Must you use Federal student loans in the academic year they are initially offered, or is it possible to decline Federal loans for Freshman and Sophomore years, (or decline the unsubsidized loans), then stack the unused amounts from those years to pay for later years?
We have enough saved for 2 years of in-state public, (or private equivalent with merit), for both sons, ('16, '18), without loans, plus a 3rd year for each with student loans. We may have to take out PLUS loans for the 4th years, (or for the final 2 years of younger S, if we decide to distribute it that way). We do have plans to downsize housing and increase my hours worked once both are in college, to be able to pay more out of current income, but are not counting on that in our calculations.
Especially for the unsubsidized loans, it seems like it would make sense to defer them until later to avoid interest if possible. We’ll need both kids to take out their max loans eventually. Is it possible, and if so, does it make sense, to defer the year 1 & 2 loans to years 3 and/or 4? Hope I’m making sense!
Yes, you must take them in the year appled for. However, you don’t have to spend them in that year and if you keep them isolated in a bank account, you do not have to include them with savings on the fafsa for the next year.
For one of my kids, we’ve done that. She took only the subsidized loan and it is in her bank account. She might need some of it for taxes, but will save the rest for next year.
Thank you! So if the student opens a savings account purely for parking the loans until they’re needed, that amount is not counted toward student savings on future fafsas, or just the following year?
my understanding is that those funds are not considered. On the FAFSA, there is a ‘help’ button (? in a circle) next to the asset box and it instructs not to include financial aid money. I’ve only experienced it for one year (borrowed as a freshman, excluded as a soph), but assume it works for all the years. D’s isn’t in a totally separate account, but I deposited the check and she’s not drawn against that money yet.
Maybe @kelsmom can confirm if my understanding is correct, but I think you have to keep track of the loan amount balance in the account. Once you draw money out and it is below that, I don’t think you can replace it with non FA money and be able to exclude it from assets on FAFSA.
Not sure if my explanation made sense.
For example in the first year you take a subsidized loan of $3500, you spend $500 on books, so you have $3000 left in excludable assets. Next year you take $4500 and spend $500, so now total of $7000 of loan money in account.
If I were to do that I think I would use a separate account just for FA refunds that the college direct deposits into.
I would pay the books with a CC or with work earnings (non work study income like summer earnings) that would be listed as assets if I didn’t spend it.
It is correct that any money in the bank account that is attributed to financial aid is not reported on the FAFSA as an asset. mommdc’s explanation makes sense (with the caveat that not all colleges offer direct deposit of refunds).