"Extra" loan money...what to do with it

[Kepania]

Current PT students, just wondering if anyone has a similar situation...

I'm starting school in the fall. I just got my award packet from school and the loans they are offering are massive. Yikes. It is an expensive school, and they have broken down all the projected costs and it does make sense. But I did my own budget and was trying to get the amount I needed down to an amount I could stomach. Anyway, my questions are:

1. Should I take the loan amounts offered even if I end up with extra money every month? (Obviously this is better than coming up short.)

2. If I do end up staying under budget, is it okay/legal to put extra loan money into my savings account and just bank it?

I figure if I take the whole amount and don't need it, I can always save it up to help make bigger payments once I graduate.

Any input would be helpful! Thanks!

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[oregonprept]

Hi Kepania,

to answer your questions:

1. Only take what you'll need to live from loans. If you really want, you can take out the full award each term, but then you might just have money left over in the bank, which may, or may not be collecting interest while you're in school (i.e. subsidized vs. unsubsidized). Taking more than you need isn't illegal, it's just not money smart in the end.

I'd recommend taking out the full amount if you don't know what your living situation/costs will be, or if you don't have a buffer of money already in the bank. That way, if things cost more, or there's some kind of emergency you at least have a back-up. My first term I underestimated my costs, so I basically ended up eating ramen half way through, until the following term, lol.

2. Yes, it's okay to keep some extra money.

It is a good idea to pay off loans faster, due to the interest. However, taking out excess from what you need is just going to hurt you financially in the long run, since the interest accruing will be large.

In other words, take out the least amount you can, because when it's time to pay uncle sam the interest accrued will be large, and uncle sam will mess up your life if you don't pay.

 

[DancerFutureDPT]

1. Take out what you need for tuition, and living expenses if you don't have money saved for that, and then maybe a little cushion for an emergency. Do not take out everything they offer. (e.g. my school estimated $1200/month for rent, and I was only paying $600. I was not about to take out an additional $600 every month that I didn't need. They also estimated $3000 for a new computer. I didn't need that so I didn't take it).

Just realize that if you're using loan money to pay for rent/food/fun, you're paying at least 6.8% interest on your rent, your beer, your concert tickets, your plane tickets, etc. Most people will need to take out loans to cover living expenses and incidentals, but if you have money saved up for it you may be better off using that, depending on your circumstances. Grad school is all about living frugally and eating lots of ramen

2. You can, but if you don't think you'll need it you're better off returning it to the loan company so you don't have to pay interest. Even if you get interest on your savings account, you're probably getting under 1%. Given that you're paying at least 6.8% on the loans, it's not worth it.

Most schools will let you take out a little extra than you initially did if an emergency pops up. It's more work for the financial aid office, but it's possible.

Also, in re: to what the previous poster mentioned....as far as I know subsidized loans are gone as of July 1st for grad students, so you'll be paying interest on everything right away.

 

[Kepania]

Thanks for the feedback! I definitely don't want to underestimate because I do not have any other source of income, parental help or savings. I'm okay with eating ramen, but I'm not okay with missing credit card payments or phone bill, etc. I guess I'll have to really break down my budget. One problem is that I'm living rent free right now, but that's probably going to change sometime during my first semester. Since I don't know when yet, it's hard to plan...

Dancer - when you say that I can return money to the loan company, does that mean that if I accept the full award and it turns out I don't need as much, then I can return it soon? i. e. Within the first couple months of receiving it? That would be a better option since interest rates are so high. Ugh I feel like I'm right back where I was when I started the pre-PT thread "DPT School Loans - Am I crazy to do this?" lol
<8-O

 

[DancerFutureDPT]

I think you have like 14 days (or some similar grace period) from the date of disbursement to return unwanted loans without paying any interest. Theoretically if you don't use the loan money at any point and it's just sitting in an account, you could pay it back to the loan as if you're making a loan payment. You'll still get charged interest on that amount, but it'd be minimal since it has only been a short period of time. It's better than using that money for unnecessary things, or just having it sit in a bank account for years.

Definitely break down your budget as much as you can. Figure out how much you think you'll need as a cushion and take that out, but try to avoid taking out excessive amounts. Ask your financial aid office as well what would happen in case of emergency. As long as you've been approved for a certain amount of money, it should be okay. (e.g. I was offered $60,000 in loans, and I took out $30,000. Had I needed to adjust it, it would be possible to do so, just more work for them). Explain to them that you may be moving mid-term and don't want to take out too much, but in case you underestimate what you need would it be possible to get extra loan money mid-semester.

 

[Litlwarrior08]

This is what is posted currently for the SUB. loans.......things are changing in July.......but this might ans. some of your questions. You need to log into an existing account to find this info. in the promisory note section when you accept the loan.​

13. Canceling your loan.

Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying your school. After your loan money is disbursed, there

are two ways to cancel all or part of your loan:

•​

If your school obtains your written confirmation of the types and amounts of Title IV loans that you want to receive for an award year before crediting loan money to your account at

the school, you may tell the school that you want to cancel all or part of that loan within 14 days after the date the school notifies you of your right to cancel all or part of the loan, or

by the first day of your school's payment period, whichever is later (your school can tell you the first day of the payment period). If the school does not obtain your written
confirmation of the types and amounts of loans you want to receive before crediting the loan money to your account, you may cancel all or part of that loan by informing the school
within 30 days of the date the school notifies you of your right to cancel all or part of the loan. In either case, your school will return the cancelled loan amount to us. You do not
have to pay interest or the loan fee on the part of your loan that you tell your school to cancel within these timeframes. If you received an up-front interest rebate on your loan, the
rebate does not apply to the part of your loan that you tell your school to cancel. Your loan will be adjusted to eliminate any interest, loan fee, and rebate amount that applies to the
amount of the loan that was cancelled.
If you ask your school to cancel all or part of your loan outside the timeframes described above, your school may process your cancellation request, but it is not required to do so.
•​

Within 120 days of the date your school disbursed your loan money (by crediting the loan money to your account at the school, by paying it directly to you, or both), you may return

all or part of your loan to us. Contact the Direct Loan Servicing Center for guidance on how and where to return your loan money. You do not have to pay interest or the loan fee

on the part of your loan that you return within 120 days of the date that part of your loan is disbursed. If you received an up-front interest rebate on your loan, the rebate does not​

apply to the part of your loan that you return. Your loan will be adjusted to eliminate any interest, loan fee, and rebate amount that applies to the amount of the loan that you return.​

Sorry about the print size​

 

[Kepania]

Thanks for the advice and info! At least I feel a little better now that I have flexibility if I take out too much or too little. I also figure that if I budget incorrectly this year and take out too much, I can use it for next year's expenses and take out less the next round.

 

[Litlwarrior08]

Agree, I think the first semester will provide us w/ a clue as to much we spend on LIFE.

 

[SnowyRox]

Thanks for the advice and info! At least I feel a little better now that I have flexibility if I take out too much or too little. I also figure that if I budget incorrectly this year and take out too much, I can use it for next year's expenses and take out less the next round.

Yes... but with the removal of subsidized loans, you will be paying several thousand dollars for that privilege. (6.8% of your COA)

 

[Litlwarrior08]

Yes... but with the removal of subsidized loans, you will be paying several thousand dollars for that privilege. (6.8% of your COA)

....and 7.9 for the Grad Plus

 

[Kepania]

Agree, I think the first semester will provide us w/ a clue as to much we spend on LIFE.

Agreed. Because It is just very unsure right now as to how much I will end up spending on rent & utilities once I have to move.

SnowyRox- that has crossed my mind. To pay interest any longer than necessary is foolish.

Are there any California students, particularly Bay Area students who can give an idea of how much cost of living has been for you while in school?