<p>Can someone provide some insights into whether there are any benefits to being offered a Perkins loan vs. either of the Stafford loans or visa versa? I know that there is a subsidized and unsubsidized Stafford yet do not know if there would be a reason to accept one over the other? And would a college offer both (Perkins & Stafford)? Thanks.</p>
<p>Yes a school can offer both Perkins and Stafford loans. Perkins loan availability is much more limited though so it is not a loan you can depend on getting… </p>
<p>Perkins is a subsidized loan. It is need based. The government pays the interest until the student graduates or drops below half time plus a grace period of 9 months. The interest rate is 5%. A Perkins loan has no origination fees. Availability and amount will depend on each school.</p>
<p>Stafford can be subsidized or unsubsidized. The maximum for a freshman is $5500 of which up to $3000 can be subsidized depending on need. (It can all be unsubsidized or a mix of unsub and sub).</p>
<p>-Subsidized Stafford - govt pays interest until the student graduates or drops below half time plus a grace period of 6 months. The interest rate is 4.5% for loans disbursed in the 2010-2011 school year. Has an origination fee.</p>
<p>-UnSubsidized Stafford - student is responsible for interest from day loan is disbursed. The interest rate is 6.8%. Has an origination fee.</p>
<p>Currently I would consider the sub Stafford the best followed by the Perkins because of the interest rate. (though if the plan is to pay off the loan before the end of the grace periods the Perkins might be better because of no origination fee).</p>
<p>The unsub Stafford is the worst of the three.</p>
<p>Just to add give you an idea of what the origination fee is…D’s sub Stafford of $3500 last year had a $34 fee deducted from the distribution.</p>
<p>You can’t count on getting the Perkins even if you are eligible for it. If you are offered it, you can replace other less attractive loans and self help alternatives for it. My friend’s daughter chose to replace work study with the Perkins when the opportunity arose one year. She felt she could get the same job without work study, and by getting that Perkins increase her available money.</p>
<p>The web site at my daghter’s school has the following:
But for her loan last year it was a smidgen under .5%. So for her $3739 direct loan (which all of them will be now) last year she received $3721 of it. Not sure if this is something the school does.</p>
<p>Funds for Perkins loans are limited, so for low-income families you might have no choice but to resort to obtaining a cosigner for a private loan. There are often higher than average interest rates but they can make college accessible since they can be far less expensive and more rewardable.</p>
<p>It is unlikely a low income family will be able to cosign for much of a loan because, well, they are low income. And “obtaining a cosigner” is unlikely as rarely will anyone outside immediate family take the risk of cosigning a loan that they will ultimately be responsible for. </p>
<p>How can a loan with
be
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<p>The last thing a low income family needs is private loans.</p>
<p>Thanks to all for this information. It would seem as though a work/study might be the better option over the unsubsidized Stafford, would you agree? If the student makes the maximum amount awarded via work/study, great. If not, the money needs to be made up some other way yet not with an unsubsidized loan hanging over anyone’s head. Is my thinking correct?</p>
<p>It depends. The problem with work study is that you have to do the work to get the money. The job might not be there. Or your student might find that it isn’t a good idea to work at that time. Having that Stafford money available for those contingencies is often less risky. Also, if the student finds he has the time, he can usually find some work on campus, whereas it isn’t that easy to get loan money mid year. There is more control over the day to day. </p>
<p>My oldest son found that the non work study jobs were better at his school. More hours, more pay. But it could be the opposite at other schools. Work study has the benefit too, of not counting against Financial aid for the subsequent year. But offerings vary from school to school. It doesn’t help to get the award and then find no job that fits your schedule or your award amount.</p>
<p>Also, there’s a limit tot he federal workstudy program, and even if you find a job and can work all the hours you might overshoot the goal and end up not being able to work enough hours. Taking the unsbusidized stafford loan can be beneficial since you can pay interest payments on it. Depending on the side of the loan, the interest payments can be very manageable. For a $2000 unsubsudiszed stafford loan, the interest payment would be something on the order of $11.00 an month. If you can pay that amount every month, you can keep the loan from ballooning up on you with interest and keep it less expensive than it would be if you had to get a private loan for example because you foolishly turned down a federal loan that you might not have needed when it was awarded but is useful now. The unsubsidized Stafford loan is not free money by any means but it is much cheaper than taking out a private loan in many instances and a lot less riskier than relying on a work-study job that you might not get or might not be able to get all the money out of.</p>
<p>Thanks to both you and cptofthehouse for the great insights. You know…I never thought to ask this but your responses lead me to ask – if a student agrees to a Stafford loan and finds, perhaps midway through the school year, that they do not need the money but have it from another source, can they refuse it after using half? I understand that with work/study, if the student does make the money, no harm/no foul. Is it the same with a Stafford loan in terms of being able to say “thanks but no thanks”?</p>
<p>And I didn’t realize that the interest on the loan per month would be so low. If that’s the case, why have I read that the unsubsidized loan is the “least” attractive way to go? What am I missing? We have not agreed to any of the financial aid package components yet and I’m still weighing the entire load situation.</p>
<p>Sorry on two fronts (mind is working faster and more accurately than fingers) tonight…</p>
<p>Meant to say (regarding work/study) that if the student “does not” make the money, no harm/no foul…</p>
<p>And meant “loan” not “load.”</p>
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<p>An unsubsidized loan is better than a *private loan<a href=“one%20offered%20by%20a%20bank%20or%20another%20lending%20institution%20like%20Sallie%20Mae”>/i</a> in terms of interest rate since you don’t need a cosigner and the interest rate is comparatively low (6.8%). However, the interest on that accumulates while you are in college, which isn’t necessarily terrible but it is definitely not as good as the subsidized loans or the Perkins loan, upon which interest does not accumulate at all until the student graduates OR drops below a certain number of credits to qualify. So, theoretically, you could probably take out a subsidized loan, ignore it until you graduate, and then immediately pay it all off (although of course that’s not really realistic since loans are usually a lot of money).</p>
<p>As for Bedouin’s example – remember, that’s only if you borrow $2000 total over 4 years. Most people who have to take unsubsidized Stafford loans usually require more than that amount over the course of four years.</p>
<p>Yes, you can return Stafford loan funds at any time. You can also request them at any time, even if you originally declined, by asking your FA office (or simply accepting them via their normal procedures). </p>
<p>We did a detailed financial analysis for my D recently as she will be considered a grad student after her junior year and had originally declined the unsub Stafford loans. The analysis showed that she should maximize her undergrad loans because the grad loans she will be offered then are at higher interest rates (8.5% vs 6.8%) and, by paying the small interest charges now and keeping the undergrad distributions in a 529 account until grad school, she can minimize the need for pricier Grad Plus loans. As a result, she requested and received her unsub loan for the full amount two weeks prior to the end of the semester! So, you may want to hold off on unsub loans for now if they’re not needed but run a few scenarios through a spreadsheet and loan calculator, based on your own child’s situation, and revisit the question before the end of her freshman year.</p>
<p>sk8rmom – wonderful and new insights…thanks. One additional question – if a student is offered (via their financial aid package) $3,000 in an unsubsidized Stafford loan – can they respond by accepting $1,500 of it now (i.e. fall semester) and if the other 50% is needed for the spring semester, request it then? If so, I would assume that a letter stating the “plan” would need to be sent to financial aid along with the financial aid agreement, correct? It’s hard to determine how to accept and what to accept – all now, part now and will they allow for part later, part now and none later.</p>
<p>And (two questions actually), if a student does not accept a work/study now but decides after getting accustomed to college, that they would like to try for a work/study in the winter, can they do so or do they need to accept it now and then determine when they feel ready to handle it?</p>
<p>You know, Pianomom, it would probably be smarter to accept the work study, scope out the situation at the school and then decide to take the Stafford loans or the work study or both if possible and the best way to go. If there are no work study jobs that fit your D’s schedule or better work opportunities exist that are not work study, or more money is needed up front, she can apply for the unsub Stafford as long as she does not go over COA. </p>
<p>Most schools will cut your aid and loans in half and apply them equally to the fall and spring semester, or in proportion to costs. I never saw one put all the aid on one term, but that is something that fin aid can easily answer.</p>
<p>Aid,including loans, is not disbursed all at once but is divided between the semesters. So if you only accept $1500 of the loan then half will be disbursed in the fall and half in the spring. So you would get $750 each semester. </p>
<p>WS is very limited funding. If the student turns it down it is likely it will be reawarded to another student who wants WS but for whom no WS funding was available. So it is possible there will be no WS funding available later if they turn it down.</p>
<p>As far as disbursement – federal money (loans, grants, etc) can only be disbursed by term (quarter, semester). You cannot have all the money you are eligible for dispensed in one semester. We were advised to consider having our son apply for the unsub stafford loans at the beginning of freshman year, while he scopes out the situation (work-study, costs, etc). His school (UChicago) is on a quarter system, so he can cancel the disbursements for the winter and spring quarter if he doesn’t find he needs the money – but if he needs it, it will be there. You can always pay back any loan at any time.</p>
<p>Just to clarify, the equal semester disbursement applies if you’re requesting at the beginning of the year. If you forgo loans in the first semester and your eligibility remains the same, the full amount can disbursed second semester.</p>
<p>If your D thinks she may want WS, better to accept the award. My D found she didn’t have a schedule that would fit many WS jobs, and there were none left for freshmen anyway. The school deleted her WS award midway through second semester as it was unused.</p>