Student Loans for Dummies

[Leica]

Hi everyone,

I'm turning to this community with a couple of questions that may seem absolutely ridiculous, but I've never had to do anything like this before, so there's a bit of a learning curve as I try to figure all of this out. I just got into my dream program (terminal MA), though (unsurprisingly) without funding (not much to go around). I went to undergrad abroad on a full ride so I've never had to take out loans for anything, and now I have to explain to my parents (both of whom also went to undergrad abroad) how this whole tuition payment situation is going to work.

My mom has graciously offered to cover the costs, though she's not sure how much she'll actually have set aside for it by the time the payment deadline rolls around. Where would I go (in terms of financial institutions) to procure a student loan with a low interest rate should it become necessary? Basically, the situation is that she will eventually (probably within a couple of months) send me (or them) a check to pay off the outstanding amount, so I'm not sure whether it would make more sense to take out a large loan for the whole cost of two years all in one go and pay a portion of it off every month, or take out one or several small loan(s) as they become needed, or just get a standard loan from the bank for the amount necessary to cover the first semester, or whether we should do something else entirely. If it matters, both of us have really good credit. How would you suggest going about this?

Thanks in advance for any advice you could offer!

[Minnesotan]

As an American grad student, you are eligible for somewhere in the area of $8,000 in subsidized (and another $10,500 in unsub) loans per annum. However, grad school is much different than undergrad -- you basically run a tab for months and months without them saying a thing, unless you hit a certain preset limit on your student account (which is generally quite high).

I would apply for the government loans, but you likely won't need them. You can turn down or repay the money at any time.

[Leica]

Oh, thank you! That's very good know, I didn't realize they had a tab system set up...

[luvalicious]

I was in the same position a couple years ago and the federal loans are the easiest and best option for paying your tuition, etc. If you don't need them but just want a buffer, you can take out private educational loans from lenders like Sallie Mae, or your personal bank. Look around on rates. However, often there is a early repayment penalty involved on the private loans. My second year I got a fellowship so I only had to do the loans once - I took out one large loan and used it for every thing I needed, and paid it off early.

Where I am finishing my MA we don't have a tab system - you had to pay off the total fees, tuition, etc., by the 1st day of the 1st full month of classes, or your classes were canceled... so you might want to check on your particular institution's rule on that, just in case.

[JordanJames]

FAFSA is the way to go, BUT, I'm not sure if the deadline to apply for federal loans has passed. Also, some states have their own loan programs with good interest rates that can supplement your federal loans if they don't cover all of your expenses. Even if you don't plan on taking out the loans it's important to file a FAFSA so that you receive work-study aid (which makes it easier to find work as a TA or RA).

http://www.fafsa.ed.gov

[Leica]

FAFSA is the way to go, BUT, I'm not sure if the deadline to apply for federal loans has passed. Also, some states have their own loan programs with good interest rates that can supplement your federal loans if they don't cover all of your expenses. Even if you don't plan on taking out the loans it's important to file a FAFSA so that you receive work-study aid (which makes it easier to find work as a TA or RA).

http://www.fafsa.ed.gov

I filled out my FAFSA about a month and a half ago and my EFC was 0, but that's pretty much all the information I got from them - I got a confirmation email directing me to the finalized EFC and... that's it. I was expecting some sort of huge information packet to arrive on my doorstep (maybe it's on its way?), but I didn't get anything other than that email. I'll bring it up with my finaid department at the admitted students' day, thanks

[JordanJames]

No problem. Most of the paperwork is done right before school starts, so don't sweat it. If you need more loans, see if your state offers any help. I know New Jersey has a loan program that's pretty good, and I'm guessing other states have a similar program.

[Minnesotan]

Where I am finishing my MA we don't have a tab system - you had to pay off the total fees, tuition, etc., by the 1st day of the 1st full month of classes, or your classes were canceled... so you might want to check on your particular institution's rule on that, just in case.

What a fascist system! That's ridiculous, considering student loans don't even come out until a couple weeks after classes start. Let alone TA pay. What do people do? Take out loans every year, then give up half of their assistantship check every month to pay it off, only to repeat the cycle next semester?

Honestly, what are some schools thinking?

[luvalicious]

What a fascist system! That's ridiculous, considering student loans don't even come out until a couple weeks after classes start. Let alone TA pay. What do people do? Take out loans every year, then give up half of their assistantship check every month to pay it off, only to repeat the cycle next semester?

Honestly, what are some schools thinking?

It really is ridiculous, and yet somehow this complicated system works... usually, because if you have a federal loan/TA/fellowship your tuition remission or payment is taken out with the assumption that it'll come, even if it's not there yet. if you've got a private loan, well, you'd better get in there and start talking fast (although usually if you actually talk to them they are pretty understanding and even agree with you about how ridiculous it is.) In the second semester of my first year, the Finacial Aid office held the balance of my loan check because it required a signature - for a month and a half, without ever calling me. I finally called THEM. Mind you, they had no problem letting the Bursar promptly take out my tuition and fees!

[rising_star]

What a fascist system! That's ridiculous, considering student loans don't even come out until a couple weeks after classes start. Let alone TA pay. What do people do? Take out loans every year, then give up half of their assistantship check every month to pay it off, only to repeat the cycle next semester?

Honestly, what are some schools thinking?

Payroll deduction.

[hambergrrr]

Could someone explain the process after a FAFSA is done? I am currently wait listed for a school, and I think it's unlikely I'll get into the other two I applied for. I won't find out for another 2 months or so if I get in, but I'd like to start researching financing options. I'll be in China all summer, so in the best case scenario, will be back in the states to take care of any paperwork about 2 weeks before classes start in fall.

What is a good rate to get on a student loan? What websites are best to refer to? How often do students end up putting things on their credit cards? My expected contribution is rather high in my opinion, especially given my salary from last year, and given that I'm spending a huge chunk of my savings in China this summer... any advice?

I forgot to add that I didn't apply for fellowships really because my GPA is not competitive... basically anything merit-based is probably not up for grabs on my end.

[hopeful grad]

I don't know the answer to all of your questions but I would be careful about what you charge on credit cards. Some companies may give you 0% apr the first year (meaning you don't pay any interest), but it often jumps to incredibly high interest rates around 16% or so.

[hambergrrr]

I don't know the answer to all of your questions but I would be careful about what you charge on credit cards. Some companies may give you 0% apr the first year (meaning you don't pay any interest), but it often jumps to incredibly high interest rates around 16% or so.

Yea, I'm thinking that is usually a last resource, but I'm not sure where to start! I'm also thinking that I'll constantly call my credit card companies to lower my interest rates in the coming months, in case I really need to revert to charging expenses.

[Ladylish]

I'm no expert, but if you checked the box or filled in the field on the FAFSA that you are interested in student loans, your school's finacial aid office will calculate that once you've been admitted (and I think accepted) for that school. Usually you have the option of Subsidized Stafford Loans or Unsubsidized Stafford loans. These are through the federal government, deferred til 6 mos after graduation and the rate is set each year (in July I think) by the Federal government. If you have need, these are a much safer and better option than private student loans or credit cards.

[luvalicious]

I'm no expert, but if you checked the box or filled in the field on the FAFSA that you are interested in student loans, your school's finacial aid office will calculate that once you've been admitted (and I think accepted) for that school. Usually you have the option of Subsidized Stafford Loans or Unsubsidized Stafford loans. These are through the federal government, deferred til 6 mos after graduation and the rate is set each year (in July I think) by the Federal government. If you have need, these are a much safer and better option than private student loans or credit cards.

And you should also be aware that the federal loans hit a limit, which may not actually meet your COA (cost of attendence) or needs, and that's where the private loan can come in, if you need to fill a gap.

For the private loans, a co-signer may help keep your interest rate lower. I went through Nellie Mae for mine. We did the entire process online, which might be helpful for you since you will not be in the U.S.

[Leica]

And you should also be aware that the federal loans hit a limit, which may not actually meet your COA (cost of attendence) or needs, and that's where the private loan can come in, if you need to fill a gap.

For the private loans, a co-signer may help keep your interest rate lower. I went through Nellie Mae for mine. We did the entire process online, which might be helpful for you since you will not be in the U.S.

I have a question about Sallie Mae, actually (I'm assuming you mean Sallie? ) - I got from their website that there are Stafford Loans, Graduate PLUS, Signature Student and Tuition Answer loans. Now, let's assume that in the worst-case scenario, I'll need about... 25k a year for two years. I have good credit (though not much of it) and my mom can be a co-signer (she has excellent credit) if needed. Which of the options is better/cheaper in the long run? I'm assuming it'll probably be entirely paid off by the time I graduate, maybe within 6 months of graduation, so grace periods aren't too important, but prepayment penalties (or the absence thereof) are. Also, if I apply online, what sort of documents should I have on hand?

Also, it's my understanding that my school should get back to me with the FAFSA stuff in... May? Or is that something not all schools do?

[luvalicious]

I have a question about Sallie Mae, actually (I'm assuming you mean Sallie? )

It was Nellie Mae who I got the loan from, but it's serviced by Sallie Mae. Kind of strange, I know, but the loans they offer are a little different than Sallie Mae's. So I'm not familiar with Sallie Mae's, but the "Signature Student" looks closest to mine and there is no prepayment penalty and I believe a co-signer is recommended but not required. One thing to be aware of is that the money goes to the school and they disburse it to you.

Your individual needs will determine what loan is best for you; I believe there is a handy calculator on the Sallie Mae site, and of course you can talk to your school's financial aid office as well. It is probably more economical to take out federal loans to the hilt (the Stafford loans) and then maybe take out the Signature Student loan or similar to cover a gap. Anything over your COA requires a different kind of private loan and you'll want to avoid that as there will be prepayment penalties, higher interest rates, and usually you can't do them online.

When I applied online, I used the same documents as I did for my FAFSA. It was, or at least it seemed, less complicate than the FAFSA and I got the decision online as well, within 2-3 days.

I'm sorry I can't be more helpful.

[Leica]

It was Nellie Mae who I got the loan from, but it's serviced by Sallie Mae. Kind of strange, I know, but the loans they offer are a little different than Sallie Mae's. So I'm not familiar with Sallie Mae's, but the "Signature Student" looks closest to mine and there is no prepayment penalty and I believe a co-signer is recommended but not required. One thing to be aware of is that the money goes to the school and they disburse it to you.

Your individual needs will determine what loan is best for you; I believe there is a handy calculator on the Sallie Mae site, and of course you can talk to your school's financial aid office as well. It is probably more economical to take out federal loans to the hilt (the Stafford loans) and then maybe take out the Signature Student loan or similar to cover a gap. Anything over your COA requires a different kind of private loan and you'll want to avoid that as there will be prepayment penalties, higher interest rates, and usually you can't do them online.

When I applied online, I used the same documents as I did for my FAFSA. It was, or at least it seemed, less complicate than the FAFSA and I got the decision online as well, within 2-3 days.

I'm sorry I can't be more helpful.

Oh no, you've been very helpful, thank you so much! I'm sorry for being such a newb, I had no idea what Nellie Mae was! I guess I'm just unnecessarily angsting right now out of pure inertia - now that the wait is over and the decision is finalized, I need something new to worry about. At any rate, thank you very much once again!

[luvalicious]

Oh no, you've been very helpful, thank you so much! I'm sorry for being such a newb, I had no idea what Nellie Mae was! I guess I'm just unnecessarily angsting right now out of pure inertia - now that the wait is over and the decision is finalized, I need something new to worry about. At any rate, thank you very much once again!

No problem, just glad that I could help. And trust me, I'm with you on the "angsting right now out of pure inertia!"

[rsgoldjw]

very good, it's very useful to me, thank you very much!

[rsgoldjw]

very good, it's very useful to me, thank you very much!

[ImGrumpy]

As of July 1, 2012 the rules for graduate student loans have changed. Subsidized loans are no longer available to graduate students. They can still borrow a total of $20,500 a year in unsubsidized Stafford loans at 6.8%. That interest will start to accrue as soon as you take the loan (which will generally be when the university receives the money and pays your tuition out of it). Also, keep in mind that it will be only $10,250 a semester so if you need over that for tuition for one semester, you will have to get either a Grad Plus Loan at 7.8% through the school or go with a private loan. Also, there is a 1% origination fee. Interest on the full 20,500 if the money is held for a full year will be $1394 and the origination fee will be $205.

Here is a brief article explaining loans options under the new rules

http://www.usnews.co...al-loan-subsidy

You may or may not hear about your loan option through the school from financial aid before July. The reason is some schools, particularly state universities, don't set tuition and Cost of Attendance until the legislatures get around to the approval process in May or June. Once that happens, the loan information will come to you. In general though, almost any graduate student who hasn't defaulted on another loan can get the $10,250 a semester without a cosigner. Just accepting the government loans through the school is the easiest as they will automatically apply the money to tuition when it comes due.

Given that your family has agreed to help out, this might be an option for you. Take out the offered government loan through the school. Then, when your family pays you, use that for living expenses etc and put it back to cover second semester tuition payment. As soon as they pay you the second semester, you can pay off the first semester loan. Yes, it will cost you the 1% origination fee and some interest but it will prevent you from taken out loan, pay off 2 months later, take out loan second semester, pay off 2 months later, etc. Also, some universities allow a payment plan with the tuition split into 2 or 3 payments over the semester. And the loans and documents can generally all be completed online so you could take care of this from home.

I would suggest that you talk with a Financial Aid counselor at your new university. They will be able to tell you about the loans you will most probably qualify for through the university, the differences between them, whether they offer a payment plan, etc. If you get one who doesn't seem too helpful, hang up and call back the next day. Most are pretty knowledgeable but occasionally you get one who just doesn't seem to have it together.

Edited May 10, 2012 by ImGrumpy

[ImGrumpy]

Could someone explain the process after a FAFSA is done? I am currently wait listed for a school, and I think it's unlikely I'll get into the other two I applied for. I won't find out for another 2 months or so if I get in, but I'd like to start researching financing options. I'll be in China all summer, so in the best case scenario, will be back in the states to take care of any paperwork about 2 weeks before classes start in fall. ... My expected contribution is rather high in my opinion, especially given my salary from last year, and given that I'm spending a huge chunk of my savings in China this summer... any advice? .

Most of the loan papers, both through the university and private lenders can be done online so you should be fine doing it from overseas.

Since your EFC is high due to salary you received last year, I would contact Financial Aid and ask for a review. They may not agree to this until you are actually admitted so just ask them. They are allowed (but please note, NOT REQUIRED) to refigure your EFC using what is called "professional judgement". In this way, they can discount items that the government programs look at but which will have changed by the time you enter school if they see justification for it. For instance, if your parent lost a job or became disabled and had been out of work for 6 months by the time school starts, they can refigure your EFC using this information. The fact that you no longer have the income from that job would count here.

As far as using up your savings you may be out of luck there. FAFSA looks at what assets you have available on the day you apply. If you choose to voluntarily spend those assets on a cruise or a new car or whatever, there is no way they could justify a reconfiguration to the government. (yes, there changes get audited by the govt). The trick here is buy that car or pay for that cruise BEFORE you fill out the FAFSA. However, your EFC could still be lowered based on the job change and lack of that higher income.

[PrattIAFF]

For all of those concerned with the mounting cost of higher education and the rising necessity of student loans to finance it, please sign this petition:

http://signon.org/sign/support-the-student-loan

Since 1980, average tuition for a 4-year college education has increased an astounding 827%. Since 1999, average student loan debt has increased by a shameful 511%.

In 2010, total outstanding student loan debt exceeded total outstanding credit card debt in America for the first time ever. In 2012, total outstanding student loan debt is expected to exceed $1 Trillion.

In short, student loan debt has become the latest financial crisis in America and, if we do absolutely nothing, the entire economy will eventually come crashing down again, just as it did when the housing bubble popped. Reasonable minds can disagree as to the solutions, they cannot, however, disagree on the existence of this ever-growing crisis, as well as the unsustainable course we're on towards financial oblivion.

As a result of more than 30 years of treating higher education as an individual commodity, rather than a public good and an investment in our collective future, those buried under the weight of their student loan debt are not buying homes or cars, not starting businesses or families, and they're not investing, inventing, innovating or otherwise engaged in any of the economically stimulative activities that we need all Americans to be engaged in if we're ever to dig ourselves out of the giant hole created by the greed of those at the very top.

Now for the good news: there's finally hope on the horizon! Representative Hansen Clarke of Michigan has just introduced H.R. 4170, the Student Loan Forgiveness Act of 2012, in the House of Representatives - legislation designed to lend a helping hand to those struggling under massive amounts of student loan debt.

For a brief summary of H.R. 4170's main provisions, please copy & paste this URL into your browser: http://tinyurl.com/7akydbk

To read the full version of the actual bill itself, please go here: http://tinyurl.com/6txure8

To read answers to some of the most frequently asked questions about the Student Loan Forgiveness Act of 2012, please go here: http://tinyurl.com/8xh4csd

Student loan debt has an undeniable and significant suppressive effect on economic growth. The Student Loan Forgiveness Act of 2012 directly addresses this enormous boot on the neck of the middle class and represents a glimmer of hope for millions of Americans who, with each passing day, find that the American Dream is more and more out of reach.

Therefore, we, the undersigned, respectfully request that Congress bring H.R. 4170, the Student Loan Forgiveness Act of 2012, up for consideration and commit to holding a straight, up-or-down vote on it this year. Thereafter, we, the undersigned, respectfully request that President Obama sign this legislation into law.