Costs may change in future years and the merit is not going to change, right?
It’s a fixed amount?
So he could take the loans for the first year and not do work study and then later if he needs extra money and he finds a good work study job, he could do work study.
The nice thing about work study is that they are usually flexible with hours to accommodate a student’s schedule, you pay federal but not FICA tax on the income and the federal work study income gets excluded on the FAFSA from EFC calculation.
Also the above information about Perkins loans suggests that they are only available through Sept 2017 so he might want to take them while he can. You will need to check with the school about that.
No, perkins loans have been extended, but THIS student might not be offered them. It is up to the school each year to decide.
If the student needs the money up front, take the loans. If the student doesn’t need the money up front, the work study might be a better choice in the long run as it is earn as you go. If the ws option is taken, and the student finds he just can’t work and still needs the money, I bet the financial aid office could switch it back to the stafford loan option before the end of the semester.
I was giving this loan thing some thought. I was planning to take out these loans because I figured if I just pay them back after college, I’m getting free/cheap money for a few years. However, it’s not as cheap as I had thought. For every dollar I take out in a loan, that’s a dollar that I don’t take out of my savings. Since I am receiving some needs-based aid, if I take out $7,000 in loans in a year, then I would lose $7,000 * 5.6%, or $392 in financial aid by not taking it out of savings. So, the cost of any of these loans is really 5.6% per year during college.
Is this a wrong way of looking at it?
Of course, if I really need the money, than I don’t have a choice. But if I can swing it, it’s much better to spend savings than take a loan. I have 3 kids and was savings some 529 money for my last child. Maybe it’s better not to do that, spend as much 529 money now and take loans for the last child when it wouldn’t impact financial aid.
Probably not. I can’t tell you what the CSS schools will do if you have $7000 in your bank account, but on a FAFSA only school, if you have a $0 EFC because you either qualify for Auto $0 or simplified assets it won’t matter. In those cases you don’t report assets.
If you do report assets, and you have $7000 in your account AND that $7000 is not from financial aid money as you get to exclude that money from assets next time your fill in a FAFSA, then your EFC might go up, but it may not be a $ for $ offset.
I don’t know at a CSS school if they will think an increase of $392 to the EFC ($7000x .056 = $392) will reduce a grant.
However, you should not borrow money if you don’t need it.
If you are the student…the assessment on your savings is 20% of the value, not 5.6%…so for $7000, that would be $1400 adds to your EFC if your student assets are counted…for FAFSA EFC calculation purposes.
I did run this through the NPC calculator for the school and saw the drop to confirm. This is at a school that meets 100% of need. So assuming those loans are still there, the grant would increase (unless more loans are thrown instead).
In general, how can the Perkins be better than unsubsidized given the difference in interest rates?
Maybe I’m completely off, but I did some arithmetic. I got that the Perkins loan is only better if it is paid off within about 4-5 years after college. Otherwise the lower interest rate is better, even if it started accruing earlier
The rules changed this year so you have to take the unsubbed loans before the Perkins anyway. You shouldn’t have a choice, but should be required to take all the Stafford loan (sub and unsub) and then take the Perkins
@twoinanddone Are you sure? In my case I’ll probably take both sources anyways. Although some of the postings earlier implied that the decision of whether Unsubsidized was a pre-req for Perkins came down to the particular college
@mommdc Thanks for clarifying. What are the fees that you’re talking about? Also when should I start paying back the Unsubsidized Loan? Should I be doing that as much as possible while I’m in college because it is accruing interest
They’ll take the fee off of your loan proceeds. If you borrow $1000, you’ll receive $990 but owe them the full $1000. For the fall, you’ll see loan amounts for Stafford of $1000 (unsubbed) and $1750 (subbed), but on your bill you’ll only see credits for $990 and ~$1732.50
Thanks @twoinanddone and @mommdc for clarifying. Will I have to pay taxes on the loans or file taxes with the loas in mind? In general, how will taxes work. And will that affect my subsequent financial aid packages.
I guess before I get too ahead of myself, am I to try and start paying off the Unsubsidized Loan? It seems like there’s no point in trying to pay off the Subsidized Loan until after I graduate because of the deferment. I’m just not sure what to make of the Unsubsidized Loan accruing interest. Am I suppose to just see that like a tax and not worry about it, or is it to my benefit to pay off at least the interest rate each year?
It would benefit you to pay at least the interest. But you don’t have to.
I am not sure what you mean about taxes. Loans are not taxable income.
You might be able to claim the amount you paid for tuition, fees, books with loans for an education credit such as American Opportunity Tax Credit (AOTC).
@mommdc Will I have to file taxes on the work study job?
I guess I didn’t know in general if there’s any downside to taking additional money in loan. As a cushion for living expenses. Either I just won’t use the money and it’ll be savings, or it was a wise idea. And if it’s savings, then I can just return it right away to pay off Unsubsidized Loan or upon graduating to pay off Subsidized Loan, so I don’t have to worry about interest accruing. Or am I viewing this all wrong