Getting a Private Student Loan?

Okay, here is my dilemma. I am currently half way through my Sophomore year of College. My parents pay my school tuition and basically nothing else. Car maintenance/gasoline, food, supplies and the like are left up to me. Last year I worked two jobs and made enough to cover my expenses, but my grades suffered. I was in the low-B to mid-C range. This past summer I made enough to carry me through my first semester, but now it is crunch time. Without having to work my grades are all A's, something I am proud of and want to maintain. I know the stress of a job (or two) will pull them down again.

But my parents are very stubborn and will not / do not see the need for me to have money. So to keep on track for a good Graduation GPA and be relaxed I want to take out a small private college loan for my expenses. I have been looking at Chase and like what I see. I was thinking about taking out around $10,000 for the next two-and-one-half years to cover my needs. My credit is good, so I think I'll be approved without a cosigner.

I thought that I would break off about $3,500 of that initial sum and place it in an interest bearing savings account, since the private college loan check would come straight to me. In no way are the school or my parents involved. I figure that the $3,500 can be set aside to make principle and interest payments on the loan every month until I graduate, so as to incur less overall interest that must be repaid. The remaining $6,500 would last me until senior year and be spent on food, supplies, etc. I know I will not get the most favorable rate but some sacrifice is necessary. Since part of the loan will be used to repay itself I will have less to repay when I graduate as opposed to differing it all. My Grandparents also have a sizable gift waiting for me when I graduate (but not any sooner) that will be able to repay most if not all of the remaining loan balance.

So my questions are: Is this a viable plan? If I have all things concerning the loan mailed to my school address, will my parents know about it? (since the loan is not verified by the school, it is a private students loan; I have to do this to avoid them harassing me) And finally, is there anything involving taxes (because my parents still do mine) that I would have to alert them about involving a loan for students expenses?

Thanks,
Charlie, 20, USA

Why borrow $10k up front at a high interest rate just to stick 1/3 of it into another account to earn a lower interest rate? That sounds pretty counterproductive to me.

Can you get one part time job to provide minimal income without adversely affecting your grades? If so, you could get a low limit, low APR credit card to live on and make payments on it. Here's the rub, you'd have to budget yourself very tightly.

This way, you would not have a $10k private loan (or your parents) to deal with. You'd get monthly credit card statements to help you from going too overboard. The extra pay from your summer jobs should be used to help pay down the debt in preparation for the next school year.

Your taxes would not be affected by either the loan or the credit cards. Again, the key is not to get out of control in your spending.

You sound like you have thought it out. That's excellent.

I'm not AS familiar with private student loans as with government-backed student loans. My best guess is that, due to your age and your dependency status it will probably be difficult to get a loan without their co-signature. The bank wants as many people responsible for a loan as possible. Students who get government-backed loans have, in essence, the government as a co-signer (they assure the bank they will be repaid, then the government comes after the borrower). Private loans are another matter.

But you won't know until you try. Have you consulted with your financial aid office? Have you attempted to get scholarships?

Good luck to you.

Thanks for the replies. My logic for getting the loan instead of a credit card with only a $1000 to $2000 limit was to have cash on hand. $6,500 of a $10,000 loan would give me $1,300 spendable dollars each of my remaining semesters, while the banked $3,500 at around 3.7% APY with ING online banking, would be paying down my overall balance. Whereas with a credit card I would be unable to make payments from beginning of fall until the end of spring. That means each month my balance would be going up and I would incur the interest charges on that ever-increasing unpaid balance. I feel that with a card I would just strand myself. But with the cash (although I know I would will lose money to interest) I feel I have a security blanket for emergencies. Let me know what you think.

Also, with the course load (and research project) I am taking, any job is pretty much out of the question during the school year. I want to focus on my studies to get a better leg-up once I graduate.

Well, if you could get the loan after today's rate drop, it might be worth your while. Why not put all of the loan into a high yield money market account and withdraw as you need it? That way, you will be able to maximize your interest.

I'd shop around for the best rates on both the loan and the savings account to minimize damage by interest on the loan.

I think you should look at how you spend your money. Try and reduce your expenses before you take out a private loan. Remember even though yyou are not paying until after graduation you are still accruing interest. And private loans are usually 8% and up without a cosigner.

what ever you do, dont see it as free money. it has to be payed back. Right now, Imsaying shoulda coulda woulda about my private student loans.

I think the private loan is attractive to me (while being repulsive to others) because of the fact that I will be able to pay off the loan right after I graduate, do to the trust that has been established by my grandparents. In the end, whilst paying interest and principle right after I get the loan until 2.5 years later, I believe I'll only have incurred several hundred to a thousand dollars in interest. I have rearranged my budget and $1,200 per semester is necessary to get by.

In some studies especially PHP degrees we don't get time for part time jobs
as research work don't give you time to sleep
from where can you manage time for job