A couple financial aid questions

[Brill]

I posted these questions in the Financial Aid forum, but it doesn't seem to get very much traffic so I thought I'd go ahead and post them in here also.

I didn't even know that this was an option, but while completing my FAFSA online last night it gave me the option of whether or not to pay the interest on my unsubsidized stafford loans while in school, or wait until I graduate to pay it. Other than having to pay an extra few thousand once I graduate, is there any reason to pay the interest now while I'm in school? What are the advantages/disadvantages of both options?

Also, does anyone know anything about using some financial aid money for costs that aren't directly related to school (like credit card debt, furniture, etc.)? I received my financial aid package the other day and I'll probably have a few extra thousand dollars that I'd like to use to pay off some old credit card debt and for a couple of other things. However, I noticed on the form that it says something to the effect of "I will only use this money for expenses related to attendance at school." Does anyone have any knowledge in this area?

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[jdpharmd?]

I didn't even know that this was an option, but while completing my FAFSA online last night it gave me the option of whether or not to pay the interest on my unsubsidized stafford loans while in school, or wait until I graduate to pay it. Other than having to pay an extra few thousand once I graduate, is there any reason to pay the interest now while I'm in school? What are the advantages/disadvantages of both options?

The advantage that I know of is just the simple fact that paying the interest now will reduce the amount principal which will acrue during your time in school. i.e. Paying 200 now might save you 800 or so later on. (these number are just made up). I know that it's a good thing to try to do, but they also tell you to borrow only what you need, and it seems like if you're taking out extra loans to pay for the interest, it's effects would be nullified.

Also, does anyone know anything about using some financial aid money for costs that aren't directly related to school (like credit card debt, furniture, etc.)? I received my financial aid package the other day and I'll probably have a few extra thousand dollars that I'd like to use to pay off some old credit card debt and for a couple of other things. However, I noticed on the form that it says something to the effect of "I will only use this money for expenses related to attendance at school." Does anyone have any knowledge in this area?

You should have no problem with this. I know that they say that loans are to be used only for school related purposes, but once it all goes in the pot, who is to say what which specific dollar goes to? I've had friends buy motorcycles (GSX-R 1000), 32 inch TV's, CC debt, etc with thier loans. I even know people who took out loans only to invest them in high-interest accounts and actually make money. I don't think that the govt. has people follow you around checking up on what you spend on. As far as I know "furniture" is considered a living expense, and is ok anyway. I'm not an expert, but I'd say that a good percentage of student loans goes to beer anyway. Good luck, and I hope my info is accurate!

Jd

 

[Brill]

I called the financial aid office at my school today regarding the first question, and they told me that the interest on the unsubsidized loans is not compounded until your repayment period begins (six months after you graduate). So it seems like the best option might be to put any "extra" money that you would be using for loan interest payments into a high interest savings account and then pay it all off just before your repayment period begins. Any thoughts?

 

[dgroulx]

I currently have unsubsidized loans. The interest does not compound, but it does accrue. I was advised to make interest only payments, if I could afford to.