Supplemental Loan Comparison Guide

Federal Supplemental Loans (Graduate PLUS Loans) generally have more favorable deferment and repayment terms than most supplemental loans offered by private lenders, such as:

• A variety of repayment plans to help manage your payment amounts and budget
• Unlimited deferment while enrolled in school at least ½ time in a degree-granting program
• Protections should you become permanently and totally disabled
• The option of forbearance during temporary periods of financial hardship
• The possibility of loan forgiveness and/or cancellation for certain public service careers

Many, but not all, private lenders also offer flexible deferment and repayment terms. It is important to consider these terms should you ever need to take advantage of them.

Your citizenship status will have an impact on which loan program you can borrow through:

• As a domestic or permanent resident student, you can borrow through any loan program.
• As an international student, you can only borrow through limited programs such as the HUECU Student Choice Loan Program, which lends to international students.

In general the Graduate PLUS credit review is less stringent than the private supplemental loan credit review.

• Graduate PLUS loan approval is based on your credit worthiness. A basic credit check will be run. This means that if you are found to be 90 days or more delinquent on the repayment of any debt or the subject of a default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off of a Title IV debt during the last five years, your application will be denied.
• Approval for private supplemental loan programs is based on your credit score or other credit criteria. This often takes into account all of the above, as well as how many credit cards you hold, the limit on each of those cards and the amount that is accruing in interest. There are other factors that go into your credit score, and you should not think that you will improve you credit score by canceling a credit card. If you need tips on improving your credit score, refer to the credit section of our website or go to annualcreditreport.com. 

Your credit could impact your interest rate and the program through which you can borrow.

• If you have excellent credit, some lenders will offer you a better rate.
• If you have poor credit, you can try to apply for a Graduate PLUS Loan since the credit criteria is not as stringent as a private loan.
• If you are denied a Graduate PLUS Loan, you may apply with a creditworthy endorser (co-signer) or you will need to apply to a different private supplemental loan program.
• If you fail the credit check of any private loan program you may be required to reapply with a co-applicant or co-signer.  

Are you the type of person that is more risk-oriented or more conservative in your approach to money and what do you think is going to happen to interest rates in the future? Rates in the past several years have been at historic lows, and interest rates of 5–8% historically are good-to-average rates. Unfortunately, there is no reliable way to predict future interest rates. However, here are some considerations:

• If you are more risk-oriented and believe that the average interest rates over the time you hold your loan could go down, then you might want to borrow a loan that has a variable interest rate. The benefit of a variable interest rate loan is that the interest rate could go down during the life of a loan and save you money in the long run.
• If you are more risk-averse and believe that the average interest rates over the time you hold your loan will be about the same or will go up, then you may want to borrow a fixed interest rate loan. The benefit of a fixed interest rate loan is that you lock in the current rate for the life of the loan. 

Are you someone who can tolerate fluctuations in your monthly payment amount?

• If so, a variable interest rate loan may interest you. The interest rate on a variable interest rate loan will change each quarter and your payment will, therefore, change each quarter as well.
• If not, you may want to consider borrowing a fixed interest rate loan. With a fixed interest rate your monthly payment will always be the same for the life of the loan. The predictability of this type of loan can help you better manage your mone

• Pros: If the fee enables you to lock in a low, fixed interest rate, you may be better off in the long run if interest rates increase.
• Cons: If you pay a fee to take out a loan you may be paying extra costs especially if you pay the loan off early.

It is important to note how loan fees affect the amount that is credited to your student bill. Fees are either added to the loan amount by the lender after disbursement, or they are deducted from the loan amount by the lender prior to disbursement.

All Federal Graduate PLUS loans have a fee deducted from the loan amount. The fee varies depending on the lender. If you decide to borrow through a Graduate PLUS Loan Program you may want to increase the amount of money you borrow to establish your desired net loan amount. Use the following information to determine the net amount to borrow to take the loan fees into account:

Most other supplemental loan types add the fee to the original loan amount and, therefore, you will not have to increase the amount you borrow to cover the fees. 

Are you planning on paying your loans off in the first few years after graduating?

• If so, an interest rate reduction after 4 years of on-time payments may not be a true benefit to you as your loan will already be paid off in full.
• If not, you should be honest with yourself about the likelihood that you will be able to meet the benefit requirements. Keep in mind that the repayment incentives are a marketing tool used by the lenders. Roughly only 12–19% of borrowers nationally actually achieve the borrower incentives; therefore, we strongly encourage you to make your borrowing decision based on a number of factors and not only there payment incentives. 

Are you someone who would prefer to have as few lenders as possible for your federal and supplemental loans?

• If so, you may prefer to have as many of your loans as possible to be through the same lender so that you only need to work with one lender. The benefit of this is that you will only have to make one payment each month for the loans through that lender.
• Since electronic debiting is very popular and mainstream now (making managing several payments at one time easier) you may be willing to work with more than one lender in order to take advantage of the best interest rates and repayment incentives.

Total cost should be a factor in making your decision in supplemental loan borrowing; however, we hope that you will consider all of the factors outlined above before making your final choice. You should use this information not as a bottom line comparison, but instead to decide if, for example, a $300 increase in total cost is worth the difference between a fixed and variable interest rate loan, or if a $600 increase is worth the security of federal repayment benefits. We recommend using a web-based interactive loan calculator to help estimate approximate total costs of the supplemental loan(s) that interest you.