<p>What is the policy with loans offered in FA packages? My son has to either 'accept' the offer or decline it on his financial aid webpage. Can you accept the offer and only use it if finances are tighter than expected? What is the disbursement procedure on these?</p>
<p>In order for your loans to be disbursed, your son will need to complete a master promissory note. </p>
<p>Are these Direct Loans? </p>
<p>Most schools will let you reinstated the Federal Direct Loans which you cancelled earlier.</p>
<p>Yes, direct loans. </p>
<p>So as soon as you accept the loan (and complete the paperwork) they disburse the funds?</p>
<p>I guess what I’m hoping to do is accept the loan but only pull the funds out of it if we absolutely need to.</p>
<p>Accepting the loans does NOTHING. Your son will be required to complete a master promissory note to get the loans. Once THAT is done, the money is disbursed, by semester, to your son’s bursar’s account.</p>
<p>You can elect NOT to take the Direct Loan NOW, but as noted above, most schools will allow you to reinstate that at any time.</p>
<p>Why not call the financial aid office and ask if they will allow you to do this.</p>
<p>The fact is, some folks don’t even complete the FAFSA until later on…and it is for the Direct Loan only.</p>
<p>Alternately, you could just accept and receive the loan. If there is an overage in your bursar’s account, the school usually sends you a refund once the semester is over…or well under way. If you don’t NEED the money, you can just pay off the loan with your refund.</p>
<p>For Direct Loans, it doesn’t mean much, but if those are Perkins loans, they will be given to someone else and that’s it. I highly recommend you take the Perkins. Interest is subsidized until after graduation so it’s “free money” for use till then. If you stick it in an account and make sure the balance in that account never goes below the amount of the loan proceeds you don’t have to report it for financial aid purposes. Any aid money sitting in the account is not included. So there is NO downside to accepting it, other than spending it when not needing it for something not needed thus incurring future repayment. You can hold onto that money or any subsidized money till graduation and not incur any interest increase.</p>
<p>Non sub loans do accrue interest if you do that.</p>
<p>What we did:</p>
<p>I was hoping not to need to use any loan funds this year(son’s 2nd year), but knew the finances would be tight by the end of the year and we might need to rely on some loan funds, so we accepted the subsidized loans and turned down the unsub. With the subsidized loans, the student doesn’t owe interest until after they stop being a student, so if we take the money and don’t use it, it can be used to pay the loans in full later (with the small fees that are subtracted). We then put the money in a savings account to be touched only if absolutely needed. About $5000 of the loan money is still sitting in the savings account which can be paid in a lump sum upon graduation if it’s not needed. If it is needed, then it’s easily accessible and the repayments can be made later. If you/your child has self-control then there’s no harm in getting the sub loans, since interest isn’t accruing. If there’s a risk that the money will be spent on things that aren’t necessary, then it’s probably best not to take it unless it’s needed. </p>
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<p>For what it’s worth, the Perkins interest rate is 5 percent and the Stafford interest rate is 3.86 percent this year (fixed at the rate when the loan is taken). The portion of the Stafford loan that is subsidized might be a better bet, just in case you need to use the money.</p>
<p>Ah, but you can take the Stafford any time you want. It’s take it or leave it with the Perkins. No later option. So you can stash it and pay it back before you accrue interest if you don’t need it. Also many schools have in a queue for the Perkins which are scarce funds, and if you turn it down this year, you are out of line and luck for getting it offered next, as many returnee fin aid packages are very heavily based on the prior year’s. </p>
<p>Also if the kid needs a fifth year of college to finish, if you don’t use up the maximums on the Staffords, they can continue to be used for that. By using the Perkins early on, if you are lucky enough to be offered them, you can keep that alternative as well. </p>
<p>I absolutely say, take any Perkins you might get and stash it if you don’t need it.</p>
<p>Does the money you stash away have to be counted as money in the bank on next year’s or future FAFSA’s?</p>
<p>No, the money you stash away does not get counted as money in the bank on next year’s FAFSA, </p>
<p>But there is an origination fee for the Stafford loans, so you will be charged 1% even if you pay back the money they gave you. I thought about just taking them and holding in case we need them for another year, but I’m so cheap I don’t even want to pay $55 ‘just in case’ we need the money for junior or senior year.</p>
<p>No. As I addressed in my 11:21 AM post, it does not get counted as assets on the next year’s or any subsequent year’s FAFSA. But you had better make sure where ever you stash it, doesn’t let the balance ever go below the amount of the loan. You can’t take it out and then replace it. Once you go below, that’s part of the loan you used and becomes the lower amount that is not counted. If you don’t have that kind of discipline or tracking, put it in its own savings account and don’t touch it. </p>
<p>“But there is an origination fee for the Stafford loans, so you will be charged 1% even if you pay back the money they gave you.” Any portion of the loan that is repaid within 120 days of disbursement is considered to be cancelling that portion of the loan … and the origination fee is retroactively removed (in other words, if you borrow $2000 and are charged an origination fee of $22 - then you repay $1978 on that loan such that it is formally processed as a return of funds within 120 days of the disbursement - the entire $2000 is considered to be repaid).</p>
<p>It’s nice that they grant 120 days, but I thought the asker of the question was planning to hold the freshman money in case it was needed for sophomore or junior year. That would be more than 120 days.</p>
<p>It would be more than 120 days to hold the money in case it was needed for the fall,most likely, in addition to the amount that is available the next year. Interest also starts accruing the minute the funds are disbursed. But a college student is highly unlikely to be able to get a loan at that rate, 4% or so (don’t know if the origination fee is rolled in there with mortgages and bank loans, it is). so that is what you have to balance. This is what is available.</p>
<p>Thanks kelsmom, for the tip
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<p>If we “accept” both the subsidized and unsubsidized loans, but then discover that we only need the subsidized portion (which is what I’m thinking/hoping), can we just not borrow the unsub part? Or once we sign the “Master Promissory Note” are we committed to taking the unsub portion too? But we can then pay it back within 120 days without penalty?</p>
<p>In other words, when is the latest we can decide about the unsub part? If we don’t take it now, can we change our minds for spring semester and take it then?</p>
<p>You can accept both but cancel at any time prior to disbursement - and repay within 120 days if it is disbursed. As far as when is the latest for the unsub? Any time during the academic year, as long as the student is enrolled at least half time. In other words, don’t accept now … if you need it later, accept then (a quick trip to the aid office when it’s time to accept will clear things up).</p>