What college offers the best deal on a loan?

For those in the know, there's an amazing deal available for financing your student's college degree. It's a 1.2 percent no-fee loan, but there's a catch: Your child first needs to get accepted into Princeton University.

Princeton is the only Ivy League school that offers financing to families, with a rate that's lower than what is offered by the federal government, notes Bloomberg News. Even high-income families can apply for the loan, given that it has an upper income limit of $500,000. Of course, the odds of getting into the prestigious college are low, with the school last year admitting only 7.3 percent of applicants.

The deal may seem like an another unfairness in a world where the elite appear to get special breaks, ranging from subsidies for private jets to yachts. But that 1.2 percent loan, while enticing, does come with one major limitation: It is only for a variable-rate loan, which means the rate is likely to rise after an initial fixed period.

Nevertheless, for Princeton parents who opt in favor of the university's fixed-rate loan, that, too, is below federal levels. Princeton will help finance your child's tuition at a fixed rate of 4.3 percent, compared with the federal government's current rate of 6.4 percent for its Direct PLUS loans. The government's loans also carry a 4.3 percent origination fee, adding to it costs.

Financing a college education is financially stressful for many families. The cost of a college degree has jumped more than 12-fold during the past 30 years, according to a 2012 survey by Bloomberg. Not surprisingly, seven out of 10 college seniors graduated with debt last year.

Attending Princeton isn't cheap -- a four-year degree will set families back $217,300, according to a survey from compensation site PayScale. That's less than some other top schools -- Harvard University carries a four-year price tag of $225,700 -- but students are expected to recoup that investment, PayScale notes. That's because Princeton students will benefit from a 20-year return on investment of $690,800, making it the 13th most favorable university when looking at long-term earnings potential.

Add in a low-cost loan, and Princeton students are likely coming out ahead of their cohorts. After all, other students will be carrying loans with interest rates at least two percentage points higher than those lucky few Princeton tigers.

  • Aimee Picchi

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