Decline unsub. Stafford loan/increase GradPLUS loan?

[mcrib]

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I'm not sure if this is possible, but roll with me here:

Let's say that I wanted to accept the subsidized Stafford loan I'd receive but DECLINE the unsub. Stafford loan portion, and finance the remainder thru a GradPLUS loan that would allow for interest to be capitalized at the end of deferment.

Wouldn't it make sense to go that route, since I wouldn't be paying interest upon interest, like I would with the unsub. Stafford loan?

I posed this question to the financial aid office at the school I'll be attending and I received this answer:

" No that is incorrect. The subsidized and unsubsidized loans are the
most beneficial. They have lower interest rates then the graduate plus
loan. The interest will accrue on both the graduate plus loan and the
unsubsidized loan at the time of disbursement."


I know that the Stafford interest rate is lower (6.8%) vs. the GradPLUS loan (8.5%, but with some companies like EdAmerica, immediate reduction to 7.25%), but the UNSUBSIDIZED Stafford Loan will accrue interest from Day 1 (and if I didn't pay the interest off each year, would compound interest I believe); and like I said earlier, the GradPLUS loan would have interest capitalized only at the end of the deferment (EdAmerica's site says this: Unpaid accrued interest is capitalized at repayment).

So I believe (and I tried running numbers, though I may be incorrect), that going the unsub. Stafford loan route would be more costly because of the possibility of compound interest.


If anyone has the patience to follow this and enlighten me on any missteps, please let me know. Thanks!

 

[QuantumMechanic]

wait are you saying that the GradPLUS is magically subsidized during your medical school years. that makes no sense. 😕

 

[mshheaddoc]

GradPLUS loan would have interest capitalized only at the end of the deferment

This is not completely true. It was my understanding that interest was similar to unsub staffords. Your interest accrues then is capitalized once you get out deferment. All the staffords I've had operates in this manner and from what I can gather, that's how GradPlus operates as well. I think that is what Ed America meant.

Here's all the details from finaid.org.

So yes, its cheaper from an originations standpoint and from an interest rate standpoint to maximize your staffords.

Don't forgo your staffords EVER!

 

[mcrib]

OK, so unsub. Stafford and GradPLUS work the same way; the accrued interest is capitalized at the end of deferment, whereas with sub. Stafford loans, you're not responsible for the accrued interest (payed for by the gov't).

I think I get it now. Sorry for the confusion.

 

[mshheaddoc]

Correct!