Question regarding student loans

[swamprat]

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This is definitely EARLY for me to be asking this, but I was wondering exactly how loans work. I know that you need them(in most cases) for tuition, but what about living expenses? Cell phone bill, car payment, food? How does it all work? Can you take out loans for X amount? It all kinda makes me nervous because I'm dead-on broke, and although my goal is to save some $ for the next 2 summers before my hopeful-matriculation, I obviously won't have nearly enough $ to afford anything for too long.

 

[natrod13]

So here is what I know about loans to this point, and my knowledge is admittedly lacking as this is the first time I will be taking loans out, but this is my understanding. The school sets up a budget, which is what an average single student needs to live on. This is your cost of attendance (COA). This includes tuition, fees, supplies, rent, utilities, etc. You can borrow up to the COA in loans. It is up to you to budget so that the loan money will cover your expenses for that year. I know that there is a good allowance for food and transportation, however, that does not include things such as car/credit card payments. If you are going to have these things you will need to find other places in your budget to cut costs. The budgets are different for different schools, but there is usually a bit of wiggle room I have found, as long as you are willing to cut back on unnecessary expenses such as a really nice apartment, starbucks everyday, etc. I have had these same concerns as well, since I am pretty much dirt poor and plan on living off of loans for the next 4 years.

 

[Semicolon]

natrod13 is right; your school sets up a COA that acts as your borrowing limit for loans (government, to be exact). Most students fill out a FAFSA and take out government-regulated Stafford loans and Grad PLUS loans (if necessary) in order to meet the COA. You also have the option of private loans (such as Sallie Mae), but the general consensus seems to be that you should stay far away from those.

 

[jazzgurl7]

Does anyone know how the loans paying for your housing works? I am under the impression that your lender will pay out the money to your school and the school will cut you a check for the refund amount (anything over tuition and fees) and then you use this to pay for housing/food/books. Anyone have any insight?

 

[snurpy]

I think private loans deposit directly to your bank account.

 

[Melicopter]

You're exactly right Jazzgurl - the federal loans go to your student account. After all student fees and tuitions for the term are paid for, you get a check which you budget very carefully because it has to last a long time! 🙂

 

[jazzgurl7]

Haha thanks Melicopter, I thought this was the case. I better start working on my budgeting skills. Also, are students responsible for the timing as far as when you need to apply for the federal loans to have them credited to your account on time? At my current undergrad institution they do everything for you, so I have never been personally involved in taking out my Stafford loans.

 

[Bacchus]

This is definitely EARLY for me to be asking this, but I was wondering exactly how loans work. I know that you need them(in most cases) for tuition, but what about living expenses? Cell phone bill, car payment, food? How does it all work? Can you take out loans for X amount? It all kinda makes me nervous because I'm dead-on broke, and although my goal is to save some $ for the next 2 summers before my hopeful-matriculation, I obviously won't have nearly enough $ to afford anything for too long.

You will receive a financial aid package from the school you'll be matriculating to. Some may call it a reward, but don't believe the misnomer. Reward does not equal loans. You are able to borrow up to the cost of attendance (tuition plus living expenses). However, you can petition to have your maximum loan amount increased by your school. The school gets the final say on how much you borrow, unless you take out private loans. Do not take out private loans, as their rates are variable and can range greatly depending on your credit score and if you use a cosigner. Currently, the interest rates on private loans are less than Stafford loans (mine are between 4% and 5%) but over time the rates will go back up.

With that, you will be using Stafford loans to primarily pay your medical education. You can borrow up to $8000 subsidized (meaning the government pays the interest while in school) and up to $32500 unsubsidized. After that, the best thing is to borrow Grad Plus loans. These do depend on your credit score, but most students can get them. You will use these loans to cover the rest of your cost of attendance.

Just because a school qualifies you for a certain amount, does not mean you have to use that entire amount in loans. Also, at the end of the year, you can always return funds to credit towards your loan account. Most schools will directly deposit excess money into your bank account for you to use, but you should be able to request a paper check as well. Loans will be disbursed at the start of the term, usually, meaning two disbursments for semesters, or three disbursments for trimesters.

 

[Semicolon]

It also takes some time for the loan money to actually reach you, so for the first few weeks of the term you still need to figure out ways to pay without that money. Usually a credit card is a good idea at that point.

 

[Dr Frankenstein]

I dont mean to hijack ur threadd buuuut im currently a temporary resident of az, no greencard no citizenship, although we are considered 'applicant' to greencard. i spoke with the financial aid at azcom and i do not qualify for federal loans. What other options do i have? Im thinking just private loans, if so which banks would you guys refer?

 

[Bacchus]

I don't think Citi is going to go under. Other than that, who knows. Also, see if AZCOM can do direct lending. Some schools can, others can't.

 

[Styria]

What are the limits on the use of the loans? If you budget well and know you won't use a portion of your disbursed funds for a little while, are you allowed to stick them in a 3-month certificate of deposit in your bank so they generate more interest until they're needed?

 

[Bacchus]

I move a chunk of my undergrad loan refund every year into my "high-yield" savings account. The refund you get from the school (the money they don't take for the expenses put forth by the bursar) is yours to do anything you want with, meaning you can make some interest off it, yes.