Paying for College: Being Smart About Private Student Loans

 Private Student Loans Can Help Fill a Gap - But Savvy Students and Parents

         do Lots of Homework and Thinking to Guide Their Borrowing

                         Private Student Loans 101



    NEW YORK, July 30 /EMWNews/ -- In the heat of summer, parents and

students sweat over the cost of college and how to pay for it. The best

approach is to sweat just a bit more by doing all the homework when it

comes to knowing the real cost of college, where to look for free and cheap

money, and determining whether and how to make use of private student

loans, i.e., loans that are not backed by the government.



    That's according to MyRichUncle(R) (http://www.myrichuncle.com), a student

loan company and information source for parents and students.



    "Parents and students who are in the process of assembling a plan to

pay for college do themselves a major favor by doing lots of leg work,

research and shopping around when it comes to calculating whether to

borrow, how much and from whom to borrow," said MyRichUncle's John P.

Derham. "Cutting corners, accepting an aid package without investigating it

and over-borrowing can cause parents and students serious money problems

down the line."



    According to a recent survey of 1,000 parents with children in college

or soon to enter college sponsored by MyRichUncle, 69% of parents believe

their children will have to borrow to pay for college. Yet 57% of parents

with children soon to go to college say they are not confident they know

which loans should be applied for first, and similar percentages say they

don't understand the range of interest rates on student loans and the

repayment options.



    "There are a lot of misconceptions and disconnects when it comes to

paying for college, and they can be costly. Parents and students --

especially in this tight economy -- need to make the effort to understand

the landscape and what it takes to make smart moves. Bottom line: Don't

just take the first aid package that's offered," Mr. Derham said.



    The Rules of Thumb



    Mr. Derham and his colleagues offer rules of thumb for financing a

college education -- including the basics of smart use of private student

loans. For instance ...



    -- Sit down and do the math to learn the real, total cost of an

education, over and above tuition and fees. Taking into account the cost of

books, transportation, housing and food will help prevent students from

getting into a jam -- one that forces rash, expensive borrowing mistakes.



    -- Know the "sequence" of funds to tap to pay college bills. First look

for "free money." That usually means scholarships and grants. "Apply for

them. It's worth the effort," said Mr. Derham. The next step for many

families will be borrowing, and the rule of thumb here is to locate and

secure the least expensive borrowing options first. Look at all the sources

available to you -- from federally-guaranteed and private student loans to

personal and home equity loans -- and exhaust the least expensive loan

money before moving on to other sources.



    -- Never borrow a dollar more than absolutely necessary. "While it's

sometimes tempting to use loans to have a little 'cash cushion,' borrowers

will regret that decision when it's time to repay. The worst attitude is,

'I'll just worry about it later.' You need to pay back more than just the

amount you borrowed; interest will capitalize on most student loans so

minimizing the borrowing is critical in managing what you will repay," Mr.

Derham said.



    -- Do not let talk of the "credit crunch" lead to rash decisions:

Federally-guaranteed loans are available to everyone who qualifies for

them, from a variety of sources. Smart parents and students fill out the

FAFSA form to qualify for federally-guaranteed loans. If they qualify, it

is worthwhile to check the rates and discounts of several lenders in order

to secure the best deal.



    -- Consider private student loans -- i.e., ones not

federally-guaranteed -- to fill a cost gap, but shop hard for those. If

there is a cost gap that needs to be filled with a private loan, shop hard

for that loan. Just one percentage point difference in the rate of interest

is significant when it comes to the amount of debt being accumulated. For

instance, the payback difference between a $10,000 loan with deferred

repayment plan at a 8.69% interest rate and one with a 6.92% interest rate

is $5,700 -- more than half the amount of the loan itself!



    -- Be your own best resource for finding the best deals. Take the savvy

shopper you are when it comes locating the cheapest gas, shopping for best

discounts on groceries or comparing rates on car insurance, and put that to

work on your student loans. Search beyond the preferred lender of your

school by getting on the Internet, visiting your local bank, and even

credit unions. Shop, compare and take the lowest rate -- it's too important

not to be actively involved in your lender selection process.



    -- Is there a co-signer with strong credit? Students often get better

-- i.e., lower -- rates on private loans if they have a co-signer, like a

parent or other relative, who has strong credit.



    -- Understand the benefits/costs of deferring repayment until after

graduation. While deferring monthly payments on your private student loan

will be less financially taxing on the student while in school, the amount

of actual debt will be significantly higher than if the student started

repayment immediately. "A good -- and realistic -- way to think about the

deferment option is that your debt level gets bigger every day that you're

deferring. If it's possible to start making on-time monthly payments in

school, do it," said Mr. Derham.



    -- Take a hard, unemotional look at the job and salary prospects for a

field or major. As difficult as it may be, it is worthwhile to research

whether one's chosen field of study or area of career interest will be able

to support what it will cost to pay back this investment in education. If

the prospects appear challenging, it might be worth starting off at a less

expensive -- e.g., two-year -- school or thinking about career

alternatives.



    "Seventy-six percent of parents told us the return on investment in an

education is a 'good' to 'great' value," added Derham. "Parents and

students can ensure the value proposition by being smart, selective and

savvy about paying for their education. We want families to make better

decisions today, for the sake of the decisions they will want to have the

opportunity to make in their future."



    MyRichUncle's web site, http://www.myrichuncle.com, provides further guidance

for parents and students solving the puzzle of funding a college education.

    About MyRichUncle(R)



    From its inception in 2000, MyRichUncle(R), the consumer brand of MRU

Holdings, Inc. (Nasdaq: UNCL) has been at the forefront of innovation for

education finance, most recently focusing on the growth market of student

loans. Since May of 2005, MyRichUncle has originated more than $450 million

private and federal student loans using its breakthrough underwriting

platforms and innovative technology to deliver competitively priced

products and services to borrowers. In May 2006, the Company launched

Preprime(TM), the first and only student loan that allows students to

qualify for loans based on individual merit, rather than credit history

alone. Dedicated to reshaping the student loan industry to function in the

best interests of students, founders Vishal Garg and Raza Khan and their

team are committed to delivering the most innovative solutions for their

customers. The Company and its founders have been recognized by Fast

Company's Fast 50 (2006) and listed among BusinessWeek.com's Tech's Best

Young Entrepreneurs (2006). For more information, visit

http://www.myrichuncle.com.



    UNCLG