<p>Can a student get a huge subsidized student loan and not use it for educational purposes? For example, is it possible for a student to take out $200,000 in loans and buy a house with it or maybe a few cars? That's just an example.</p>
<p>just a moment we<em>tard</em>it. let me think about this…</p>
<p>…thinking</p>
<p>…thinking…done.</p>
<p>there is no way the feds are gonna let u get away with it unless you apply the loans towards tuition and fees and other expenses that are school related, for example transportation to and from school and the like.</p>
<p>so unless you wanna go to the pokey, don’t even think about buying a house with the funds…nor a car, mink coat or anything else extravagant with the funds.</p>
<p>if you still want those things get a personal loan or mortgage or home equity loan.</p>
<p>is there anybody brave enough to add to this? if so chime in!</p>
<p>Subsidized loans are awarded by the school - usually paid into the bursars account - expenses are deducted and if there is anything left it is paid to you. </p>
<p>There are 2 subsidized loans. They are awarded based on COA at a college and need. They are
Perkins loan. Maximum for an undergrad a year = $4000. Cumulative maximum $20k</p>
<p>Stafford subsidized - Maximum a year - freshman $3500, sophomore $4500, Junior & senior years $5,000. Cumulative maximum $23k</p>
<p>So
A. There are no ‘huge subsidized loans’ to be had - the cumulative maximum an undergrad can get are @ $43,000.</p>
<p>B. The money is not given to you. It is used to pay your expenses - any excess is given to you. If you do not enroll and incur educational expenses you will not get any financial aid.</p>
<p>So no it is not possible to do that.</p>
<p>Back in the 80s I took a small student loan and used it to purchase my first car; of course I paid the tuition and was actually in school, but no one verified I “needed” the money. I would guess the amount was less than COA.</p>
<p>It was a private credit union student loan</p>
<p>Please correct me if I am wrong about any of the following. To summarize everything that has been said, this plan is not possible for 2 reasons.</p>
<p>1) There are no subsidized loans quite that large (all are less than $200,000)
2) Subsidized student loans must be used for tuition and other educational costs before a student can receive the excess left over</p>
<p>What if a student without any educational expenses (everything was paid for) tried to take out subsidized student loans? Technically, the entire loan is excess and under his ownership until he graduates. Could he use those loans ($43,000 maximum) to buy a car?</p>
<p>Is is still illegal if he planned to pay back the loan in full after college? Subsidized student loans do not incur interest during one’s college years so they’re better than other loans.</p>
<p>You cannot ‘take out’ a subsidized loan. Application for a subsidized loan is via FAFSA. Subsidized loans are a federal loan that is awarded to you by the school based on financial need. If there is no ‘need’ as established by COA less EFC less scholarships you will not be awarded a subsidized loan. If everything is paid for there is no ‘need’ so you cannot get a subsidized loan. And the cumulative maximum an undergrad can be awarded over their entire undergrad career is $20k Perkins (high need and hard to get) and $23K Stafford (need based). That is not per year. That is over a 5 year period. </p>
<p>To reiterate - **subsidized loans are NEED based **. If your COA less EFC less scholarships show no ‘need’ you will not be awarded subsidized loans.</p>
<p>And yes it is illegal. The papers you sign when applying for a loan specifically say that you will use the money for educational expenses.
</p>
<p>If your EFC is low(i.e. your family income is low) and “everything is paid for” by a generous third party (e.g. your rich uncle), you can divert some of your uncle’s money to use elsewhere and receive subsidised loans to pay for school. If you invest this money wisely you could come out ahead by the time you graduate. If you just spend it then you will end up owing money for your education that could have been free thanks to your uncle.</p>
<p>In any case, don’t do this without your uncle’s approval or you may find his willingness to “pay for everything” diminish in the following years.</p>
<p>I have a related question, if you have received the maximum Stafford loan and met the COA w/ scholarships, subsidized loans, and grants is it possible to take out an additional Stafford to finance something like a new musical instrument? My D’s instrument is slowly dying and a newer better one is definitely in her future, it would be nice if we could get a lower interest rate than a private loan would offer.</p>
<p>Of course you can. You can also rob a bank. Now if you want to talk about legalities and maybe ethics, that’s a whole different story.</p>
<p>In reality, once you get money, and it’s all in one pot, there’s little discerning which dollar went where. To get the money, however, if it is an education loan, you need to show that you have an education that needs to be funded. Once you get the money, if you spend it somewhere else, and then take a private loan and pay the education from those proceeds or other that rolls in, yes, it is possible.</p>
<p>Just to let everyone know, yes, there are kids who use the loans for other purposes. My friend’s daughter qualified for subsidized loans and grants because of a very low EFC from FAFSA due to her mother’s situation. But Dad paid all of the bills under the table and gave out generous handouts. Girl went to a FAFSA only school and got all kinds of federal/state money that she really did not need. PROFILE schools did not offer a red cent.</p>
<p>Well, as my D will be a music major I honestly feel that a new French Horn is an educational expense. However, I also was under the impression that Federal loans could not surpass the COA so really that is where my question lies. If it appears I was trying to be immoral or unethical you will have to excuse me, I really was not born knowing this stuff.</p>
<p>Momof3: each school has their own COA, each has certain things they will allow to be added to it. PUblics tend to be pretty rigid, things that make sense to you and I may not be allowed, but other items may be able to be added…medical expenses paid out of pocket and a computer are two I can think of. In most cases it will only increase loan availability, but if that is what you want, check with your schools finaid dept</p>
<p>Thanks Somemom. I would never have known that I could do that!!!</p>