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Celebrating 30 years of ExcellencePlanning, Saving & Paying for College

Comparing College Loan Options

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• The Fine Print• Key Terms• Tiered Pricing• Interest Rates• Wise Borrowing Tips• MEFA vs. PLUS• Connect with Us

An Overview

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•Review Application and Solicitation Disclosure Statements– Found on lender websites and loan comparison tools– Provide loan details

•Questions to learn the answers to when comparing college loans:– Do I know the interest rate before applying?– What are the fees?– What will be my total loan cost over the life of the loan?

Read the Fine Print

Familiarize yourself with the terms of

the loan

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Key Term: Annual Percentage Rate (APR)

• Single percentage number• Rate charged to consumers for borrowing funds • Represents total annual cost of the loan• Considers interest rate, fees, & repayment term • Quick way to compare loan options

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• Signs the loan agreement along with primary and/or student borrower

• Has equal responsibility for loan repayment • May increase chances for approval• Those with good credit may help decrease the interest rate• May be released from the loan after a certain number of on-time

payments for certain loans

Key Term: Co-Borrower

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• Specifies time period that borrower has for loan repayment

• Denotes when repayment begins• Has a direct impact on total loan cost• Selected by borrowers during loan application

process

Key Term: Repayment Term

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Some lenders use tiered pricing, which means:•The interest rate is based on credit score and your risk to the lender•You may not know the interest rate before you apply•The advertised rate may not be the rate you receive

Be Informed About Tiered Pricing

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• Fixed Rate vs. Variable Rate• Transparency: Are the rates posted up front?• If the rate is variable, is there a limit on how high the rate

can go?• Rate may be based on repayment option chosen

What to Consider in the Interest Rate

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• Borrow the Federal Direct Student Loan first

– Available by submitting the FAFSA

– Annual limit for freshman year: $5,500

• Minimize Borrowing

– Use available savings

– Enroll in the college’s interest-free monthly payment plan

• Know your total loan cost

– Use MEFA’s Loan Payment Calculator

• Get advice from trusted resources

– Speak with the college financial aid office

– Reach out to customer service representatives at MEFA

Wise Borrowing Tips

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MEFA and PLUS Loan Comparison  MEFA Loan Direct PLUS Loan

Interest RateStarting at 4.99% (APR 6.13% – 6.51%) fixed interest rate 6.84% fixed interest rate

Fee4% origination fee added to loan amount

4.292% origination fee deducted from loan amount

Student on loan? Yes No

Responsibility to repayStudent and parent or other credit-worthy co-borrower share responsibility

Parent or custodial step-parent is borrower

Can responsibility be transferred?

Yes, with the Student Deferred Loan option No

Credit criteriaMinimum credit score based on repayment option Minimal standards

Repayment terms 10 - 15 years 10 - 25 years

Repayment optionsImmediate, Interest-Only, and Deferred Repayment Immediate and Deferred Repayment

Enrollment status At least half-time At least half-time

Consumer safeguardsStudent death and disability loan forgiveness

Parent death and disability loan forgiveness

Requires filing of FAFSA No Yes*The Annual Percentage Rate (APR) reflects both the accruing interest and the effect of borrowing the origination fee and paying the expected monthly payment over the term of the loan. APR varies with length of deferral, length of the Anticipated In-School Period, and the presence of a co-borrower.

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MEFA is here to help you.To learn more, join our community at

mefa.org.

(800) 449-MEFA (6332)

Connect With Us