After reading this article, the first thing that came to my mind was, even student loans, that are supposed to help you pay for your future, can also be a gamble depending on your situation in terms of financial outlook.
The graduation benefit provided by Wells Fargo, in essence, for me is one awesome offer.
The pros about this offer compared to a Federal loan, from my point of view are:
1. APR starts at 3.5% compared to a Federal APR which is at 7.9% fixed. No need convincing, I am bought.
2. Since I am a dad that wants control over finances, receiving loans directly from the bank is better compared to federal loans which send the funding directly to the school. So whenever there is a problem, I have to go to the school and for the school to talk to them (happened twice and trust me, it’s a hassle). Cutting of the middle man is better (for me, in my opinion) compared to other unforeseen hassles that might come in the picture.
3. No origination fees compared to a Federal loan that charges for that. Again, I am bought.
4. IF YOU GRADUATE, your interest rate will be lowered by .50%. This pretty much gives me a good reason to push my son to finish his studies. It is like the carrot and the stick tactic. But, I like it. The rest for me are just add-ons as I am not really into too much bells and whistles since there is always a catch one way or the other.
For the cons, however, here are my thoughts:
1. APR which start at 3.5% is a variable. Almost all my credit cards had conned me in the past few years in paying for unseen charges with variable percentage added. One must be careful here. It might be a good deal but if something crashes, you might be dragged down with it.
2. Extended repayment plans for government school loans are not available for private parent loans neither is the graduated repayment plan. This is the gambling part that I am not a fan of as in this economic downturn, a lot of parents that I know of are a bit delayed in terms of payments so my suggestion is to look for a salary insurance plan that makes sure that you are covered whenever you get sick or be involved in any accident.
So, here are my thoughts about this program. I hope this helps some of the parents who happen to read this article. In the end, you will still have to discuss this with the entire family, which I always do as I practice transparency in terms of financial outlook in the family to promote responsibility and choose together which plan you think works best in your current situation.
