<p>If a student had the money, would it hurt his future financial aid if they made and saved enough to pay down old loans but still qualified for new ones? I known there is no interest being charged but he is not comfortable with the debt.</p>
<p>The point being the new loan would have a cheaper interest rate than the previous loan that is two year old. This is an independent student who has one year to go. He has done an estimate for next 2011/2012 and it appears he should receive a $1200 pell grant. His feeling was, the money he has saved for senior tuition to avoid loans might be better spent paying the previous loan down and taking a new subsidized loan with the new lower rate.
I believe he has a $2200, a current loan for $5500, and then the upcoming senior loan. He would like to pay the $2200 loan.</p>
<p>Can you see any holes into this thinking. It would also reduce the money in the savings as he will not receive an asset allowance. It is only a couple thousand but it might effect his pell grant saving this in the bank.</p>
<p>Debt doesn’t help you qualify for financial aid anyway, so why would you keep any around that you could get rid of? As long as he can still make tuition without the extra cash that was used to pay down the debt, he should be fine.</p>
<p>Agree, no downside as long as unexpected expenses don’t crop up! You mention that he’s an independent, so I’m assuming that means living off campus and having a vehicle. If so, he should plan to keep something as an emergency fund. Also, there are usually extra expenses in senior year - graduation, interview expenses (and wardrobe), moving expenses, GRE/grad school applications, etc. Make sure he has a plan or resources to cover all that and is not underestimating those!</p>
<p>If the money in the bank is the result of financial aid refunds, it should not be reported as an asset for FAFSA.</p>
<p>i may be wrong,
once you start paying on a stafford subsidized loan, the deferment for this year’s and previous years’ loans are then amortized. The next year’s subsidized stafford is deferred until graduation.</p>
<p>Kelsmom - So he could payoff the one 2200 loan and take the new senior loan and it would not trigger anything --his junior loan of 5500 would still be subsidized and not due until 6 months after graduation as well as the senior loan he would take, correct?</p>
<p>Thanks for the reminder of senior expenses sktr8mom. Yes he does have a car and an emergency fund is important for car repairs at minimum.</p>
<p>He can call the servicer to find out how to make sure that his payment is credited to the loan he wants to pay down. He can find all the info he needs, including servicer & loan dates, at [National</a> Student Loan Data System for Students](<a href=“http://www.nslds.ed.gov%5DNational”>http://www.nslds.ed.gov).</p>
<p>The only situations that I can think of where paying down a loan can hurt a student’s ability to get financial aid is if the loan repaid is a HELOC where where the value of the house is increased by that amount and the college issuing financial aid takes that home into account in the asset, and if there are prepayment penalties or conditions on the loan which might occur, in some private loans, though I have never personally seen such a situation.</p>
<p>I just thought of another scenario where paying an old loan can conceivably hurt your financial aid situation. If you make enough money during a year so that your financial aid award is going to be reduced, you had better not use those funds to pay off certain loans since your pay is going to be hit up for college costs. That you don’t have the money because you paid off old college loans isn’t going to cut it. You still aren’t going to meet the eligibility if you are in that situation.</p>
<p>It depends on how much interest will be saved with the “lower rate.” Don’t forget, that college loans come with points, so some of that lower rate will be eaten up by the new fee.</p>
<p>Thank you everyone. I’m thinking he should wait to reduce his loans after rethinking the situations. Senior graduation expenses, an unknown tuition increase senior year, am estimated reduction in the Pell Grant means he will most likely need the funding to finish school. It is crazy that the harder one works to minimize loans, it often means that the increased earnings reduce or eliminate the grant aid leaving an even larger gap.</p>
<p>Thanks for the update. I see that the required loan origination fees have declined from 4% to 1% according to Student Aid on the Web). But if my math is correct, that is $10/$1k. Nevertheless, very easy to cover if the interest rate is lower on the new loan.</p>
<p>$5 is net … there is a loan origination fee of 1% and a loan rebate of 0.5%. That is a net of 0.5%. It was the same last year, just 1.5% fee/1.0% rebate, if I recall correctly.</p>
<p>Someone up above said "If the money in the bank is the result of financial aid refunds, it should not be reported as an asset for FAFSA. "</p>
<p>Is this true?
Also, in a different scenario, if the money in the student’s bank account is all from Work/Study earnings, does this get reported as an asset for FAFSA? What about for the CSS Profile?</p>
<p>Thanks, swimcatsmom. I messed up and reported my elder kid’s full bank balance last year. It wasn’t much, but it was all from Work/Study earnings. Since student assets are assessed at 20% for FAFSA (how much for Profile? - I don’t remember, if I ever knew), it helps to only report what you’re supposed to, and not any extra! Every little bit helps. Does this Work/Study-money-in-the-bank-account situation also apply to the Profile?</p>
<p>In a situation where a student is living off campus and some of his FA is going to rent and groceries (ie. the FA is more than the $$ amount of tuition and fees), is this what is referred to as a “financial aid refund”? Then the part of the student’s bank account that is from that money isn’t supposed to be included either? (my kid may be living off campus next year, and it helps to know all this stuff in advance.)<br>
Thanks again!</p>
<p>That is certainly how I understand it. My daughter has lived off campus since sophomore year. Her financial aid exceeds her direct school costs so the balance is refunded to her and she uses it to pay her rent, bills, and food. The money sitting in the bank at the time we file FAFSA is usually all from her financial aid refund (and from WS in the years she had WS). We do not report the money in her account that is from financial aid. </p>
<p>I don’t know about profile as she is at a FAFSA only school.</p>
<p>It’s not going to matter for for many students in 11-12. The FAFSA no longer automatically asks for a number. Instead, it asks if the total assets are greater than $X. If no, no amount is requested. If yes, you will be prompted to enter an amount. What happens is that the asset net worth threshold is automatically computed using the income info (more reason to make sure questions are correctly answered - or to use the IRS data retrieval tool). The prompt will ask if your assets are > your threshold number (that number is provided for you), and you answer yes or no. If yes, you will be prompted for your asset info. If you answer no, you will not be required to enter any numbers.</p>