My financial package wants me to take out $3k in subsidized loan and $500 unsubsidized. I know subsidized loans have to do with financial need, but was this limit determined by my school or the government?
Next, my parents and I are trying to figure out if we should put off taking out unsubsidized loans. If I don’t take out the full loan amount for my first year, can I take out more following years or are the limits the same? I’ve got a bit of savings that my grandma left me, but once that runs out we’d be taking out higher interest parent plus loans so we’re trying to decide what’s most logical.
Sorry if this doesn’t make sense or if these are dumb questions. Thanks for any help!
You can borrow $5500 as a freshman, $6500 as a sophomore, and $7500/year as a junior and senior. You’re better off taking those each year then take money from the savings your grandma left you. Your parents may still have to take PLUS loans, but they should be able to take less. The interest rate on the federal student loans is better and they have protections the PLUS loans don’t.
The money was left to be used towards my education, so we’ll definitely use that before taking any parent PLUS loans. Do you know about the subsidized limit? Did my school determine that I can only take $3k in subsidized loans? I was admitted last year and deferred, and last year the package said I could take the full $3500
The subsidized loan amount is determined by subtracting the (FAFSA EFC + gift aid awarded) from the overall cost of attendance.
Basically, you cannot obtain sub loans that cut into the FAFSA EFC amount. My FA office walked me through this while I was in undergrad.
Your school does determine the amount that is subsidized using federal formulas. Of the yearly amounts, $2000 is always unsubsidized (so for freshmen, only $3500 can be subsidized, for sophomores, $4500, etc).
If you only want to take out the $3000 + $500 this year, it’s worth asking the school to make the entire $3500 unsubsidized. If you think you’ll want to borrow the entire $5500 allowed, then $2000 is going to be unsubbed anyway. If you think you are going to need it for later years, it is wise to borrow it now and bank it. The amount of accrued interest is going to be less than borrowing at the higher Plus rates in junior/senior years. Keep track of the amount that is loan money as it doesn’t have to be counted as an asset on future FAFSAs.