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View Full Version : Should we use Stafford Subsidized loan offer or money from savings?


klfrech
03-26-2011, 08:34 PM
DD just received her financial aid package from University of Pittsburgh. She has the ability to borrow $3500 in subsidized Stafford loans and another $2,000 in unsubsidized loans. From what I've read, the subsidized loan does not accrue any interest until after the grace period, whereas the unsubsidized does. Although we have the money saved for her to attend college, I've been thinking about having her borrow the subsidized Stafford loan, and paying it off for her as soon as the loan is due. My thinking is that we could basically borrow $14,000 interest free, while keeping our money intact. I know there is a 1% origination fee on the loan, but I still think it would be worth it.

Am I missing something here?

jessrose18
03-26-2011, 09:28 PM
I took out the full amount of subsidized (didnt pay interest until 6 months after grad) every year I went to school....you should save your money, earn interest on it, and pay it off at the end of schooling.....:thumbsup2 You never know in the years to come if tuition will increase, they will transfer to a pricier school, etc etc...best to keep your money now and see what happens in the future.

DawnM
03-27-2011, 07:33 AM
Well, the 1% origination fee would bother me.

It would also concern me to have a loan, but I hate loans of any kind.

If you have the money in savings and will not be tempted to touch it or spend more of the loan than is absolutely necessary, then you could do it, but most people tend to spend more if they have more, justifying the additional items (clothing, computer, things that are not necessary but are nice to have) because they have it available.

I am sure I will get flamed for be accusatory, so please know that I am not saying that YOU can't handle money.....I am just saying that many are more tempted to spend if it is available.

Dawn

disneymomto5
03-27-2011, 07:34 AM
I have to agree. My son is taking out the Stafford loans for his 4 years of school and we figure we'll help him pay it back at the end. We've kept our money for emergencies, etc. As it turns out my husband's job got cut backs and he lost 20 percent of his salary so I'm glad we've done it this way. Alot of people are horrified that you make your students take out loans, but we feel that if they have something invested in their education they are less likely to goof off. So far, it's a theory that's working well.

klfrech
03-27-2011, 08:10 AM
Although the loans will be in our daughter's name, we will be giving her the money to pay them back. Paying them back doesn't at all concern me. We have the money and it won't be used for anything else.

My question is whether or not this makes any sense. 1% on $14,000 is $140. I'm thinking that if I leave the money where it is, I will certainly make more on it than $140 over the course of 4 years.

I don't like loans either, and the paperwork will make me crazy, but why not use the governments money interest free for 4 years?

ilovemk76
03-27-2011, 08:24 AM
I would have her take the loans. If she chooses to quit college then she has to pay them back. If she graduates then you can pay them off for her.

DawnM
03-27-2011, 10:13 AM
That shouldn't be that hard to figure out. What interest rate do you have? If the math works for you, then make your decision based on that. I personally don't like having loans of any kind and would probably choose not to do it.

Dawn


Although the loans will be in our daughter's name, we will be giving her the money to pay them back. Paying them back doesn't at all concern me. We have the money and it won't be used for anything else.

My question is whether or not this makes any sense. 1% on $14,000 is $140. I'm thinking that if I leave the money where it is, I will certainly make more on it than $140 over the course of 4 years.

I don't like loans either, and the paperwork will make me crazy, but why not use the governments money interest free for 4 years?

chewbacca
03-27-2011, 11:28 AM
I have to agree. My son is taking out the Stafford loans for his 4 years of school and we figure we'll help him pay it back at the end. We've kept our money for emergencies, etc. As it turns out my husband's job got cut backs and he lost 20 percent of his salary so I'm glad we've done it this way. Alot of people are horrified that you make your students take out loans, but we feel that if they have something invested in their education they are less likely to goof off. So far, it's a theory that's working well.


This is what we will do when our kids go to college. When my DH was in college he saw many kids just partying on mom and dads dime. If they do have to take loans we will help them pay them back if they graduate. If they do not, they are on their own. Please look at us like we have 2 heads when we tell them this! :eek:

hpfan100
03-27-2011, 11:38 AM
You are right about no interest accruing on subsidized loans. It will not start until 6 months after graduating or stopping classes at least half time. Summers do not count in the stopping so they will stay in deferment while on summer breaks.
stay away from the unsubsidized loans if possible as the interest grows while in school.

good luck!

Free4Life11
03-27-2011, 02:22 PM
Taking out the loan will build her credit as the loan will be in her name. Do it if for no other reason that to help her start to build a credit history.

Jeff_G
03-27-2011, 02:43 PM
Just some things to think about, many are finding out in the past year or so you cannot necessarily find a job within 6 months after graduating however the loans are still due.

Also make sure the money doesn’t get used for something else ie emergency, and you child thought their education was going to be paid for and now isn’t.

If it were me I would not have my child get the loans, I would pay for their schooling outright. If you are worried about them goofing off because mommy and daddy are paying for their ride just make it clear once their grades go down the money goes away…