Loans on top of funding

[VulpesZerda]

Today I was discussing with one of my professors my options for my grad school living situation. I have a fully funded offer that seems to be just enough to squeak by in the area (as most stipends probably are!). She thinks I should still take out student loans so that I can have a cushion and maybe eat decent food. Do people do this? I took out so many loans for undergrad and I was looking forward to never doing that again. But she has a good point, maybe better safe than sorry? So, if people do this, how does it work exactly? I'll have my tuition waived as a part of the offer, so would it have to be a private loan instead of a student loan? I'm clueless!

Edited February 12, 2015 by VulpesZerda

[geographyrocks]

I did this.  Luckily, I made so little money last year that I qualify for financial aid loans.  I didn't really need the loans, but I wanted them for a couple of reasons.  I wanted a security cushion in case something expensive happened.  I also wanted to erase the possibility of stressing about money during my first year.  I also used the loan to pay off credit cards because the loan interest is much lower than my credit card interest.  I know the average salary that I should make after I get my PhD so I am comfortable with my indebtedness (as comfortable as one can be with debt ). 

Edited February 12, 2015 by geographyrocks

[GeoDUDE!]

I think most people over worry about how little their stipends are. I had a 13k a year stipend + 2k a year students fees and still pocketed a few hundred a month in the bank after bills. I ate out, went to happy hours, cooked whatever I want. Sure my rent was only 375. But Now i'm making roughly double and my rent is also double. So its still doable. 

 

You will find ways to conserve. I highly suggest you do not take out the loans. 

Edited February 12, 2015 by GeoDUDE!

[VulpesZerda]

I appreciate both of your perspectives! I tend to be an extremely frugal person so I know I could make it work. I guess if I really felt stuck I could try to borrow from friends or family.

[Cheshire_Cat]

It depends on how much you will probably make after school and how long you want to be repaying loans.  I am going to end up with a little debt, but I estimate that I will be able to repay that debt in 2 years, while making debt payments that are around 10% of my monthly income.  That seem acceptable to me.  I have a friend who has 180k in student loan debt, and works as a nanny.  That is unacceptable to me.  Just remember that if you are in debt, every cent that you spend on something silly, is a cent more you are in debt.  Debt can be a useful tool, but like a chainsaw, if you use it incorrectly you could end up losing an arm.

[yellowmint]

Today I was discussing with one of my professors my options for my grad school living situation. I have a fully funded offer that seems to be just enough to squeak by in the area (as most stipends probably are!). She thinks I should still take out student loans so that I can have a cushion and maybe eat decent food. Do people do this? I took out so many loans for undergrad and I was looking forward to never doing that again. But she has a good point, maybe better safe than sorry? So, if people do this, how does it work exactly? I'll have my tuition waived as a part of the offer, so would it have to be a private loan instead of a student loan? I'm clueless!

No, it wouldn't have to be a private loan. It can be a federal loan.

[pianocognition]

I am wondering the same thing. I have a TA offer where I would teach 2 classes. It's the highest level this department offers. I would need to pay $600 per semester for tuition. The stipend is $7,800 for nine months split up monthly. I told the college I was very interested in being nominated for some of the fellowships (it was their suggestion). I am concerned about needing to take out loans to survive. I don't want to commit if it is going to be a lot debt. 

[lilymasala]

To me "safe not sorry" would be to scrimp and scrape by without loans.  I know quite a few people who have gone through graduate programs, taken out loans to support particular lifestyles and were unable to find employment commiserate with paying them back in a timely manner.  Seriously, only take out the loans when the emergency happens, not "just in case."

[lavendercloud]

Here's my two cents: if you take an unsubsidized loan, plan on paying the interest while you're in school instead of deferring the loan completely. I don't think they're worth taking out unless you need to pay off credit cards and can't borrow money from family. Learning to live within your means is important and if you're committing to a life of academia, the sooner you learn to do so the better!

[JustChill]

I also would take out a loan only if and when "something happens." I'm also on a full-funding package from my university, which doesn't provide much expendable income but covers all of my immediate costs. For now, I'm comfortable without a large savings account if that means avoiding debt. In fact, every day I thank my lucky starts that I have no debt from grad school. 

[VulpesZerda]

Thanks all! I really, really hate that I went into this much debt for undergrad ($50k). It could be worse I guess, but still. At age 18 I was NOT equipped to make that decision and sign a loan. Argh.

Now that I have the opportunity to go to grad school without adding more debt, I guess I really should be thankful and take advantage of it. If I didn't get a funded offer I would be working with a BA in psych (basically screwed) or paying for a master's which I can't afford. So, yay for funding.

Now, if I can ask a follow up question: for those of you who had loans for undergrad, did you start to pay them off during grad school? I don't want to defer because of the interest but wonder if I could even afford to go into repayment.

[geographyrocks]

As far as I know (and someone please correct me if I'm wrong) your loans automatically defer while you're still in school.  I know I'm not paying on my loans (nor have they hounded me about paying them) although I plan on starting after I pay off some higher interest debts. 

 

I guess my perspective is somewhat different than most people because I was older when I obtained my BS and I had absolutely zero help from family.  I've been in crisis situations where I had no one to to ask for financial help so I'd rather have it and not need it than need it than not have it.  Crazy to some?  Probably.  But that's what I choose to do and I didn't choose it lightly.  That being said, some schools have emergency funds that you can apply for if you do have an emergency financial situation.  You should check to see if your school offers that. 

[Cosmojo]

Yes your loans automatically defer while you are in grad school, and to be honest paying them is dumb. Depending on the type of loan you have with some of them once you start paying them you HAVE to pay them every month, which if you are on a graduate stipend is nearly impossible unless you have other funding or live with 8 roommates. So the good you wanted to do by paying to make that interest go down suddenly turned into a mandatory $250 monthly payment (or whatever payment it would be...I have no idea) granted I don't think all loans are this way but I know I looked into mine, if I pay any money towards them they come out of deferment. 

You are much better off saving every month and letting interest accumulate than having to pay them every month- because stuff does happen all the time and you will regret a bill that you didn't absolutely need.  

[geographyrocks]

granted I don't think all loans are this way but I know I looked into mine, if I pay any money towards them they come out of deferment. 

Yikes.  I hadn't bothered looking into repaying while still in school yet.  If it ends the automatic deferment, I definitely won't be sending in payments.  Savings account here I come! 

 

FYI: It doesn't appear that there are any penalties if you begin to pay off a Stafford Loan while still in school.  http://www.staffordloan.com/stafford-loan-info/faq/what-are-the-penalties-for-early-loan-payments.php

Edited February 16, 2015 by geographyrocks

[VulpesZerda]

I dunno, I think I'll look into that and hopefully @geographyrocks is correct about Stafford loans, because just think about how much it would add when $50,000 of loans starts compounding interest for the 5 or 6 years that I'm in the program? That's a lot of freaking money. And if I'm just saving up to pay them off later in a stupid 0.5% interest account or CD, it doesn't nearly make up for the interest I'm losing.

 

I haven't done exit counseling yet, so maybe I'm getting ahead of myself, but I worry with all this debt! At least one of the three types of loans I have adds interest while I'm deferring. I think the payments are adjustable and I figure I might be able to handle a couple hundred of dollars a month. Maybe?

[lavendercloud]

As far as I know, you can make payments even when you're in deferment. Paying just the interest is generally much less than the full minimum payment you'd be paying if your loans were not deferred. Four years out of undergrad, I still owe as much on my unsubsidized loan as I took out to begin with thanks to that compound interest at 6.5%. Whether or not your loans are deferred you can also do income-based repayment which will result in you owing very little (often $0) but having the option to pay as well - in which case, PAY THE INTEREST whenever you can, and don't do what I did when I was a broke recent grad and paid nothing.

[rising_star]

I am wondering the same thing. I have a TA offer where I would teach 2 classes. It's the highest level this department offers. I would need to pay $600 per semester for tuition. The stipend is $7,800 for nine months split up monthly. I told the college I was very interested in being nominated for some of the fellowships (it was their suggestion). I am concerned about needing to take out loans to survive. I don't want to commit if it is going to be a lot debt. 

This doesn't seem like enough money to me but that's because you'd be losing two months of pay to tuition.

[Bacchanalia]

Does anybody know about applying for loans when I'm already in the workforce? My wife and I both work for the state, so we're definitely not rolling in it, but I'm not sure if it would even be worth it to fill out the fafsa?

Anybody have any experience or knowledge in that area?

[geographyrocks]

If you plan on going through the school's financial aid office, I believe that you must have a FAFSA on file. So it's better to apply and not need it than need it and not have it. I can't think of any downsides to filling out the FAFSA. I filled it out this year even though I know I wont be needing it just in case.

[omidance]

If you have to take any loans, it would be best to stick with federal loans since they have income-based repayment plans. Whatever you do, I just hope you are able to create a situation for yourself where you can keep your health at its best. IMO, the most important thing is keeping your sanity and good health so that when you're done you're not too broken down. If that means taking out a small amount of student loan debt so you can eat right and sleep more instead of heading to that part-time job, then I'd take out the loans. You don't have to accept all that's offered to you. Take a peek at your budget forecast and decide how much of a deficit there is...include a little savings for car maintenance and dental work (which may not be covered in your student health insurance). FYI: I've been on an income-based repayment plan for a couple of years and my payment just went up from $0/mo to $40/mo. Manageable for me, at least. Good luck, friend.