Loan Questions

[will]

i am currently researching my options for a career training loan (outside of a private loan, which might be a last resort) to pay for flight training. the owner of the school (as well as my local bank) that i am probably going to attend suggests SallieMae as the financing institution of choice for this loan. after visiting the SLM website application several times, i have generated several questions that maybe someone here might be able to answer...

 

1. based on the average CFI pay (most likely my first job), what would be a reasonable repayment period on a $20,000 loan, given an average cost of living (i'm not training or planning to work in the boston or san fran areas).

 

2. is there an advantage to "Interest Only Payments" vs. "$10 Deferred Repayments?"

 

3. is it reasonable to list a "graduation date" that is 12 months after a "start date" if I plan to pursue a "Professional Pilot Program" as a full-time student?

 

4. the application lists six "Disbursements" (dates/amounts). can anyone explain how these are used when paying for training that is "pay as you go?"

 

5. would a lender such as SallieMae grant a larger loan amount if a certificate is already paid for by the individual? for instance, if i enrolled and paid out of pocket for PPL, would i be more likely to get a $20,000 loan to finance subsequent certificates?

 

the truth is, i have the savings to pay for all of my training out of pocket, but i would be broke at the end of the training and have to subsist on a CFI salary. i've done that before (my first job in boston 11 years ago was <$25k), so it doesn't scare me all that much, but i'm 34 now and have something of a lifestyle that i'm used to. i know this will be a different life, and i'm sincerely looking forward to it...it's just...i haven't been broke before, and i really am not looking forward to it.

 

any help/input would be greatly appreciated. thank you.

[Sparker]

If I had the cash for it, I wouldn't even consider getting a loan for it. Pay cash for the training and after your done if you can't handle the lifestyle borrow money for whatever you feel you need, i.e. car, house, blah blah... You'll get approved easier having some sort of collateral. There is less risk using your own money within reason, keeping maybe 6 months of living expenses (not wages) in your savings, and if you find your self in a jam you still have cash to fall back on.

 

As for Sallie Mae, they aren't handing out much money any more. If you have a billion credit score and no other major debt with a looooooooooong history of former debt properly handled, maybe.....

[Darren Hughes]

12 months is a pretty reasonable time to go from zero to CFI in a full time Pro Pilot Course. It can be done in a lot less depending on the school, weather, and the motivations of the student. And on the other hand it can take longer for some people but 10 to 12 months is probably a good average.

 

I recommend using the cash you have if you're fairly sure you can make it stretch until you're making money as a CFI. Sure, times will be tight for the year or two that you are instructing. But when you move on to the next step on the ladder where you'll be making $50K - $60K, you'll be pretty happy that half of that isn't going to Sallie or Bernie or Freddie or whoever you chose to borrow money from. Because, at the end of the day those lending companies are going to make a fortune off you.

[jehh]

1. based on the average CFI pay (most likely my first job), what would be a reasonable repayment period on a $20,000 loan, given an average cost of living (i'm not training or planning to work in the boston or san fran areas).

 

That you'll have to figure out... $20K over 15 years at 10% interest works out to $214.92 a month, the question is, can you afford that? If you change the terms to 5 years, it works out to $424.94 a month.

 

2. is there an advantage to "Interest Only Payments" vs. "$10 Deferred Repayments?"

 

Yes, you pay less total money back, approval is easier because the monthly payment will be lower, and you'll pay a point less in interest.

 

The downside, you have to start making interest payments right away.

 

3. is it reasonable to list a "graduation date" that is 12 months after a "start date" if I plan to pursue a "Professional Pilot Program" as a full-time student?

 

Yes

 

4. the application lists six "Disbursements" (dates/amounts). can anyone explain how these are used when paying for training that is "pay as you go?"

 

Yes, the money goes to the school, generally in three disbursements, however it can be 6 if you like.

 

The school should keep the money on account for you and provide an invoice every time you train, showing what is left on account each time.

 

5. would a lender such as SallieMae grant a larger loan amount if a certificate is already paid for by the individual? for instance, if i enrolled and paid out of pocket for PPL, would i be more likely to get a $20,000 loan to finance subsequent certificates?

 

No, banks do not work that way. They are looking to be repaid, so it comes down to past credit history and current income. They really could care less what certificates you do or do not have.

 

the truth is, i have the savings to pay for all of my training out of pocket, but i would be broke at the end of the training and have to subsist on a CFI salary.

 

Apply for the loan, if you get approved at 5%, take it... If at 14%, then run away... Everything inbetween, you'd have to think about. Cash is king, and it is much easier to get when you already have it, not so easy once you've spent it.

[fry]

Yes, the money goes to the school, generally in three disbursements, however it can be 6 if you like.

 

The school should keep the money on account for you and provide an invoice every time you train, showing what is left on account each time.

 

Are the lenders (what lenders there are) still doing that? That is the issue in all of the currently on-going lawsuits related to Silver State. The students' attorneys are attempting to hold the various lenders liable as parties to SSH's fraud for disbursing the loan funds to SSH too far in advance of the when the actual training occurred. The students can't go after SSH because it is bankrupt.

 

If the lenders are still disbursing the loan funds in that manner (which in the case of SSH was according to the students' loan agreements) that would seem to suggest that the lenders are not concerned about the legality of the practice. Which means the lawsuits probably aren't going anywhere and unless the lenders agree to settle for PR or political reasons the SSH students will either repay the loans or file personal bankruptcy.

[jehh]

Are the lenders (what lenders there are) still doing that?

 

Sallie Mae always has, and probably always will... Keep in mind that Silver State got all the funds very quickly, before even 1/3 of the training was completed. We get the funds spread out over the entire training, in fact we often have to request Sallie Mae move forward the money as the student account has run low, and yes, this does require permission on part of the student.

 

Also, unlike Silver State, when a student wishes to stop training or go somewhere else, we refund the remaining funds on account to Sallie Mae. How many people were able to leave Silver State part way through training?

 

At the end of the day, the real problem was that Silver State was a crooked operation, not the way the loans work.

[will]

folks, this has been invaluable information, and i thank you all very much. at the end of the day, it looks like i will just be rolling the dice on a $20k loan (maybe even less), and if it doesn't come through, i won't cry in my cereal over it. if it comes down to the wire, and i'm only a few hours away from finishing, the private loan option is always available to me.

 

i begin training for my second career in mid-september at the age of 34, and i've never been so excited. thanks again for the answers and input.