<p>We plan to "accept" the $3500 subsidized loan offered, but decline the $2000 unsubsidized loan. From what I can tell the subsidized loan amount increases each year of college, and so if we stay with this plan the total debt would be $19,000. This would really help us afford the college, and is an acceptable amount of debt for a science degree at a LAC with undergraduate research possibilities in preparation for grad school. It's also an amount of debt I could likely help DS pay off.</p>
<p>We are close but do not currently qualify for need-based aid, with an EFC of just under $16,000 which includes $12,000 savings of DS which we plan to use next fall for college expenses in his freshman year. Next year's FAFSA will presumably show a lower EFC, and we may qualify for need-based aid</p>
<p>DS was not offered work-study, just the $5500 in federal loans.</p>
<p>Are there any implications for this plan (to decline the $2000 unsub loans) that I should give some consideration to?</p>
<p>I think its wise. If you can do it thats great!</p>
<p>If you were offered subsidized loans, then you qualified for need based aid according to your FAFSA EFC because you can’t get it unless that EFC is less than the COA of the college. But, yes, you can decline the unsubsidized part of the loan. She can also ask for work study up to the amount of her FAFSA need which is defined as COA - EFC. Whether they have any available or will give it to her is up to the school, however.</p>
<p>Just to confirm my reasoning: the unsubsidized loan begin accruing interest immediately and must be repaid starting at undergrad completion, but the subsidized loan does not begin accruing interest or require payment until graduate school completion. </p>
<p>Correct?</p>
<p>I’m trying to be smart about the loan debt, even though it had been my hope to avoid it altogether…I’m trying to compromise so that we can afford the LAC over the state public.</p>
<p>Am I missing something?</p>
<p>If we decline any offer, does that send the message we don’t really have that need?</p>
<p>
Unsub loans start accruing interest immediately while the gov’t pays the interest for sub loans while the student is in college. Payments for both unsub and sub loans must be started 6 months after school is done (under grad or grad if that follows immediately).</p>
<p>One thing you can do is pay the interest for the unsub loan every 6 months so it doesn’t accrue. We are doing that now for DD2.</p>
<p>Erin’s dad - great idea! Can you give me an estimate of what I might expect as interest on $2000 every 6 months?</p>
<p>I believe the interest rate is 6.8% on unsub? That would make it $68/$1000borrowed/year.</p>
<p>With the change (I think it was part of the raising the debt limit deal in 2011) the subsidized student loans still have a 6 month grace period but interest will accrue during the grace period. Graduate subsidized loans were cancelled in this same “deal”. The undergrad loan will be deferred while in grad school - and interest paid by the government (I think?)
QUOTE:
*Note: If you receive a Direct Subsidized Loan that is first disbursed between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues during your grace period. If you choose not to pay the interest that accrues during your grace period, the interest will be added to your principal balance.</p>
<p>[Subsidized</a> and Unsubsidized Loans | Federal Student Aid](<a href=“http://studentaid.ed.gov/types/loans/subsidized-unsubsidized]Subsidized”>http://studentaid.ed.gov/types/loans/subsidized-unsubsidized)</p>
<p>Yes, interest on the sub loans will still be paid by the government during grad school but not during the grace period. At least for now … who knows what the future will bring. I was surprised by the loss of sub loans at the grad level, and I am more surprised by the loss of the subsidy in the grace period (or at least with how quietly that was slipped in). As I wait to find out what the new loan origination fees (as a result of the Sequestor) are … considering that it affects all loans first disbursed after MARCH 1 … I no longer am surprised by anything the feds do in terms of financial aid.</p>
<p>I used finaid’s loan calculator to determine the future outstanding balance on a unsubsidized loan which is disbursed during the freshman year. The following results compare the interest which would accrue both with and without a minimum month interest rate interest payment during the college years. The 51 month time frame in the figures below assumes 45 months from beginning of the first semester to graduation, plus the 6 month grace period. </p>
<p>Initial Loan Balance: $2,000.00<br>
Loan Interest Rate: 6.80%
Loan Term: 10 years
Minimum Payment: $50.00<br>
Deferment (Months): 51
Capitalization Frequency: Quarterly </p>
<p>After the deferment period of 51 months, the new loan balance is $2,663.71 , including $663.71 in accrued interest. </p>
<p>Without the interest capitalization there would have been 45 payments of $50.00 , plus a final payment of $24.50 , for a total payment of $2,250.00 (including a total of $250.00 in interest) plus an additional $578.00 in interest paid during the deferment period. </p>
<p>With the interest capitalization there are 63 payments of $50.00 , plus a final payment of $29.95 , for a total payment of $3,150.00 (including a total of $486.29 in interest plus $663.71 in interest accrued during the deferment period). </p>
<p>Thus the total amount paid with interest capitalization is $3,150.00 , or $322.00 more than would have been paid without capitalization. That’s an extra $0.16 for every dollar borrowed.</p>