<p>My D was accepted to her 2nd choice (deferred from 1st). The school offered her a nice initial FA package. My wife recently retired from her job, partly for medical reason, and also stress. The retirement would affect our 2014 taxes. I went back to the schools FA office with this additional information and they gave my D an additional $3K in grants. As part of the FA package they offered her a Stafford unsubsidized student loan. I'm figuring that what I have in her 529 account I should be able to fund this difference (without taking the student loans), for probably the first two years. After that she'll probably have to take out some loans. If I can cover the first two years without her taking loans will she be elibible for loans ($6,500 Stafford unsubsidized) in her junior year? Will that be automatic and be offered by the school even though I didn't take them the first two years? Or, would another option be for her to take the loans in her freshman and sophomore years and allow the money I've saved to strech further?</p>
<p>Yes, the student loans are available to students each year on the $5500/6500/7500/7500 and it’s the official university standing the school year that the student takes the loans that determines the amount. Once you turn down a loan, you can’t get the money IN ADDITION to what allowed that next year, though the total amount can be borrowed in future years in increments determined by the students official standing. In other words, if your student does not take the $5500 freshman year, the option of taking it as a 5th year loan is there if she needs that extra year to finish. There is that overall maximum dollar amount for a dependent student, and as long as the student does not exceed it, the student can take more than 4 years, but those yearly maximums stay in place. </p>
<p>So if you decide that she should not take the unsub part of the loan(3.9% interest rate), that amount would not be taken from her undergraduate dependent student maximum over her entire ug years, but she can’t take it IN ADDITION to each year’s maximums since that yearly maximum is also in place. Whether you want her to take the loans now, and give you flexibility these years, or wait till she needs them is a personal and financial decision you need to make. If they are unsub, I’d whole heartedly say take them as you can then stash them at no interest, but how good is that 3.9% vs your investment earnings and what flexibility this can offer you? Only you can make that decision. </p>
<p>Thank you for your reply and information. Maybe I’m missing something, but I thought the interest on the unsub starts accruing when the loans are first disbursed? </p>
<p>Unsubsidized loan interest rate is 6.9% and begins accruing interest on the day it is dispersed, or when you first take the loan. Subsidized loans are interest free until graduation. </p>
<p>Taking the unsubsidized loans later would be better. Also, if you take the stafford loans, look into paying interest only during college years, and when she graduates, the loan will be the original amount. If not, you are accruing interest into the loan, and paying interest on the interest. Wish I did that for my son. Would only be about 60.00 a month until graduation.</p>
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Not all unsub loans are 6.9% See <a href=“What is a Subsidized Student Loan? | Edvisors”>www.staffordloan.com/stafford-loan-info/interest-rates.php</a>
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<p>Thanks everyone! So maybe I’m looking at this too simplistically. If I can cover at least the first two years of tuition (after all scholarships and grants) then what benefit would there be for her to take the loans and for me to pay the interest? I know I can take the 5,500 and invest it elsewhere and possibly get a good rate of return, but there’s no guarantee. Is there a tax deduction that I can take on the interest?</p>
<p>There are tax deductions for the interest on student loans, so check that out.</p>
<p>Run your own analysis of projected expenses for all four years. If you don’t take any loans this year, as mentioned above, you won’t be able to take out that money later on unless it is for a 5th (or more) undergraduate year. Given that your family’s financial picture is changing drastically with your wife’s retirement, it may make sense to use some loan money (at least the subsidized money) now so that you gain flexibility later on.</p>
<p>Wishing you all the best.</p>
<p>It’s not all that easy to take every single thing into account, and we are not talking big amounts here. The benefit of taking those loans when they are permitted is that if you need the money the next year, it’s not like you can take what you did not take freshman year and add it to what you can take sophomore year. Once freshman year is gone, your window of opportunity to take the loan is gone. Need the money next year, too bad. You can only take out what’s allowed for sophomore year.</p>
<p>But, your student can take out the allowed loan right up to the end of the year, so if things look tight for the next year, the money from, say freshman year can be taken out in April May of that year and used for sophomore year along with the sophomore year loan. You have to know the rules with the loans. </p>
<p>If you pay the interest on the loans, you can deduct from taxes, but then you have less taxed deducted from your income for fin aid purposes, which mitigates the effect. </p>
<p>But not taking the loans might be a good idea too, as some kids need an extra term or year to graduate. Use them all up, none left.</p>
<p>@cpt - this was very helpful. I thought the loans had to be taken for at the beginning of each semester. </p>
<p>Similar situation as the OP, but as parents we want our kid (s) to have some responsibility in paying for their education. We are thinking they should pay the total amount of the direct loan worth of fours years.
So, I guess we would need to loan each year, but knowing that we ( I will check loan terms) can delay until April/ May of each year helps.</p>
<p>@cpt…good information!! What’s the process to taking the Stafford unsub loan later in the year…say April or June? Do I just go the finaid.gov site in the April/May time frame and apply for the loan? Is there any additional information about doing it this way. Seems like a viable option in my case.</p>
<p>I’m going to have to crunch some numbers and decide the best way to approach the loans.</p>
<p>If you have the FAFSA already on file, you just go to that site and apply for the loan. It’s not really an app as you are already approved. YOu have to go through counseling questions, and the sign the MPN which is the promissory note, all o line. You call the financial aid office afterwards and they can see if it can be subsidized or not given your EFC and all, and they will take it from there. My son did that in spring of his sophomore year when he needed the money for a summer course and trip and other things after having to let his part time job go and not being able to get a course he wanted that spring at school. It was unsub on his part. The FAFSA was on file, so all that had to be done was to go to the site and go through the steps. Notification was sent to his school and within a few days, he called and they had it in his account and he could get the bursar to give it to him via a check. Other schools might do it differently but that’s what his school did. If you have a balance on your school account, however, the amount will go there first, and you get what’s left. That way, you save a little on interest on the loan as you didn’t take it out till you needed it. It’s a little under 4% interest, but every bit counts when you are a student on a tight budget. Make sure you don’t miss the year end deadline. I don’t remember exactly what that date is and I don’t know how that works with individual school years and school policy either.</p>
<p>Also, Direct loans are split by semester if you take them first semester. $5500 Direct loan, you can only get $2750 first term and the rest after the 2nd term starts. But if you apply second term, you can get the entire $5500. You are limited if you have other awards in that there has to be room in your COA. If your school COA is $35K, for example, and you got $32K in other financial aid and scholarships, you only have $3K left on the COA to borrow. You cannot borrow or get more aid/scholarship through educational sources than the school’s official COA amount. Each school has that official amount they report to the government which is on file and used when you go to get any loan through them including PLUS as well as Student Direct Loans. </p>
<p>@cpt…thank you! So if I call the school and tell them we are not accepting the unsub stafford that they included in their package, I can go onto the FAFSA site next April or so and complete the MPN and get the full $5500? and then in the fall take the $6500 as well and/or delay it until the following spring?</p>
<p>No. The school has its own procedures for accepting and declining loans. All sub and unsub loans are applied for through the school, not the FAFSA site. ONLY your D can accept/decline HER loans, and only SHE can complete the entrance counseling and MPN (she should be finding out how to do this by looking at her school’s financial aid website and/or calling to talk to them). It is really, really important to realize that these are your D’s loans and only she should be completing the requirements for them … not that you can’t guide her, but she needs to be the one actually doing this.</p>
<p>You don’t really have to tell them anything. Until you complete what you have to complete for the Stafford’s you don’t get it. If you are taking the sub part, ask them how to just get that. If you aren’t eligible for any subsidization, no issue. You just have to make sure you get money in your college account to pay the bills when due. . Then in the spring, yes, you can apply and get the loan as long as you are still a full time student at the school. </p>
<p>The $6500 would then be for the next academic year, I am guessing the 2015-16 school year, and you have to file a whole new FAFSA to get eligibility for that, and yes, when you do , you have up till spring to borrow that $6500. If you ask for it in the fall, you get half in the fall and half in the spring. Required by federal law that it’s split that way if you ask in the fall. </p>
<p>Again, for unsub loans, no need is required but a FAFSA still has to be filed, and COA rules have to be observed.</p>
<p>@cpt…so let me make sure I get this right. If I decide not to take the $5500 unsub in the offer we just received (2014-15 school year), and next spring (Spring 2015), if I decide I would like to take the full (or partial) amount that was offered to my D for the 2014-15 school year, I could just go to the FAFSA site and fill out the MPN and get the funds dispersed? At that point my D would also be eligible for the $6500 amount for her sophomore year (2015-16)?</p>
<p>Not quite. If you decide to take the $5500 unsub next spring, not a problem. You fill do the credit counseling questions, the MPN, and then the entire $5500 will go into your DD’s account within a few days And she can get that money through whatever process that college has for excess funds. Everything has to be paid up, or they’ll take part of that money to pay it. </p>
<p>For the year beginning 2015-16, the money does not get dispersed until around the tution due date of your school, and I don’t remember exactly how early your DD can do the counseling and sign the MPN. There is a window of lead time you can give it. It may not be until after June1 that you can actually get fill out the actual MPN and such to get the money for that year, and about 1/2 will be dispersed at around the time the tuition is due into the university account. You can’t get next year’s money until the gates are open to do so. It avoids confusion. I don’t remember the exact dates. People are getting their award letters now for the 2014-15 school year, but they can’t actually process those loans right yet. The act of accepting the award or not has a deadline for fin aid purposes, but the actual things you then have to do to get some of the money, particularly the loans will then be conveyed to you. I don’t think you can do this until after June 1 or maybe later. The MPN has to be signed within a certain time period before the funds are dispenses and the funds are not dispensed until August or Sept, That is the case with PLUS and other federal loans too You don’t just get the money from fin aid. You are just telling them you will be filling out the paper work for the money so that they they can code it to the bursars and if there is a delay or issue with the fed govt issuing the money, you get no late fees in some cases.</p>
<p>So you won’t be getting the money together. You have to get the earlier loan wrapped up by June 1 (I think that is the deadline) and you can’t wrap the other one up until after that date. </p>
<p>Your DD will get the $6500 in two installements, usually August and January, sent to the school account. When you do the MPR and request for the loan second term, you get the entire amount. My experience has been that they are very quick with the transmitting the funds. </p>
<p>You do have to have the FAFSA completed for the next year to get the next year’s loans, do be aware. </p>
<p>Right now, I have a kid in college. If he wants the entire $7500 of unsub loan, he can just go to the site and do the counseling form and the MPN and is likely to have the funds in his account by the end of the week. Since he’s paid up at the school, he could then get that money from the Bursar’s office. His school will just give him a check. That’s what happened two years ago when he borrowed. Or he could leave the money there to pay towards the fall.</p>
<p>But until after June 1 or whatever the deadline date is, he can’t complete the stuff for the next school year. When he can, he could then get approval for Direct loans in the amount of $3750 to be deposited to his school account on, say Aug 28th or Sept1 or whatever the date is for his school. Then, he’d get another deposit of $3750 in January for his next semester. If he owes money, the university will take it out of that money, lickety split. If not,it sits there and can be attained via check once his required payments for that term are met in full, </p>
<p>Ok…that makes sense. I understand what you’re saying. If she takes the $5500 in the Spring of 2015 and she also decides to take the $6500 for the 2015-16 school year she’ll have to wait until the deadline set by the school to apply and then that money will not get disbursed until tuition is due for the Fall 2015 term. But the $5500 will be available in her college account w/in a week or so after she completes the MPN. Is what I’m saying correct?</p>
<p>Yes. Unless there is a change. Or a govt shutdown. I’ve always seen that money moved very quickly. The MPN has to be signed within X days of the disbursement. You can’t sign it and then wait 4 months for the disbursement. IT’s a problem with the parent loans, (PLUS). Some parents count on using them, accept a school and then when they apply, they are denied. Then it’s already time to pay, the way it works. </p>