Federal loans have great perks, like being able to take advantage of programs like Public Service Loan Forgiveness (PSLF) (link), Income Based Repayment (IBR), and Revised Pay As You Earn (REPAYE) (link), and there is a chance that some of all of them could be forgiven in the future depending on about 12,000 political factors.
Since public loans have these perks, private loans should only be considered if you can’t qualify for federal loans, or if you can save money from private loans by getting better terms. If you want to check out some private lenders and compare rates you can check out our calculator here (link) that will let you compare options.
If your loan has an origination fee then you will receive less money than you borrow. If you have a 4% origination fee, then you will get 96% of whatever you borrow. Borrow $10k, you will receive $9,600, and interest will accrue on the full $10k.
“An origination fee is a percentage of your loan amount charged by the lender for the processing of your loan. Federal student loans have an origination fee; therefore, the amount you may receive as a disbursement may be slightly lower than the amount you accept.” - studentaid.gov
In short, no; You should reconsider the lender if they are charging application fees. You can find a list of lenders that don’t have fees here (link).
If you are in a credit position where you can’t qualify for all of the federal or private loans (from more reputable lenders) that you need to attend school, then we recommend reaching out to your university for guidance.
Note: If you are a DACA recipient, then some private lenders will loan you funds as if you are a US citizen. You can check out our lender comparison table here (link) to see which ones.
Frankly, you are in a tougher spot when it comes to borrowing than others.
If you have someone who is a US citizen/resident who will cosign on your loan, then you can borrow with most private lenders (and all of our highlighted lenders).
If you do not have someone who can cosign, then we recommend these four options:
- Reach out to your university, or the international student’s club. This will be a great place to get some school specific information.
- Look for borrowing options in your home country that will cover US education.
- Check out US-based lenders that cater to international students. You can see two on our lender comparison page (link). Keep in mind that these lenders know that you are in a hard spot (and people occasionally stop paying their loans and leave the country) so they have higher fees and interest rates than those for US citizens.
- Find a lender who will give you a personal loan (vs a student loan) and pay the school directly. A hard thing here is that you will have to start making full monthly payments immediately after you get the money.
For federal loans you can switch to an income based repayment plan while you Clerk to reduce your payment. On this plan you only have to pay a fixed percentage of your disposable income. You can learn more about IBR, at https://studentaid.gov/manage-loans/repayment/plans/income-driven
As of right now, only a few private lenders offer a guarantee of full deferral while you Clerk, and those only offer it for 12 months so you will have to start payments if you do more than one. However, some private lenders might be willing to work with individuals on a case-by-case basis.
Keep in mind that anytime you defer your loans (or make payments lower than you your minimum monthly payment), you will be accruing more interest than you would otherwise and the total price you pay for your loans will be higher than if you made consistent payments.
These are federal programs that allow you to pay a certain amount on student loans each month based on how much you make. Each type of IDR has different rules, and you can learn more at https://studentaid.gov/manage-loans/repayment/plans/income-driven
While you are on an IDR plan, you will still accrue interest based on your interest rate.
To learn more about PSLF from the government, you can go here https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service
An important note: PSLF is only for federal loans. If you borrow with a private lender or refinance with a private lender, this option is no longer an option.
PSLF is an amazing program and it is vital that you understand the program if you have federal loans. One major challenge is that there are quite a few requirements you have to meet in order to take advantage of the program. We are a small operation and keeping all the requirements up to date would be tough, so we recommend checking out the above link to learn more.
A quick summary of things that are unlikely to change in the foreseeable future. In order to use PSLF, you have to qualify for an income driven repayment plan and you have to work for a qualifying employer and you have to do both of these (and other stuff) for 120 payments (at least 10 years).
We are not giving legal, financial, or tax advice. Do your own due diligence and make thoughtful, considered decisions.
You can qualify for income driven repayment plans regardless of who you work for. Therefore, one time you should definitely consider PSLF, is if you are deciding between being employed by a ‘qualified employer’ and a non-’qualified employer.’ In this scenario, your choice of employer may be the only thing that keeps you from using PSLF and you should take that fact into consideration.
A brief piece of unsolicited advice: It is important to plan for the long term when considering IDRs and PSLF. If you are deciding between a ‘qualified employer’ and a non-’qualified employer’ then you should project out your future earnings across all 120 payments, and not just what you will be making the first year. This is a long way of saying that your future earning from a non-’qualified employer’ might be higher than a ‘qualified employer’ AKA raises might be bigger with private companies vs public companies. This is written with love from someone who worked for the federal government for 10 years.
Note: these programs are sometimes called LIPP or Low Income Protection Program.
Loan Repayment Assistance Program, or LRAP, are university sponsored (paid for) programs where Universities help their students pay for loans. This is essentially a kind of financial aid, but it is based on after school instead of before school. Every LRAP program is slightly different and only a few schools offer them, but we expect that this number will increase over time.
Jarron went to some admitted student’s weekends with his partner, and after 3 or 4 90-minute presentations on LRAPs he realized that law schools aren’t super good at getting to the point.
Of course the questions you should ask depend on your specific situation BUT here are some...
- Does the LRAP apply to private and public loans?
- How much will I have to make to take advantage of the LRAP?
- Does the LRAP only apply to certain types of employers?
- Is the LRAP limited based on the type of work I am doing?
Good question. We would love to make a calculator that helps you figure that out. Unfortunately, every school has a different LRAP threshold so it’s hard to put into a calculator, but we are working on figuring it out.
For individuals, we would recommend:
- Think about how much you will have to borrow with and without the scholarships
- Assume that you will make the median of what the schools’ graduates make (link)
- Ask the school with the LRAP how much they will help with loans assuming you make the median amount.
- Look at your take home pay (after paying student loans) for the next 10 years
- See which school is a better financial deal
- Chose which school you like more with this in mind