question: pay this way, not that way?

Paying for College
1

<p>My brother asked me if I have any suggestions about how he and his family should cover their child's EFC (about $30,000). Are there any rules of thumb about borrowing versus taking money from savings or about preferable loans? I did tell him that the subsidized Stafford loan is good (assuming one can pay it back). Thank you in advance for any tips.</p>

2

<p>If his EFC is 30,000 he won’t be eligible for a subsidized Stafford.</p>

3

<p>That’s good to know. Thank you!</p>

4

<p>He won’t be getting a subsidized Stafford loan in most likelihood.</p>

<p>Parents have several ways to fund their EFC…and it can be and usually IS a combination of them. Savings, loans, current income are the three ways to fund the EFC. Most families use a combination of these three. If the family has savings they can use, then some of the EFC costs can come from there. Then see what they can contribute out of current earnings. THEN see if they need to take loans for any amount AND the family has to feel comfortable doing so. The STUDENT can take $5500 in Stafford loans as a freshman in their name. Additional loans would either need to be in the parent name OR cosigned by the parent. Or if they have an active HELOC, they could use that if they choose to.</p>

<p>I don’t think there IS a rule of thumb. I know that in this household, we did not use parent signed or cosigned loans and these were our LAST choice for funding college for our kids.</p>

5

<p>So, the child could do unsubsidized Stafford (if the family chooses to do so), no matter what the family’s EFC is? I don’t know that I’ll recommend that, but I don’t want to give any more incorrect information.</p>

6

<p>Yes, if the student files a FAFSA they will be eligible for an unsub Stafford regardless of their EFC.</p>

7

<p>If there is a lot of money in the child’s name, some people advise spending that down first as FAFSA includes a higher percentage of the child’s assets than of the parents’ assets in the EFC. The parents can work through the FAFSA formula on paper and try out different scenarios: <a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/101310EFCFormulaGuide1112.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/101310EFCFormulaGuide1112.pdf&lt;/a&gt;&lt;/p&gt;

<p>For a Css Profile school, they need to talk with the financial aid office to find out what is included in the formula for that school.</p>

8

<p>If the EFC is $30K, a subsidized Stafford is certainly possible if the school costs more than that and that there is unmet need of at least the amount of the subsidized part of the Stafford.
If my current son should have chosen to go to a school that cost us over about $45K, and had an unmet need of at least the amount of the subsidized Stafford., he would have been eligible for the subsidy. That he is at a school under our EFC is what makes him ineligible for any financial aid including subsidization of the Stafford. He can still take the Staffords, but on an unsubsidized basis.</p>

9

<p>cpt…I think that might be school dependent. Our son had an EFC of $22,000 and never saw a penny of subsidized loans at a school that cost almost $50K at the time. He got the unsubsidized loans but not subsidized.</p>

<p>Oddly, DD who had almost the same EFC (both were undergrads at the same time) had ONLY subsidized loans at a school that cost the same amount.</p>