Borrowing everything? No financial aid

[DrStephTColbert]

With my parents' high income I don't qualify for need based aid so I'm responsible for the full amount. I'm entering my third year. Is anyone else in the same boat and figuring out the best source of loans? I'm thinking of taking the maximum Stafford unsubsidized loans (fixed 6.8% with 1.051% origination) and then adding Grad plus (7.9% fixed with a 4.204% origination) to make up the difference. However, I've received a mailing from Discover student loans with a 5.49% fixed fee and no origination fee. Sounds too good to be true.

What have other people in the same situation done?

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[RangerBob]

A fixed loan of 5.49% does sound impressive, but keep in mind that's likely the lowest rate they offer, and is contingent on you having excellent credit and most likely a cosigner as well. That's usually how they try and hook you in.

Personally, I'd go with the federal loans, even GradPlus, anyday over a private loan, even if the private loan was fixed at 5.49%. The federal loans have far more benefits, such as indefinite forbearance for residency (helpful if you don't want to make any payments in a long residency, vs. ~3-4 years for most private loans), and Federal loans have IBR/PAYE, and at least as of right now, loan forgiveness/PSLF. Federal loans are discharged if you die. Private loans may pass on to your dependents (depends on the lender). Federal loans are also much more forgiving when it comes to economic hardships.

The only time I'd recommend getting a private loan is if it's for an emergency and you can't get a federal loan, or if you need a residency/relocation loan and plan to pay off the private loan first.

I'd say always max out on federal aid before looking to private lenders. But if you can, don't even max out the federal loans if it's possible to live on less.