<p>Well, just a brief overview of my situation: my EFC is ~12.5k. I'm going to be attending UC Berkeley at a cost of 31k, but I also have the Regents Scholarship covering 19k so that I only pay my EFC.</p>
<p>The school offered me a 5.5k federal unsubsidized student loan, and my parents a 7.2k ubsubsidized Parent PLUS loan. After talking about it with my parents, they said they'll pay the 7.2k, but they're still iffy about the student loan. They prefer that I take the student loan because my parents want to buy a house and with the savings we have in the bank, we barely have enough to make the down payment on a townhouse. We currently rent, and my dad doesn't make enough to have any extra money to spare after making rent payments, etc. We're not quite sure what to do, in part because the student loan is unsubsidized and in part because we're unfamiliar with how federal loans work (when to take out the federal loan, how to take out the federal loan, etc).</p>
<p>Can someone clarify and provide some advice for us? Thanks in advance.</p>
<p>So you have a gap of your EFC? How much can you AND your parents pay out of savings and current earnings? That will leave what needs to be borrowed. If you take the $5500 in subsidized loans, would that then cover the whole amount? Did you and your parents expect college to cost absolutely nothing? Are you working this summer? That would cover some of the gap too. My advice has been for the student to take out the unsub Stafford before the parent takes out he PLUS and to take out the PLUS for just the amount that is truly a gap.</p>
<p>Looks like there is no gap on the EFC - $31K COA, 19K scholarship. The OP certainly could take the Stafford loan. That would leave $7K for the Plus.</p>
<p>Your student loans are all unsubsidized because you have no financial need based on your EFC and the school’s COA. To get a subsidized loan, there must be “need”. Parent PLUS loans are always unsubsidized.</p>
<p>To get the student loan, you must go online and do the online counseling and sign the master promissory note. The school should have the information about how to do this on their FA page. The loan will be divided between the number of periods in the normal school year (2 for semester systems, 3 for quarter systems). It will be disbursed direct to the school. As is is unsubsidized, interest will start accruing from the day of disbursement. You can defer paying the interest until the loan goes into repayment (6 months after you graduate or drop below half time), but the interest will be accumulating the whole time.</p>
<p>To apply for the PLUS loan, your parents must go online an apply.</p>
<p>Keep two things in mind about the Plus. 1) there is no deferment - your parents must start to pay back the loan immediately. 2) taking out a Plus loan may cause them problems taking out a mortgage.</p>
<p>I talked to my parents a little more and it looks like they’re willing to pay enough to cover up to my 5.5k loan, so they’re paying about 7k. That takes care of the Parent PLUS loan - we won’t need it! However, my student loan is still there.</p>
<p>I guess one thing I wanted feedback on is whether or not a 5.5k loan per year is going to rack up a huge amount of debt. I plan on graduating in 3 years to help alleviate the financial pressure for my parents and keep the debt from going too high.</p>
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No gap in my EFC. My FAFSA says I pay about $12,500, and Berkeley only expects me to to pay that $12,500. Berkeley also offered me an unsubsidized federal student loan as well as a unsubsidized parent PLUS loan to cover my EFC, if I choose to take out those loans. My parents are willing to pay about 7k out of our savings. They prefer that I take out the student loan so that they have enough savings to buy a house (we’ve been renting and never owned a house; my mother thinks it’s wiser to buy a house ASAP). If I take the $5500 in UNsubsidized loans, that covers the whole amount. I wasn’t offered any subsidized loans. I’m going to work this summer as a tutor but that will cover in the hundreds, not thousands. My parents won’t take the PLUS, so that’s not a problem. It’s mainly just my student loan.</p>
<p>
Yup, that’s correct!</p>
<p>
Thanks for the info! Is it better to just pay the interest concurrently so that I don’t rack up as much? Also, for federal loans, is the interest monthly or yearly or some other time frame?</p>
<p>Thanks to everyone who replied in this thread!</p>
<p>If you can manage to pay the interest as you go along, then that is certainly better than letting it accumulate.</p>
<p>The max Stafford loan a year is really not a bad amount of debt to graduate with at all. The maximum increases a bit: Freshman $5500, Sophomore $6500, third year and up $7,500. If you do graduate in three years the debt will be less than $20,000 (excluding interest), which is not too terrible.</p>
<p>The interest rate on unsub loans is 6.8% a year, but interest will be charged monthly (6.8%/12 a month) on the outstanding balance. There is also an origination fee of (I think) 1% when the loan is disbursed. So for a $5500 loan, you would actually receive $5445.</p>
<p>So how is the interest calculated if the loan is disbursed in once per semester? Would the 6.8% be applied to $5,500, to $2,750, or is it even cut into months? (Thanks for all the info btw)</p>
<p>Also, is there someone I can talk to in real life for information about these loans besides my school’s financial aid office?</p>
<p>The interest accrues on the outstanding balance. For example, the interest will be calculated on a balance of $2750 from the time the first portion of the loan is dispersed until the time (probably December/January timeframe) when the second half of the loan is dispersed. At that time, interest will accrue on the outstanding debt of $5500. This explanation is a bit simplified because your balance increases each month if you don’t pay the interest as it accrues.</p>