Why not accept a subsidized Stafford?

Paying for College
1

<p>I've been offered a subsidized Stafford loan for the upcoming academic year. I went through the counseling process, and noted the number of times that I was told to "Borrow sparingly." and "Decline all that you do not need."</p>

<p>I understand that the federal government is trying to limit the impact of students taking out loans that they cannot afford. However, looking at things from an economics perspective, why not accept a subsidized loan? Is there something that I'm missing? If I accept the full award, I can place it in a savings account and get interest on it--while at the same time having the government pay interest on the loan. I can draw on it when needed due to money supply fluctuations (summer employment, cash gifts, scholarships/grants, etc.) and place money back in the savings account if I can afford it. Then at the end of my academic career (including graduate school), I can pay most of the loan off from the savings account and enjoy a low (3.4%) interest rate.</p>

<p>Is there any reason to decline my financial aid offer?</p>

2

<p>Don’t forget the loan origination fee when calculating your plan.</p>

<p>However, there is no huge reason to not use FA as a safety-net and/or pay it off as fast as possible after finishing school. Whether or not you’d make a profit would require a more detailed calculations (and if you end up spending it, then of course, keep an eye on how far in debt you are getting).</p>

<p>The money will also be distributed first to your school, unless you have other grants/scholarships that have already paid your tuition and bills.</p>

3

<p>How much is the origination fee on a $5500 Sub. Stafford loan?</p>

4

<p>A quick look online seems to indicate the origination fee has been being phased out (it used to be 3%) but that the default fee is still set at 1%. There is a lot of fairly outdated info out there on webpages that haven’t been updated in the past few years, so the OP will need to look for firmer confirmation of this info.</p>

5

<p>The net Stafford loan fees are 0.5%. It’s $5 per $1000 borrowed (multiply the loan amount by 0.005 and you get your loan fee).</p>

6

<p>If you borrow the money, and don’t use it won’t it show up as available assets for the next year if it is sitting in your bank account somewhere?</p>

7

<p>I also was thinking that it would appear as assets affecting next years financial awards from school.</p>