Affording Boarding School with the prepGATE® k-12 Loan Program
(http://www.prepgate.com)

By Kristen Power, First Marblehead Corporation, prepGATE® k-12 Education Loan Program

Whether you are a parent looking to send your child to a private k-12 school, or your child is currently enrolled in one, you are probably exploring your options for how to pay for tuition and the other costs associated with a k-12 school. The following information will guide you as you consider the many loan program options available to help you pay for your child´s private education.

Tuition Planning

Advanced planning is your best option for financing a private school education. The first step in planning for education financing is to contact the admissions or business office at your child´s current or prospective school. The financial aid officers at the school can help you learn about available financing options.

Today, a large number of private school students receive financial aid. Many schools offer financial aid in the form of merit awards and need-based scholarships. Based on eligibility, these awards can help make a private school education more affordable. Financial aid grants may cover a significant portion of your child´s tuition depending on the school and eligibility.

Learning About Private Student Loans

In addition to scholarships and grants, there is another valuable resource to help you pay for your child´s education, particularly when grants and scholarships don´t cover all the costs. In the past fifteen years, the emergence of private k-12 education loans has made all types of private school education more accessible. Private student loans are an excellent option that will help you avoid dipping into savings or using high-interest products like credit cards. These loan products, many of which are credit-based, can help you spread out tuition payments and make financing tuition more manageable.

Should you decide to finance your child´s education with a private k-12 education loan, there are a number of things to consider before making your final decision. For starters, it is critical that you research and understand the terms of the loan. Terms of a loan include the interest rate, repayment schedule, and Annual Percentage Rate (APR).

Interest rates and fees vary based on the type of loan you receive. Some lenders have products that offer different interest rates based on the borrower's credit history and score. Other lenders offer a flat rate for every approved borrower. Many loan programs may also include an origination fee. This fee may be an out-of-pocket fee or it may be included in the principal of the loan. With prepGATE, for example, the same low interest rate is charged to every qualified borrower. Also, our origination fee is 5.0% and is added to your loan principal at time of disbursement. Click here for repayment information.

Repayment terms and deferment options (when available) also differ between private loan programs. Some loans begin repayment immediately following the school's cashing of the loan check. Others might provide a deferment period during which no payments are required. Some private loan programs allow a borrower to pre-pay the loan without penalty, while others charge a fee if you decide to pay off your loan before the end of the repayment period. prepGATE does not have prepayment penalties and repayment of the loan begins within 30 to 60 days of final disbursment.

The most important metric when comparing and choosing the right private loan is the APR. The APR, or Annual Percentage Rate, represents the annual cost of your loan and is affected by the loan's interest rate, origination fee (if any), and repayment and deferment terms. Be sure to review all aspects of the assumptions and loan terms used in an APR calculation to ensure a true "apples to apples" comparison among loan options.

Finally, be sure talk with your student's financial aid officer about your options for private school loans. For additional information on important things to look for when getting a boarding school loan, continue reading the sections below.

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Apply for a Loan

Would you like to apply for a boarding school loan? Follow this link and apply now! You can also apply by phone by calling 888-353-GATE. We look forward to hearing from you!

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Tips on Choosing a Boarding School Loan

What should you look for in a boarding school loan? Consider the following criteria when evaluating your private loan options:

Annual Percentage Rate (APR) -- What is the APR on the loan? The APR is the effective interest rate when all finance charges and up-front fees are included. The APR on a loan can vary among lenders because of differences in up-front fees, even if the interest rates are the same. The term of the loan and repayment terms can also affect the APR.

Preliminary Approval -- Do you want to know quickly if you qualify? Does the lender offer loan preliminary approval over the phone or Internet?

Repayment Options -- When does repayment begin? Be sure to be aware of when you must begin repaying the loan.

Returning your loan documents -- Does the application process allow you to print the Credit Agreement and return it by fax?

Repayment Period -- How long is the repayment period for the loan? If the cost of your child's tuition requires you to borrow large amounts, you may need a longer time to repay the loan. While this will lower your monthly payments, it will increase the aggregate finance charge you pay for the loan.

Loan Limits -- Is there a maximum amount you can borrow? Does the loan have an annual or aggregate limit? Will these limits meet your needs? It's a good idea to borrow from the same lender each year, so make sure the lifetime aggregate loan limit is high enough to cover the tuition costs throughout your child's entire education.

Interest Capitalization -- Be sure to look at how often your loan's deferred interest may be capitalized (added to your principal balance). When is the interest added? Annually? At repayment? If the interest is capitalized annually, the loan is more expensive than if interest is capitalized only once at the time your loan enters repayment.

Service -- What is the application process? Is preliminary approval offered? Is the application Web-based? How does that fit into your school's processes? What are the delivery options for funds? Can you access and view account information on the loan? Can the lender/servicer offer combined billing of all your educational loans?

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prepGATE K-12 Education Loan Program – Product Overview and FAQs

The prepGATE loan program helps make private K-12 education affordable, including more than 1,800 registered and/or accredited private k-12 day, boarding, parochial, or special needs schools in the United States. The prepGATE loan program is designed to empower parents to make the best educational choices for their children. Using the prepGATE loan program is a smart way to fill the gap between what you have, what you receive in aid and what you need to maximize the k-12 private school experience for your child.

Parents and schools consider the prepGATE loan program because it offers:

• Low rate - Low cost -- For most parents, the most important things to look for in a loan are low cost and affordability. prepGATE's interest rate is just 8.52% as of January 1, 2008, based on LIBOR Index + 3.5%. The APR is 9.23 %. Click here for repayment information.

• Simple, convenient application process -- There are three easy ways to apply:
  • Online - you can start the online application process at anytime.
  • By Phone - You can ask questions or start the application process over the phone by calling 888-353-GATE
  • By Mail - You can contact us to receive an application through the mail. Call 888-353-GATE or email us at parents@prepgate.com.

• Accessibility - Our credit standards are designed to provide access for as many families as possible. Since the beginning of the prepGATE loan program, we strived to help families fill the education financing gap.

• No cash up front - There are no application fees or up-front fees and the 5.0% origination fee is added to the loan principal and repaid in your regular monthly payments. Click here for repayment information.

• Timely disbursement - Loan proceeds are disbursed directly to the school within 5 business days after receipt of your completed application.

• No prepayment penalties - You can pay off some or all of your prepGATE loan balance at any time without penalty.

Would you like to apply for a prepGATE loan? Click here to apply online now! You can also apply by phone at 888-353-GATE. We look forward to hearing from you!

Here are some additional FAQs to consider when thinking about prepGATE education loans:

Q. Why choose a prepGATE loan?

The prepGATE loans offer a low rate, no hassle processing, and the highest quality customer service. The prepGATE loan program is also the preferred BoardingSchoolReview.com private loan product.

Q. How do I know if I need a private loan?

A private loan should be used for any unmet need as determined by your child's school. You can also use these loans to cover any outstanding balance owed to the school, even if your child no longer attends.

Q. Are private loans and alternative loans the same thing?

Yes. Private loans and Alternative loans are the same thing. Private loans are "alternative", or non-Federal, sources of financing for your child's education.

Q. How do I estimate the full costs of my child's education?

Contact your child's school to learn the details of the program's total cost of education.

Q. What does credit-worthy mean?

A credit-worthy applicant is an applicant and/or co-signer who must have an employment history of at least two years (if self employed, have been in business for at least two years); have proof of current income; have a satisfactory credit history of at least 21 months; have resided at his/her current and immediately preceding addresses for a total of at least 12 months and is a U.S. citizen or permanent resident and has resided in the U.S. for the previous two years.

Q. What is the current interest rate?

The current interest rate is 8.52%, as of January 1, 2008. The APR is 9.23%. Click here for repayment information.

Q. What other fees are associated with the program?

There is a 5.0% origination fee that is added to the loan principal and repaid in your regular monthly payments. Click here for repayment information.

Q. How long does it take for a preliminary approval?

You can receive a preliminary approval as quickly as 15 minutes after we have received your loan application.

Q. Is it a fixed rate or variable?

The rate for the prepGATE k-12 education loan is variable and is adjusted quarterly.

Q. What is the timeline to receive my funds?

With the prepGATE loan program's downloadable Credit Agreement and fax-back option you may receive funds in as few as five business days. Once you are conditionally approved, a credit agreement is available online for completion. At the same time we notify your child's school electronically of your conditional approval and request they certify information pertaining to enrollment status, the student´s identity and loan amount. Once we receive the completed and approved paperwork from you and your child's school, disbursement of the loan proceeds will occur within 5 business days.

Q. Is there any penalty for early payment on a prepGATE loan?

No, there is no penalty. You can pay off some or all of a loan at anytime, even if your child is still enrolled in school.

Q. What are my monthly payments going to look like?

On a $10,000 loan with a 5.0% fee and an interest rate of 8.52%(as of 1/1/08),the average monthly payment is $91. Click here for repayment information.

Q. How long do I have to repay the loan?

You have up to 20 years to repay the loan. Click here for repayment information.

Q. When do I begin repayment?

Repayment begins 30 to 60 days after the final funds disbursement to the school.

Q. Will my credit score affect my interest rate?

No, the prepGATE loan program offers the same low rate to every qualified borrower.

Q. I am a foreign parent sending my child to a school in the U.S. Can I still apply?

Yes, you will need to have a credit-worthy co-signer who must have an employment history of at least two years (if self employed, have been in business for at least two years); have proof of current income; have a satisfactory credit history of at least 21 months; have resided at his/her current and immediately preceding addresses for a total of at least 12 months and is a U.S. citizen or permanent resident and has resided in the U.S. for the previous two years.

Q. Do I need to know what school my child is attending to apply for a prepGATE loan?

Yes, your child's school information is an important part of your application process. As soon as your loan is conditionally approved, we arrange school certification, which includes verification of your student´s enrollment.

Q. What if my child's school is not listed on the approved school list?

We recommend contacting our Customer Service at 888-353-GATE to confirm the eligibility status of your institution. If the school is not approved, we can speak with your child's school and provide detailed information regarding our school approval process.

Q. How do I know my child´s enrollment status?

Enrollment status may play an important part in the type of loan for which you are eligible. The best way to determine your child´s enrollment status is to contact the school's Financial Aid Office.

Q. How much can I borrow?

You can borrow up to the cost of education less financial aid (as certified by the school and subject to a generous borrowing limit).

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Glossary of Loan Keywords

Below is an alphabetized list of commonly used phrases in the boarding school loan industry:

Accrued interest: Interest which accrues on the unpaid principal balance of a loan.

Amortization: To provide for the gradual elimination of debt by paying a portion of principal at the time of each periodic interest payment.

Annual Percentage Rate (APR): The effective interest rate when all finance charges and up-front fees are included. The APR on a loan can vary among lenders because of differences in up-front fees, interest charges and the length of the loan term. Federal Truth-in-Lending laws require that lenders state the cost of their credit in terms of both the finance charge and the APR.

Borrower: The person(s) who obtain(s) the loan and is required to repay it.

Capitalization: Addition of unpaid interest to the principal balance of a loan which increases total outstanding principal.

Capitalized Interest: Accrued interest which is added to the principal balance, thereby creating a new and higher balance on which interest now accrues.

Consolidation: The combining of two or more loans into a single loan.

Co-signer (or co-applicant, or co-borrower): Any individual other than the borrower who co-signs your loan documents and thereby agrees to be equally responsible for the repayment of that loan in the event the primary borrower defaults. This person is typically a parent or relative.

Credit Agreement (Loan Documents): Contract between a borrower and a lender that includes the terms and conditions under which the borrower promises to repay the loan (Formerly known as Promissory Note).

Credit Bureau: An agency that collects and distributes personal credit information about consumers. A credit report from a bureau may include payment history on loans and other credit accounts (such as credit cards), balances of accounts, and length and place of employment. Any default information on student loans may appear on a credit report for as long as seven years.

Credit Scoring: An empirically derived statistical analysis of information available in a credit bureau report that demonstrates, based on past credit history and performance, how likely an applicant will properly manage their credit.

Credit-worthiness: the prepGATE loan program's definition of a credit-worthy applicant is someone who must have an employment history of at least two years (if self employed, have been in business for at least two years); have proof of current income; have a satisfactory credit history of at least 21 months; have resided at his/her current and immediately preceding addresses for a total of at least 12 months and is a U.S. citizen or permanent resident and has resided in the U.S. for the previous two years.

Default: The failure of the borrower to make an installment payment when due, or to meet other terms of the Credit Agreement, to such an extent that it is reasonable to conclude that the borrower does not intend to pay.

Deferment: A period when a borrower, who meets certain criteria, may suspend loan repayment.

Delinquency: Failure of the borrower to make a loan payment when due, or to meet other terms of the Credit Agreement.

Disbursement: When loan funds are issued by a lender to the school.

Disclosure Statement: Statement of estimated costs to the borrower for a loan, the annual percentage rate and any additional finance charges.

Eligible Borrower: A consumer who meets all prepGATE k-12 education loan program requirements.

Forbearance: A special arrangement between the borrower and lender (at lender's option) which may allow the borrower to temporarily stop making payments, obtain an extension for making payments, or make smaller payments than originally scheduled.

Guarantee Fee: An administrative fee charged by the guarantor for each loan it guarantees to reduce risk for the lender and permit them to offer funds at a lower interest rate.

Guarantor: The guarantor pays the lender or other source of funds for the loan in the case of default. The guarantor then attempts collection from the borrower at that time.

Interest Rate: The rate at which interest accrues on the principal balance. This rate is either a fixed rate or a variable rate based on an index.

Lender: The bank, savings and loan, credit union or other approved entity from which funds for a student loan have been obtained.

Loan Limits: The minimum and/or maximum amount of money which an applicant may borrow from a lender during a specific time period.

Origination Fee: The fee, charged by the lender, for services provided in connection with the origination and funding of the loan.

Prepayment: A prepayment is any amount of money that is paid on a loan over and above the then due amount. Prepayments are always applied to interest due first and then to principal.

Principal: The dollar amount of the loan before interest charges.

Program Administrator: The state agency, guarantor, lender or other company that is the primary (or sole) marketer of a private loan or tuition assistance program.

Repayment Period: The time span within which a loan must be repaid to the lender or servicer.

Repayment Schedule: The monthly installment plan on a loan. Monthly payment amounts, which include a portion of the principal balance and the accrued interest, are determined by the length of repayment. There is usually a minimum monthly amount as well.

Servicer: An organization that acts on behalf of the lender/holder and conducts certain activities, such as billing students for repayment, processing deferment forms, processing requests for forbearance, sending out notices to borrowers about the status of their loans, and collecting on delinquent accounts. Some holders act as their own servicers rather than hiring an outside loan servicer.

Terms and Conditions: Loans have characteristics that define what the borrower and the lender are each entitled to and what actions they may or must take. Examples of terms and conditions include interest rate, length of repayment, repayment options (e.g., equal installments, graduated repayments), deferment options, charges for late payment, and consequences to the borrower in cases of delinquency or default.

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Loan Calculator

Use the calculator below to calculate sample monthly payments for a loan:

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Repayment Example

Repayment Example: APR (Annual Percentage Rate) computation assumes $10,000 is borrowed with an origination fee of 5.0%; payments begin within 30-60 days of the final funds disbursement; repayment over 20 years, in 240 equal monthly payments of $91.48 ; and interest will be capitalized once at repayment. The LIBOR Index is equal to the average of the one-month LIBOR rate as published in the "Money Rates" section of the Wall Street Journal on the first business day of each of the three (3) calendar months immediately preceding each quarterly adjustment date. LIBOR means London Interbank Offered Rate. If the LIBOR Index increases, the APR will increase.

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