<p>Is that allowed? Is it doable? Is it a good idea?</p>
<p>I have a bachelors degree in which I had to take out around $50k in loans. I've been paying on them for about 18 months and have made decent progress considering.. Now I'm a graduate student and I was able to pay my first semester's tuition out of my pocket. I work a full-time job and live at home so I thought I had budgeted to be able to pay for all of grad school out of pocket. This next semester it looks like I'm going to have to take out about $3k for school after all and so I've gone through FASFA and everything. I'm told I could take out Federal Loans in the amount of $10,500 for the fall semester and $10,500 for the spring semester. </p>
<p>My thought is to take out these Stafford loans and use some of that money to pay down some of my private loans with higher interest rates. </p>
<p>Thoughts?</p>
<p>You paid cash for school that you could have used to pay down those old loans instead. Yes, you could borrow Federal loans and use them for your living expenses while using cash on hand to wipe out some of the old debt.</p>
<p>In other words, yes, you could follow your proposed plan. Just be sure that the conditions of the new loans are more favorable than the conditions of the old ones. And do your level best to not accumulate one cent of debt than is absolutely needed.</p>
<p>I did this with some old federal loans. I had finished a 2yr degree more than 10 years ago, and my interest rates were about 8% fixed. When I went back to school last year, I borrowed new Stafford loans at the 4.whatever% they were. I had enough scholarships/financial aid to pay tuition and expenses, so I simply paid off the old loans with the new loans. There was no reason not to, as the school covered most of the origination fees.</p>
<p>I’d suggest you do a spreadsheet to make sure the math works, and to keep track of all your interest rates. Then dive into the new terms to make sure origination fees, payment terms, subsidized vs unsubsidized, etc before you decide to proceed. You definitely don’t want to have something come back and bite you because you weren’t aware of the terms. And obviously, be disciplined to make sure you spend it where you’re supposed to. I personally had trouble getting Sallie Mae to apply the payments to the correct old loans, and it took some time to get it worked out properly. But the interest I saved was definitely worth the hassle.</p>