How do grad loans work?

[zpal91]

Hello! I had a question on grad loans. So I mainly need assistance for housing. How does this work? Do my loans release to the school then the school releases the loan to me?

[SkyStrike]

I'd like to know this as well. It's been awhile since I last took out a loan.

 

As far as I know cost of attendance covers living expenses but I'm not sure how the access to the money is determined.

[DaniCM]

Usually, every grad student is awarded an unsubsidized direct loan for $20,500/year. If that is not enough to cover your school's projected total cost of attendance (which includes both tuition and estimated living expenses), you can also take out a Grad Plus loan to cover the remainder.

 

For example, say you school's tuition and fees are $40K/year. They estimate cost of living expenses (food/housing/utilities/transportation/miscellaneous) to be $15K/year. You're given a $20K scholarship for the first year. That scholarship, in addition to the standard unsubsidized direct loan of $20,500 will cover your tuition and fees. For the $15K in living expenses, you'll need to take out a Grad Plus loan.Grad Plus loans have a higher interest rate (7.9%) than do unsubsidized direct loans.

 

All loans will first be dispersed to the school, which gets first dibs on your loan money so they can apply it to direct educational costs. What's left over (in this example, that would just be the Grad Plus loan) then goes to you. The school usually just directly deposits the money into whatever account they have on file for you.

[bluestskies]

I've never taken out a student loan before and was curious about what they can be used for, exactly. Does it have to go towards tuition if I work full time during school?

 

For example I will likely only be in school part time (8 credits/quarter) and paying for 2 credits per quarter out of pocket (the other 6 will be covered by the school in tuition reimbursement because I'm a state employee). 

 

So I can use a loan for those 2 credits, but what if in a quarter I only decide to take 6 credits because of a heavy workload around that time - what happens to the loaned money that is essentially 'unused' for those 2 credits?   

Edited March 29, 2013 by bluestskies

[DaniCM]

Loan money is dispersed each semester, fall and spring. So, in the fall, if you're taking 8 credits, 6 of which are covered by tuition reimbursement, the school will receive the full total amount of loans you requested, and take what they need to cover your direct education costs - the remaining 2 credits. If there's anything left over, it will go to you. You can use if for whatever, but it should be used on books and living expenses. Since you're working part time, you may just want to immediately repay any surplus loan money and use your own wages to pay for books and living expenses.

 

The following semester, if you sign up for fewer credits, the same thing will happen. The school will get the total loan amount, take what they need to pay whatever your tution reimbursement doesn't cover, then give the rest to you.

 

Even though your loan is released in two separate dispersements, you must request the total loan amount for the academic year prior to begining that first semester. That total amount is then divided in two equal amounts, to be dispersed once in the fall and once in the spring. If you're taking less credits one semester of the acadmic year, the school will simply need to take less of your loan dispersement for that semester, leaving you to pocket a higher amount. Again, I would suggest repaying what you don't need immediately

[bluestskies]

Ahhhh, thank you so much for your help!!
 

That makes total sense, and is much simpler than I had envisioned.

[DaniCM]

No problem!