<p>My daughter will be attending Cornell in the fall. We recieved a generous grant as well as $7500 in offerred subsidized and institutional loans . We have enough in savings to cover the EFC this year without the loans, but we will have to start some borrowing after that. Are we better off accepting the loans Freshman year because the terms are so favorable--or paying the entire bill and having less in savings for next years FAFSA? I am afraid if we don't take advantage of these loans now, when she is a Jr and Sr we will have to borrow more from private sources at a higher rate.Thanks for your comments.</p>
<p>To know whether or not $7500 would add anything to your FAFSA EFC, print out the FAFSA formula, and run your numbers through it. <a href=“http://ifap.ed.gov/efcformulaguide/attachments/010512EFCFormulaGuide1213.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/010512EFCFormulaGuide1213.pdf</a> Parent savings above the asset allowance are assessed at 5.6% (I hope I got that right!) which would mean an EFC of about $400 higher than if you spend down the amount your daughter could borrow.</p>
<p>Personally, I say let her take out this loan this year. Hold on to your money for the time being. She won’t get a chance to take out this particular loan again - each year’s loans are separate and if she suddenly needs this much in addition to what she could borrow in a future year, she would have to get a private loan. If she finds that she doesn’t spend all of the money this year, she would be able to bank it for a future year or pay part of the loan back at the end of the year.</p>
<p>If she has a sizable chunk of the loan money “left over”, she can use it to “pay you back” for your parental college-related expenses so that it isn’t sitting in her account at FAFSA time. You will know how much has to be moved out of her account if you run the calculator I linked above.</p>
<p>Lastly, depending on how her aid package is structured, she will probably need to pay income tax on part of the aid. Scroll down through this forum to find the threads on that topic. There also are some in the parents forum. The taxes might take a bite out of her “savings” as well!</p>
<p>I met Happydad when we were both grad students at Cornell. We have many fond memories of our years there. </p>
<p>Wishing you and your daughter all the best!</p>
<p>And don’t forget, new legislation this year will probably extend the 3.4% interest rate on student loans (it’s an election year…) but will rise to 6.8% for the loans offered next year. Just something to consider. If loans are subsidized, then there is absolutely no reason not to go for them at this point.</p>