I’ve been thinking through the best way to pay tuition over four years.
I’ve read here that it’s best to hold off two years to use a grandparent’s 529. Is this till true with the change in fafsa timing?
If you want to minimize debt is it better to put off federal loans if there are sufficient funds to get through the first couple if years without them?
Is there benefit to using a parent’s savings first to bring down assets for a better chance at financial aid in later years?
Any other pro or cons to saving loans and a grandparent 529 until junior and senior year?
Would any responses change if a sibling will enter college when the first is a junior?
Lots of questions. For grandparent 529 use (or use of any money that comes from someone whose financials are not reported on FA forms), waiting until spring semester of sophomore year will mean that none of the funds will be reported on FAFSA or Profile. This assumes that the student is studying under a traditional academic calendar and will complete the undergraduate requirements in four academic years.
Standard student loans are $5,500 freshman year, $6,500 sophomore year, $7,500 junior year, and $7,500 senior year. That comes to a whopping $27,000. If a student doesn’t take that year’s loan, and suddenly needs more in a later year, that missed loan can’t be borrowed retroactively. However, it can be borrowed when offered, stashed in a savings vehicle, and held for possible use in a future year, and isn’t reportable on FAFSA becauseit is left over financial aid money. There are no penalties for paying these loans back early. Some families consider the interest they have to pay worth it in order to have that money potentially available.
Unless your child ends up at a guarantees to meet full needs institution, spending down parental assets does not guarantee increased aid in future years. You need to carefully investigate the aid policies of the places on your kid’s list.
Don’t forget to factor in the loan origination fee as well when doing the cost/benefit analysis when deciding whether or not to get a loan.
Yes, but student loan interest rates also go up.
You could at least take any subsidized loan offered.
Also undergrad student loans have lower interest rates and origination fees than grad and grad plus loans.
This is all very helpful.
@happymomof1 The schools we are considering in the preliminary list are all below our EFC with merit and are not meet need schools. So it doesn’t seem like there will be much of a chance if benefit when the next starts.
@mommdc I like the idea of subsidized loans. They might give some wiggle room if that seems like it might help with travel expenses for example.
@BelknapPoint Thanks for your comments and cleaning up the date question for using the 529.