<p>Okay, two questions.</p>
<p>1) Apparently the interest on Stafford Subsidized loan will increase to 6.8% in2012 from the 4.5% it is now. Does this affect loans taken out this year; as in, if I take out a loan this year, in the future will I be paying 4.5% interest on that loan or 6.8% interest?</p>
<p>2) That being said is Perkins or Stafford Subsidized a better loan to take out? Or rather, I am thinking of reducing one. Currently I am allotted 3k in Perkins and 4.5k in Stafford Subsidized. Because I have set myself a limit at 20k in loans for all four years of college, I don't want to take out excessive loans each year. </p>
<p>I am going to be a sophomore in college next year and get 18k in grants, however the school that I go to is one of the more expensive ones. I have also been granted work-study which I am taking advantage of this year; however I probably won't be able to work to the maximum as I am taking 6 classes (most of which are hard science/math courses as I am going for an engineering degree). My parents both work, but make about 90k total per year; however we do have money saved up and I do have a fairly well off aunt who has been supporting my education. However, I would rather depend less on her if possible.</p>
<p>I have also read through a few of the posts on here, and some of them mention that the Perkins program is disappearing next year? And others flip-flop back and forth on whether Perkins or Stafford Subsidized is better. So I am currently rather confused.</p>
<p>The interest rate on sub Stafford loans taken out this year is 3.4%. It will stay 3.4% on those loans disbursed this year. The interest on Perkins loans is 5%.</p>
<p>Perkins were always considered the better loan as the interest rate was lower. The last 2 yeyears the sub stafford loans have had better interest rates. Perkins does not have an origination fee. Stafford does (about .5%). Perkins has a slightly longer grace period, 9 months comared to the Staffords 6 months.</p>
<p>In my opinion, if you are planning to pay the loan off before the end of the grace period, then the Perkins would be marginally better because of the lack of origination fee. Otherwise, the 3.4% interest fee is better than the 5% interest rate, so if you are going to pay the loans off over 10 years the Stafford would be better.</p>
<p>According to the loan calculator at finaid.org, the total interest on $5000 at 5% over a 10 year repayment period would be $1364. At 3.4% it would be $887.</p>
<p>(The Perkins does have some loan forgiveness programs for public service, but with an engineering degree you probably won’t be doing the dort of work required, plus the lower interest with the Stafford is a bird in the hand, so to speak).</p>
<p>If you are disciplined, I would suggest taking out the full amount of both sub & Perkins this year. Put what you do not need now in the bank, which will allow you to borrow less next year when the interest rates on subsidized Stafford are scheduled to rise to 6.8%. Perkins is “free” until pay-back time, so I think this would be a prudent move. You have to be sure NOT to spend it, of course, in order for this to work out in your favor.</p>
<p>P.S. Stafford origination fees only amount to $5 per $1000 borrowed.</p>
<p>Thanks! I think I shall take kelsmom’s suggestion in hand. :)</p>