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Private Education Loan Fundamentals Aubrey Stelly Senior Lender Consultant TG.

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Presentation on theme: "Private Education Loan Fundamentals Aubrey Stelly Senior Lender Consultant TG."— Presentation transcript:

1 Private Education Loan Fundamentals Aubrey Stelly Senior Lender Consultant TG

2 Session objectives Provide the tools necessary to discuss the factors involved in evaluating private loans Enable you to provide a framework for borrowers to evaluate their private loan options

3 Factors for borrowers to consider Interest rates Fees Program types Repayment terms

4 Interest rate factors Index –Prime Rate –LIBOR –Commercial Paper Rate Credit Score –Credit history –Co-signer School

5 Index definitions Prime Interest Rate — Interest rate that commercial banks charge their most creditworthy borrowers, such as large corporations LIBOR (London Inter-bank Offered Rate) — Interest rate that banks charge each other for loans (usually in euros) Commercial Paper Rate — The rate paid by large corporations for short-term borrowings, usually less than the Prime Interest Rate

6 Interest rate example Lender ALender B Loan Amount$5,000 Repayment Term10 Years Origination FeesNone Co-signerYesNo Rate IndexLIBOR (0.23%)Prime Rate (3.25%) Rate Margin+5.0%+7.75% Starting Interest Rate5.23%11.0% Monthly Payment$65.51$ Total Interest Paid$2,861$7,128 Total Repayment Amount$7,861$12,128

7 Fees Origination Late Ways to reduce –ACH –Banking relationships

8 Fees example Lender ALender B Loan Amount$5,000 Repayment Term10 Years Origination FeesNone3% Co-signerYes Rate IndexLIBOR (0.23%) Rate Margin+5.0% Starting Interest Rate5.23% No-fee Interest Rate6.89%7.40% Monthly Payment$65.51$67.54 Total Interest + Fees Paid Over Life of Loan $2,861$3,104

9 Program types State private loans Private — General study Private — Specialty study

10 Repayment details In-school Post-completion Capitalize interest or not

11 Interest capitalization example Lender ALender B Loan Amount$5,000 Repayment Term10 Years Origination FeesNone Co-signerYes Rate Index6.0% (fixed)LIBOR (0.23%) Rate MarginN/A+5.77% Starting Interest Rate6.0% Capitalization FrequencyNeverAnnually Monthly Payment$55.51$71.13 Total Interest Paid$2,936$3,536 Total Repayment Amount$7,936$8,536

12 Repayment length example Lender ALender B Loan Amount$5,000 Repayment Term10 Years5 Years Origination FeesNone Co-signerYes Rate Index6.0% (fixed)LIBOR (0.23%) Rate MarginN/A+5.77% Starting Interest Rate6.0% Monthly Payment$69.67$ Total Interest Paid$3,360$2,279 Total Repayment Amount$8,360$7,279

13 Additional considerations Trade-offs Penalties Co-signer impact

14 Summary Interest rate is not always the most important factor. Every borrower’s situation is different. Borrowers should conduct their search over a short time span so that the basis of the interest rates is similar.

15 Questions? This presentation is available for download at


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