I have a 529 for my son. It won’t cover 4 years since he chose OOS. It will prob cover 3.
Does it make sense to use the fund in its entirety and then move to loans once it’s dry? Or, should I spread the fund over 4 years and supplement that with loans each year so his last years aren’t entirely on loans?
Is he taking the federally funded student loan each year?
Hasn’t taken anything yet. He’s an incoming Freshman. That’s the $5,500?
If you take anything other than the ~$5500/year federal student loan, interest will accrue. You’ll have to borrow for the 4th year because students don’t qualify for outside loans.
How much will you be borrowing and who will pay it back? The total federal student loans are ~$27k over 4 years. If you add a ~$30k private loan for the full cost of OOS attendance for the 4th year, that’s ~$60k in loans. That’s double what most students can comfortably repay.
Couldn’t he take the student loan every year and save it for the last year?
Interest only payments can be made I think.
How much will the school cost per year?
Total cost about 40k/yr.(grad school likely but that’s on him)
Firm believer in letting the kid take some financial burden for HIS education but I won’t let him go under either.
If I have him take the 5.5k a year, is it permissible to save it all and use it for the last year? I thought you had to apply it to the year that you received.
You can take and save. I’d use and save the 529 tho.
As far as I know you can borrow the loans if you file a FAFSA. Interest will accrue, so you can either have it applied towards the college costs, and you pay less out of the 529, or pay the bill from the 529, and then receive a refund for the loan amount. It will be refunded to the student, so you would want to be sure he saves it.
He could also get a summer job and a campus job to help with costs.
I’d spend the 529 money now and borrow what is needed in year 4.
The Stafford loans for years 1-3 will most likely be unsubsidized. There is an origination fee of 1% plus interest accruing from the start, so it is not free money. During the first 3 years, you can be saving more, replenishing the 529. Son can be working during the summers. He might get some scholarships or grants, an internship, a co-op that pays some good money so you wouldn’t need the entire amount you’d planned to pay for years 2 and 3 from the 529 money.
Thanks for the advice