<p>I'm going to college in the fall and I am pretty sure that I will be taking out only $5500 in loans. I won't be able to work this summer but because of this program I'm in I will be doing a paid internship NEXT summer, after my freshman year. I should earn enough during this internship to with pay off those loans. But if I pay off those loans I will still need to borrow $5500 for my sophomore year. Is it better to borrow every year then pay it off each summer, or pay off the next year in full and keep the loans from freshman year for until after I graduate?</p>
<p>I think there’s origination fees (2 or 3%) with these stafford loans? If so it makes no senses to pay if off and then take another if you’ll have to pay this origination fee again. </p>
<p>Even without the origination fee, I don’t see it worth the effort. Just use the work money the following year and take no loan.</p>
<p>All you’d save would be a month or 2 of interest. Plus the rates may go up for next year, I don’t know.</p>
<p>Payoff the unsubsidized loans and keep the subsidized loans until 6 months after graduation. Put your money in savings account or CD and pay the subsidised loan off when it is due. You keep the interest and the money in the bank is emergency money if needed. You’ve got to have the discipline not to use it unless it is truly an emergency.</p>
<p>Agree with ^^ except for the 6 months after graduation part - subsidized loans disbursed after July this year will no longer have the 6 month interest free grace period after graduation.</p>
<p>And the discipline part is important - my daughter took out subsidized loans when she could have managed without the full amounts offered (my suggestion as I used to think she was quite practical with money). She didn’t save a dime of it and now is about to graduate with more debt than she really needed.</p>
<p>Thank you so much all of you. I don’t know anything about origination fees, or CDs, so I’m kinda worried. I’ve never even had an allowance before because my family doesn’t make a lot of money. Also, I have heard that you get penalized if you pay off a student loan too soon. Is this true? Do any of you know of a website or something where I can learn about these things? Once again, thank you so much.</p>
<p>The origination fee is only 1% so if you borrow $5500, it’s $55 dollars.taken right off the top each time you trigger a loan. So why pay this when you already have the money? Unless you will nibble away at it. </p>
<p>Swimcatsmom, my older kids were so good with money, until they were out of college. Now they are having serious issues. I wish they had made their mistakes earlier. My friends have DDs that did the exact same thing as your daughter, and they did learn.</p>
<p>If you need only $5500 a year and will be quickly paying them back, your best bet is going to be Federal Student Aid called Stafford loan. It is a government backed program, it is probably the program that offers the most flexibility in terms of qualification and options in paying back. There is origination fee but it is very small and not very significant. There is no penalty for early payback. You should be entitled to both subsidised and unsubsidised loans. You need to file FAFSA form on [Home</a> - FAFSA on the Web-Federal Student Aid](<a href=“http://www.fafsa.ed.gov/]Home”>http://www.fafsa.ed.gov/) website to qualify. Check out website below for more info on Stafford loan:</p>
<p>[Student</a> Aid on the Web](<a href=“http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp]Student”>http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp)</p>
<p>As for CDs, you just need to go to a bank or a credit union and ask them about different saving account options which should include CDs and pick the one that best match your need. It is usually a compromise between the length of the term until you can take out your money and interest rate. Again, go to any reputable bank or credit union and they will explain different type of accounts to you.</p>
<p>On origination fee, the fee is upfront 1% but you get .5% rebate when you pay it back on time. So the net result is really .5%. Also if you pay back the loan within 3 months or so of the original date, you will get full refund of the origination fee. I am suggesting that OP should take out and just carry the subsidised loan and more likely than not, OP should be able to get more than .5% return in some sort of fixed interest accounts over the years.</p>
<p>Of the $5,500 direct (Stafford) loans, up to $3,500 may be subsidized if there is financial need. I can’t tell from the OP’s post whether he will be eligible for subsidized loans or not. The subsidized loans are need based, so eligibility will depend on his EFC, the cost of the school, and any other aid/scholarships received.</p>
<p>Yes, my assumption was that OP qualifies for subsidised loan which might not be true especially when he/she only needs $5500. (I have tendency to project my situation onto everyone.) OP you need to read up on financial aid and what a FAFSA and EFC are. Google it and read up on what they are all about.</p>