I'm A Doctor, Not A Mathematician!

[AggieMed05]

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Ok, I'll be the first to admit that I'm completely lost when it comes to figuring out the best way to handle loans. My original plan was to just take out what I needed for school, decline the rest and take my chances. Lately though, I've been reading a lot of the threads in this forum and I see that some of you wiz-kids have come up with ways to beat the system. For example, if you take a little more money when you don't need it and stick it in the bank, you're protected from getting denied for loans when you do need them. Because decisions on how much money somebody takes depends on their individual situation, I thought I'd throw mine out there to see what you guys recommend.

For my MS1 year, I've been awarded $35.3k per semester broken down as follows:

Direct Lending Grad Plus - 12,830
Direct Lending Sub Stafford - 4,250
Direct Lending Unsub Stafford - 18,222

My tuition is ~ $21k (yes, per semester!). Although I know they can't afford it, my parents have insisted on paying for my room and board, books, and personal expenses. So, my question is this: does it make sense to avoid the grad plus loans if I think I can squeak by without them? Or should I just suck it up, take $5k-$10k of the plus and sit on it? Any other ideas are welcome and appreciated!

Thanks for reading!

 

[TMP-SMX]

If they can't afford it, just talk to them and say that loans are there for a reason. That's a lot of money for them to give you. Grad plus are not the best loans, but you don't have much choice with that high of a tuition. Keep in mind that you can always take out more loans if you need it in the middle of the semester for emergencies. Just talk to your financial aid office. Though you might as well take out the loans because it can take a little time and if you really do have no money then you could have problems during an emergency.

 

[osli]

I'd take out the money, but that's based more on my personal feelings about the current economy and market than any really concrete logical reasoning. But I'll try to explain.

Banks just aren't lending money right now... not to each other, not to businesses, and it's not nearly as easy as it once was for a lot of people to secure car loans or mortgages. Likewise, the student loan market has changed and is changing. Many private lenders have closed shop, and direct to consumer student loans have vanished completely.

If there's one thing that's a given and evidenced numerous times through the years here on the SDN forums, it's that school financial aid departments are very reluctant to increase your "cost of attendance" when what you borrowed (or what they budgeted) comes up short. Sometimes people don't take out the full amount because they didn't need it (at the time), their situation changed or maybe they underestimated, and they had holy hell getting the school to allow them to dip back into the grad plus or school certified private loan pool to make it through the year. Other times something truly unexpected happens and you need a lump of money - illness, car blows up, apartment or house fire, significant other leaves you... In the past, students to go to direct to consumer loans for those types of emergencies or situations. Or, if lucky, get $1000 or so from the school in an emergency loan (that typically has to be repaid within that school year). Or in rare cases, get the school to approve a budget increase for that student in the middle of the year. Very rare.

Bottom line, you'll find lots of examples of students not having enough money during the year for one reason or another, and having a hard time figuring out how to secure more financing. You won't find anyone complaining about having $10k in the bank "just in case." With banks being very stingy about loaning to anyone these days, and many private loan options gone, I think I'd accept just about whatever amount of financing was offered to me at the moment, thank you very much.

Also, and I'm sure this can be debated at length, right now might not be the worst time to take $10k of "emergency" money and put it into the market for a year or two. Much more risky, but if you really believe you don't need that money, it might be a risk worth considering. Or you can put it under the mattress.

 

[mr2trd3]

Question:

Would having $10k in the bank not affect how much fin aid one would be receiving for the next term? I would assume that the school/govt can easily find out how much money you have and award you the neccessary (lower) amount of fin aid.

 

[TMP-SMX]

No. You shouldn't be counting loan money as assets in your bank accounts. If you have been you screwed up. If your checking account is $10,000 and it is all loans, your checking account effectively has a balance of 0 for the FAFSA.

 

[osli]

Not only that, but your ability to provide funding on your own (assets, income) should only affect the balance of subsidized vs. unsubsidized stafford loans. In every case I have heard of, here or elsewhere, the student is allowed to borrow up to the school CoA regardless of estimated family contribution. Loans in the bank from last year do not constitute financial aid for the following year.

 

[nontrdgsbuiucmd]

If they can't afford it, just talk to them and say that loans are there for a reason. That's a lot of money for them to give you. Grad plus are not the best loans, but you don't have much choice with that high of a tuition. Keep in mind that you can always take out more loans if you need it in the middle of the semester for emergencies. Just talk to your financial aid office. Though you might as well take out the loans because it can take a little time and if you really do have no money then you could have problems during an emergency.

I've not started yet, but have heard the same thing as above regarding loan dispursement -- the response to my specific question to the financial aid office of total available loans and when I'd be able to access them was that the school considered loans and cost-of-living on a full-year basis; if I don't anticipate needing funds now I can turn down part of the financial aid package, and if things change in February, I will be able to obtain the $$ I'd turned down (to be safe, I'd only do this for federally unsubidized or grad + loans as these will still be available I hope in a few months!)

But as Osli had said, I too may well try to keep a small emergency cache available, i.e. take out an extra thousand or so this year if cost-of-living allowance is more than I need for M1.