is in your name (and your co-signers name) solely and does not have a guarantor backing the loan; this is different from your Federal student loans.   In most cases, lenders tend to be conservative business men and women who like the idea of being paid back the money they loaned you.  If you default on the note, the lender will be left holding the note, with no recourse but to try to collect the money from you or your estate. Unlike other loans, educational loans cannot be dismissed in bankruptcy litigation. As a result, most lenders require a student with limited credit history to obtain a co-signer before they are considered for a private loan.  Your co-signer should be someone with a good credit history; this way, if something happens to you, they have someone to go to when trying to collect on the promissory note.   Even if you have very good or well established credit, you may want to consider using a co-signer for you loan.  Often lenders will give a lower interest rate or better terms simply because you applied with a co-signer.  Be sure to discuss lending options with your cosigner, they should have an equal say as to whom the loan is borrowed through since, in essence, they are borrowing the loan too.

Processing time from the start of the loan application to the disbursement of the loan also needs to be considered when investigating private loans.  The borrower needs to stay on top of communication between themselves, the lender, the co-borrower, and the institution they are attending.  It may take as long as 5 weeks to get the private loan in place at your institution.  By immediately responding to any queries sent to you by your lender, you may be able to cut this down to 2 weeks, but it will still not be faster than borrowing through the federal loan program. If you know you will need a private loan, the best practice is to apply early, finish all required steps by your lender, and keep the institution you are attending informed of where you are in the private loan process.

When choosing a lender, you will want to look at the terms and conditions of the loan.  The terms and conditions spell out the basics of a loan such as:  interest rates, origination fees, and repayment terms. Find multiple trusted lenders that offer private loans and compare the terms and conditions of each lender. Many lenders have multiple private student loans; find the one that best fits your need. percentage

Most loans will have a variable interest rate but there are a few with a fixed rate.  If you choose to take a loan with a fixed rate, you may have a rate that is much higher than if you had selected a loan with a variable rate.  On the other hand, if you select a variable rate loan, your interest rate may be lower than the fixed rate, either at first or for the entire repayment period depending on the economy.  The interest of a variable rate loan will be based upon a set variable like the current Prime (WSJ Prime 3.25%) or LIBOR (.78%) rate plus a margin.  The margin will vary from +0% to as high as the lender feels is necessary to adequately cover its risk exposure.   The better the credit of you and your co-signer, the lower the margin will tend to be.   The margin will remain in place for the life of the loan while base variable will go up and down as interest rates go up and down in the economy.  Review the terms and conditions of the loan you are considering to review the variables you may be facing.  Also look to see how often the interest rate will be recalculated and if there is an interest rate cap of any sort.

Origination fees:

Origination fees are fees that are assessed; you pay them, but never see the money.  A front end origination fee is where the lender takes a portion of the loan, a set percentage as defined in your terms and conditions, off the top.  A lender with a 2% origination would take $2 for every $100 borrowed.   The problem is that if you need $100 you need to borrow $103.  Some lenders will offer you a lower interest rate in return for paying an origination fee.

Term of the loan: 

The term of the loan is the period over which you will pay the loan back.  When does it begin?  Are you expected to make payments while you are in school?  Some lenders expect you to repay the interest on the loan even while you are in school or at least make a monthly token payment to assist in covering the interest that is accruing.   Other lenders would not require you to make any payment until you enter repayment.  Federal government student loans will normally be amortized over 10 years.  This will not be the case for your private loans.  Many of them have a repayment period of 15 to as much as 25 years.  While this sounds great remember the longer the period the greater the amount of interest.  It may make it easier on your monthly pocketbook to take a longer repayment but you may wind up paying 2 -3 times as much over the life of the loan.  You will also want to review the terms of the loan to see if there is an early repayment clause.  You can forecast the cost of your debt by using PayBackSmarter’s online calculator.

Borrower benefits

Does the lender give you an interest rate discount because you have an account with them?   Do they offer a benefit if you sign up for auto-debit where the loan will be automatically drafted from your bank account on the same day every month?   Some lenders will offer a discount if you let them do this.

Ultimately, it comes down to choosing the loan that makes the most sense to you and your co-signer given your projected income and possible income growth.

Have additional questions about whether borrowing a private / alternative loan or whether it is the right option for you?  Please feel free to contact the MyMoney at Purdue team at mymoney@purdue.edu or (765)494-5050 for more help. mymoney-alt.jpg

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