<p>I have enough money, if I pool everything, to pay for 1 year of college. The question is: Should I pay for the first year out right or should I take the direct stafford loans and keep some of the funds in the bank to pay for the next years bill. I know that loans cost 1% in origination fees so that is an added expense. Thanks all.</p>
<p>Are you offered any subsidized loans?</p>
<p>How will you pay for the other years? Is this for a CC?</p>
<p>I would borrow the subsidized loans if you are eligible. The origination fee will be $35, and that’s worth the insurance of knowing you have at least that much saved. If you don’t need it, pay it back before interest on the principal starts. If you don’t need it freshman year, make sure you can show that it is all the loan money and then it won’t be included as an asset on next year’s FAFSA (put it all in one account, and leave it there).</p>
<p>If you are eligible for the subsidzed loans, I agree with Twoinanddone, and would borrow them and bank the money, using up what you have saved instead. For fin aid purposes, you get hit 20% at least on any money you have sitting in the bank unless it came from fin aid, so your loan proceeds can sit right there and not be included as assets. </p>
<p>If you are not eligible for subsidized loans, the cost of doing this is about 5% of the amount you borrowed in interest charges, and you have to decide if that’s worth that price. </p>
<p>What about unsub loans?</p>
<p>Hello all. If I tally the responses it seems borrowing via the stafford loans is considered the right move. The loans are $5500 and these are a mix of subsidized and unsubsidized. I have prepaid tuition certificates that I believe I must be used this year. In addition I have some 529 funds. Taken together these equal the price of 1 college year. Beyond these years there are more 529 funds and prepaid tuition certificates but not a full year. What is my plan? Earn money, apply for financial aid, apply for scholarships, apply to be an RA, all of the basic things that everyone else does. But the point is well taken, Apply for the loans and save the college funds for years 2, 3, 4. Does having a loan do much for the financial aid picture? There is a sibling entering college when the first is in year 3. This is a 4 year college that is being paid for.</p>
<p>Thanks!</p>
<p>It doesn’t make sense to get the unsubbed loans and have those funds sitting in a bank account earning 0.1% while paying 4% on them. If it looks like a freshman might run out of money or not have enough for sophomore year, it might make sense to get the unsubbed loans at the very end of freshman year.</p>
<p>yes on the unsubbed loan analysis. No point in paying money to have cash on hand. But the subsidized loans are a different story. I am a fiscal conservative and am against loans if there is a different angle, however, the idea of having an interest free loan sitting in the bank as a cushion may make sense.</p>
<p>Consider also the American Opportunity Tax Credit for 2014; pay $4,000 of qualified education expenses (tuition, books, fees) with non-tax-advantaged dollars (such as the subsidized loan dollars, or regular cash from savings) in order (for the parent of the student) to get the full $2,500 tax credit (then ask your parents to give you the $2,500).</p>
<p>But see IRS Publication 970 to determine if the parent would qualify for the credit: <a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>Madison85–good idea.</p>