<p>Is this okay to do? My daughter was only offered a Perkins loan and a subsidized Stafford loan. A good thing, I know, as other colleges had much more in loans in their pkgs., with some being unsubsidized. As I understand it, though, she can, if she wishes, also borrow the $2000 limit in unsubsidized loans.</p>
<p>I will need to take a PLUS loan to cover part of our EFC. Can I have her take the unsubsidized loan in place of a portion of my PLUS loan? The interest rate is lower, and I avoid the 4% origination fee on $2000 of the PLUS loan. Then, could I start paying the loan off right away so it is gone by the time she graduates? My daughter is willing to take the risk that dear old mom will keep her word and pay the loan so she won't have more loans than she can handle when she graduates, but I'm worried that this is somehow skirting the law or just not ethical somehow. Is it possible to do this?</p>
<p>Yes, it is fine to do that. Schools seem to offer the PLUS automatically instead of the unsub. But if she asks for the unsub she should be able to get it with no problem. Nothing unethical or unlawful about it. You won’t be able to claim the interest deduction on your taxes as the interest is technically your daughter’s so only she can claim it. But it is still probably a better deal as you avoid the origination fee and the interest rate is lower.</p>
<p>I had my daughter take out the full loan amount offered and I told her I would pay off the unsubsidized loan for her. The interest rate was lower and I still can take out a parent loan another year if needed.
I also did that with my son, I paid off about 3,000 in principle over the 4 years.</p>
<p>That’s exactly what we have done for our children. Go for the lower interest rates and pay the loan. But agree that the deduction for loan interest is the students not yours even though you are paying it.</p>