<p>My son will be going to state college this fall. We have $42000 saved .
Tuition/room&board will be $20000 per year.He has qualified to receive
a subsidized Stafford Loan of $3500 with interest rate of 3.4% and an
unsubsidized Stafford loan of $2000 at 6.8%. Should we use one of the
loans or both? Or, should we pay the full amount for 2 years and take
out full loans the last 2 years? I am divorced. Thank you.</p>
<p>Good question. We are in a similar situation.</p>
<p>My thought is to not use the savings all at once. One assumption we have is that as we use up our savings, our EFC would decrease, so that we would have the opportunity for more grants and not have as many loans.</p>
<p>My financial advisor suggested using up all savings first 2 years…then maybe we would qualify for more money last 2 years. The subsidized Stafford Loan interest rate goes up after this year. I am wondering if we should at least take that loan. It may not get lower than this again and the government pays the interest while in school.</p>
<p>The subsidized loans are interest free until the student graduates or drops below half time plus a grace period of 6 months. I would definitely take those. For 2012-2013 school year the interest rate is scheduled to increase back to 6.8%, the same as unsub loans. That may change of course, but I would not pass up the sub loan with the 3.4% interest rate. </p>
<p>Your savings do not have a huge impact on the EFC. The maximum amount a parents savings will have on the EFC is 5.6% (possibly less if you are under the protected asset allowance), so it is possible that you will not qualify for any additional grant money even without the savings (difficult to say - it depends on your EFC and the rest of your financial picture).</p>
<p>By savings, I meant 529C and collegebound funds. Thank you…I, too, thought the 3.4% was a good rate.</p>
<p>Next fall will see our first child attending college so I’m not sure how all schools work but the one my D will attend has language in the grant acceptance that the grant amount will not increase in subsequent years. Perhaps it’s for that very reason–that as the student attends, the savings are lowered or depleted, and everyone has more need unless the income increases at a faster rate.</p>
<p>The Stafford loans have limits for each year: $5500 fr, $6500 so, $7500 jr & sr with an undergrad limit of $31K. If you don’t take the Stafford now, you can’t “save” the amounts for later years, and may have to take other loans with less desirable terms. Just my opinion. We plan to take the Stafford but will try to stay away from other loans.</p>
<p>midwstmom, sometimes schools that include that language also do not cut the grant if the income situation improves. That can be helpful when there are two in college this year but only one in a future year. I have a friend who worked at a college that did that with grants … it was more or less considered a tuition discount for four years. It’s always good to check school aid policies beforehand!</p>
<p>What if the situation goes the other way, e.g., the family has a 21-yr. old that decides maybe college is a worthwhile path and enrolls? 
Then there are two in college but it wasn’t accounted for on fafsa. Might the school increase the grant, or can you only hope for aid reflecting two in college from the older one’s school?</p>
<p>You should ask … but from what you wrote, it sounds like the answer is no. They are saying that the grant won’t increase, so I don’t think an extra student in school will make a difference.</p>
<p>I also think that the subsidized Stafford Loan is too good to pass up.</p>