- Private student loans typically have variable interest rates. The interest rate is tied to an index, such as LIBOR or PRIME, plus a margin.
- The Prime Lending Rate is the interest rate lenders offer to their most creditworthy customers. A rate of LIBOR + 2.8% is roughly the same as PRIME + 0.0%.
Comparison Example of Two Private Loans Based on a $10,000 Loan With Two Disbursements
|Lender 1||Lender 2|
|Interest Rate||LIBOR + 9.75%||LIBOR + 9.75%|
|Monthly Interest Payment (In-School and During Grace)||Four Payments of $42.92 (Following First Disbursement); and 47 Payments of $85.83 (Following Second Disbursement)||No payments.|
|Monthly Principal and Interest Payment (Following Graduation)||$170.99||$155.88|
|Repayment Term (In Months)||84||180|
|Total Amount Paid||$18,569.30||$28,058.51|