What would you do- Grad Plus loan question!

[Malphaba]

Hey everybody, I'm new here! Incoming first year for my MPH at Boston University!

I'm in the process of figuring out my loans, etc, aside from what the school is providing and have some questions. I have contacted my financial aid office, and am waiting to hear back, but wanted some other opinions.

Here's the situation:

I'm looking at applying for Grad Plus loans for the majority of my living expenses (I will be working as well, but my income is not hugely sufficient, and I'm unsure if I will keep my current job hours while in school) And in reading about them- you can apply for up to the cost of tuition, minus what you're already getting in financial aid.

Then whatever you take out goes to the rest of tuition THEN toward your living expenses.

With what I am getting through federal direct loans, and scholarships, I would be allowed to apply for 23,000 for Grad Plus, but if they take out my estimated contribution first, it would be even less...

My question is, What would you do? Pursue something else for the estimated contribution (Sallie Mae, etc?), and put whatever I apply for with grad plus towards living expenses, or just apply for the full amount and let them put it towards tuition and go from there? I don't have experience with either, so I'm not sure..

Sorry if this doesn't make sense, I'm just wondering how people have handled loans in this situation.

[kaguyahime]

Hello Malphaba,

Well, I am certainly no expert, so I can only tell you what I have experienced.

I hope it will be helpful in some way.

1) In my experience, they do not take out your "expected contribution" from your loans/scholarships.

This only reduces the total amount of aid that you are elibible for.

For example, if they say that the total budget for one year at BU is $60,000, and your estimated contribution is $2,000, then you will only be eligible for a combined total of $58,000 in financial aid from all sources.

2) The financial aid office usually applies your direct loans and scholarships towards your tuition and fees first. If you are eligible for $23,000 in grad plus loans, it is likely that this will all be over and above your tuition and fees.

3) Have you checked on the possibility of being a TA, graduate researcher, or graduate reader? Sometimes these options are available in departments other than your own, too.

[OregonGal]

The short answer: don't go with Sallie Mae.

I've been doing a lot of number-crunching in regards to taking out loans; I'm in a similar degree to yours (international policy). While 7.9% is pretty horrible, one strategy is to consolidate your loans once you hit the end of your 6-month grace period after graduation. You can only do that with federal loans (Direct, Grad Plus, undergrad direct loans); it averages out your interest rate and puts you on a 25-year payment plan. Federal loans encourage you to pay off early; there's no penalty and you can overpay in lump sums or by the month, so it gives you a bit of flexibility compared to a 10-year plan.

Sallie Mae loans are federally guaranteed but not issued. I talked to a recent MBA grad the other week and he told me that when he was in undergrad, Sallie Mae's terms included a 21% interest rate. That's higher than most credit cards! Unless you have a really good credit history and some assets (a house, working spouse, etc) they will screw you over on interest even worse than the federal loans will.

I also second Kaguyahime in that you should look into TA positions on campus. BU is a large school so there should be plenty of those opportunities, and it's fairly standard for TA compensation to include partial tuition remission on top of salary, saving you thousands of dollars in tuition and loan interest.

If you want a look at a neurotic spreadsheet, here's my breakdown of loans/repayment/etc.

[Malphaba]

Thanks so much OregonGal!

Yea, I then remembered, my sister looked into into Sallie Mae for her undergrad, and they wanted to charge her more interest than the amount she was even applying for!

That's helpful!

[SlickMcFavorite]

So, can you consolidate a Sallie Mae loan?

[OregonGal]

Not under federal loan consolidation. That program only applies to "Federal Direct" loans (Perkins, Stafford, Direct Sub/Unsub), where your payments go straight to the Dept of Education and not to a 3rd party like a bank or Sallie Mae. It also doesn't apply to Parent PLUS loans, so you can't take over the debt your parents took on to send you to college.

[butterfingers2010]

Malphaba-

My understanding is that your EFC is simply a number used to determine your financial aid elgibility, although this can also be the amount they expect you to pay out of pocket, depending on what your school's financial aid department decides. One school I was accepted to wanted me to pay my EFC, while the other told me I wouldn't have to pay anything out of pocket. It just depends. If at all possible I would pay the out of pocket cost without taking out a loan for it. Depending on how much it is you're paying, you could save that amount up before school starts. If you can't do that, maybe you could work just enough hours that you could cover some of your living expenses (and therefore not take out that money in loans). You could also look into TA positions, as someoen else mentioned. I think that you should avoid taking out a private loan if it is at all possible and just have that be your last resort. You can't consolidate private loans, the interest rates are generally higher and they are not as easy to forgive you should something catastrophic happen that would cause you to not be able to pay.