<p>Is it reasonable to take out subzidize loan even if I don't need it now. I am not paying any interest till graduation, so why not take the loans right? Who knows when I am going to need it specially with the recession now. I might not be able to get loans later. </p>
<p>So, what do you guys think? Do you see any risk that I might not have thought about?</p>
<p>I think that is a personal decision. Our financial aid officer suggested we take the loan when it is offered because you don't know what will happen in the future. If you don't accept it the first semester, you can still change your mind for second semester because the loans are offered in 1/2 for each semester. If you have money for your tuition I am assuming the money will sit in a bank account each semester which will be counted as assets for the following year on the fafsa. For me, I hate the idea of having a lot of debt so taking a loan this semester when I didn't truly need it seems silly. If I lost my job next month,I may think differently but I feel pretty secure in that area. I think it's too easy to get into debt with too much borrowing. Just my opinion for what it's worth. DD is trying to work more to elimate as much debt as possible. I think at the end of four years someone would be happier having less debt than wishing they had borrowed more if that's possible for you.</p>
<p>My school does not count money I have from financial aid as part of the asset.
So, I think I am okay.</p>
<p>I plan to maybe let my brother borrow the money. He has problems with his credit card. He exceeded the limit and has late fees. He is really very irresponsible. The limit was 750, but he has like 1000 debt and his minimum payment now is around 80. So, I am thinking of paying it for him, and let him pay me 50 bucks a month, and use that money to payback my student loan, and hopefully he won't make the same mistake again.</p>
<p>A detail to mention is that if the loan is subsidized, then you pay no interest until 6 or 9 months after graduation, depending on the type of subsidized loan. This time period is called the "grace period," because payments and interest do not start until it runs out.</p>
<p>So, aside from the origination fee, a subsidized loan is free money for as long as it takes you to graduate plus the grace period. You have to pay it back, but it does not cost you anything to use it (except the origination fee).</p>
<p>Now in the situation postulated, excess subsidized loans were awarded, which in theory is not supposed to happen if the EFC calculation was correct. There can be legitimate reasons for this happening though, such as unexpectedly high summer or school year student employment earnings. This has happened in my family, when one year my son got cast in a really minor role in a TV commercial, shown as a member of a musical group for about 5 seconds and playing 3 notes, which then got a lot of play during sports shows for the following two years. We found out this means nice residual checks. We were joking that on a per note basis, he was making money as fast as the Rolling Stones. Anyway the point is, it can happen that you don't need all your loan money.</p>
<p>Should you take it anyway? It seems like a no-brainer to say yes, since the money is free, but then you need to spend it on something you really need before the next year's FAFSA, or else it will be sitting in your checking account as an asset that will increase your next year's EFC 50 cents on the dollar. A loan to a relative is also considered an asset, by the way, similar to a bank account or an investment. </p>
<p>Financial aid awards are not considered FAFSA income in the year received, but I know of no reason unspent awards, loans, or work-study wages would not be considered assets the following year. After all, if you have money just sitting there, how does that not decrease your need for aid the next year?</p>
<p>Just so you know ... when you accept a Stafford, you sign an agreement that states that you will be using the funds for educationally-related expenses only.</p>
<p>Aside from the above ... lending money to relatives must be carefully considered. What if you take out a loan and he doesn't pay you back?</p>
<p>I agree with kelsmom - if he is that irresponsible, a loan to him could be a bad idea.</p>
<p>I had saved enough money to pay for my first year of college, and did not take out a loan. I did take the max ($2500 then) sophomore year, then the Reagan administration changed the rules and I was ineligible for a couple of years until I could establish as an independent and get a loan for my 5th year. I did regret not having taken the loan the first year, I used all my savings and had to commute sophomore year, so I would say if you are eligible for a subsidized loan, take it, but don't lend it to an irresponsible relative.</p>
<p>Thanks everyone!</p>
<p>Well, you see, when I filed the financial aid this year, I did not list down my savings, etc. So, anyway, they give me a supplement for me to list down how much money I have in checking and savings, and it says there not to include any financial aid that I recieve. </p>
<p>But, maybe I was wrong when I read it which means what I did was a fraud. Now, I am scared.</p>
<p>I am not lending my brother some money I guess.
I think my dad will bail him out, and pay his credit card.</p>
<p>Definitely do not risk your own financial situation by borrowing student loans to pay off some one else's credit card- he may never pay you back and you would be stuck. Let him grow up and pay off his own credit card. I highly recommend never loaning to some one who has bad credit,nor encumbering yourself for them, like getting them a cell phone because they don't qualify- if the companies who are in the business and who make a lot of money on interest and late fees don't figure the person is worth the risk, why should you take the risk?</p>
<p>ploamble, you wrote: I plan to maybe let my brother borrow the money. He has problems with his credit card. He exceeded the limit and has late fees. He is really very irresponsible...</p>
<p>Are you kidding? YOU'RE going to be responsible for paying back that money, NOT your IRRESPONSIBLE brother.</p>
<p>Sheesh. Really? Loan it to me, at least I'm NOT irresponsible!</p>
<p>You don't solve money problems with money.</p>
<p>Thank you everyone for the reply. </p>
<p>My brother has been depresed lately, and it is sad seeing him like that.
It really made me wonder how he forgets to pay his credit card on time maybe because I seldome use my credit card, and when I use it, I pay it immediately.</p>
<p>The other consideration is that the credit card debt has some measurable consumer rights which are still applicable and so your brother may have some remedies if he researches his rights. </p>
<p>If you borrow from a student loan to pay the card bills, you have no real recourse if some unforeseen event delays your payments on the student loans. </p>
<p>Figure it this way, it is tough on your relative and credit card companies can be problematic, irritating and exploitive. But the SL people due to effective lobbying and misinformation were given legal carte blanche for unparalled abuses of borrowers. You do not want to endanger your situation by increasing debt to these organizations-especially for anything which is non education related and not absolutely essential. </p>
<p>Incidentally due to changes in regulations over the credit card industry, even if its paid on time it may not be considered paid on time. There've been some complaints to state consumer rights agencies that certain of these companies consider payments on time when its processed through their system, rather than when it is received at their location.</p>