Private Education Loan Fundamentals Aubrey Stelly Senior Lender Consultant TG

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

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

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

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

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

Fees Origination Late Ways to reduce –ACH –Banking relationships

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

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

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

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

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

Additional considerations Trade-offs Penalties Co-signer impact

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.

Questions? This presentation is available for download at