Questions about Max. Loan Amounts

[Sol Rosenberg]

OK, I will hopefully be attending medical school starting next year, and I am trying to put together a financial plan. I am leaving a job with a 6-figure salary to go to Medical School, and, although my wife will continue to work, her salary cannot support us both while in medical school. Because we have children, pets, etc we will most likely need to buy a house. I currently own two houses which I am debating about keeping as rentals/investments, but I also need to see if that is financially feasible.

When I apply for financial aid (loans -- I doubt that I will receive any grants) will my previous job be taken into account in determining the maximum amount of loans that I can receive? Will my savings prohibit me from obtaining the maximum amount of loan $? I'm talking mostly sub. and unsub. Stafford here, as I doubt I'll qualify for Perkins, and Independent programs vary. I read the thread on Bof A's Maximizer loan, but what I'm really looking to do here is to determine the maximum amount that I could borrow to attend school to see how much I need to save to cover other expenses? Is this a chicken-egg problem (i.e. the more I save, the less I can borrow?) or is this something that I can determine now?

I think I had previously read that savings in a 401k/403b plan is not considered for financial aid purposes, and it is possible, as a full-time student, to withdraw money penalty-free from such a plan. has anybody done this (i.e. "hide" money in a 401k/403b plan -- both are available to me.)

Thanks for any help.

Jota

P.S. I have excellent credit.

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[medicalbound]

OK, I will hopefully be attending medical school starting next year, and I am trying to put together a financial plan. I am leaving a job with a 6-figure salary to go to Medical School, and, although my wife will continue to work, her salary cannot support us both while in medical school. Because we have children, pets, etc we will most likely need to buy a house. I currently own two houses which I am debating about keeping as rentals/investments, but I also need to see if that is financially feasible.

When I apply for financial aid (loans -- I doubt that I will receive any grants) will my previous job be taken into account in determining the maximum amount of loans that I can receive? Will my savings prohibit me from obtaining the maximum amount of loan $? I'm talking mostly sub. and unsub. Stafford here, as I doubt I'll qualify for Perkins, and Independent programs vary. I read the thread on Bof A's Maximizer loan, but what I'm really looking to do here is to determine the maximum amount that I could borrow to attend school to see how much I need to save to cover other expenses? Is this a chicken-egg problem (i.e. the more I save, the less I can borrow?) or is this something that I can determine now?

I think I had previously read that savings in a 401k/403b plan is not considered for financial aid purposes, and it is possible, as a full-time student, to withdraw money penalty-free from such a plan. has anybody done this (i.e. "hide" money in a 401k/403b plan -- both are available to me.)

Thanks for any help.

Jota

P.S. I have excellent credit.

I am currently going through a similar predicament (although I'm starting this year).

The max amount of loans is dependent only on the published Cost of Attendance of the school - your assets do not limit you on the loans, but it does on the type (as you are aware). You will most likely be ineligible for subsidized loans and all grants, but you will be eligible for the full amount of unsubsidized loans up to the stated COA.

Your living allowance in the COA will most likely be a joke. My school only allows 1300/month and my rent chews up most of that. I have 3 kids and my wife is a stay-at-home mom. We are selling our house and will have the equity in the bank to live on. Your financial situation will be based on the previous years taxes, but you will be able to submit an appeal based on a change in income. If your wife makes any amount of money, however, it will most likely not help your case.

With regards to your retirement, there are ways to withdraw money and not be penalized, but it depends mostly on your specific plan. There are often exemptions for monies used for educational purposes. Also, the money may count as earned income and you'll be taxed on it if this is the case. I am planning to withdraw only enough each year to avoid taxation since the income will be next to nothing.

Fun, fun, I know, but it's worth it. Good luck!

 

[medicalbound]

By the way, your credit will only come into play when/if you have to go to private lenders. This becomes necessary if you've exceeded the max amount of federal funds (~$220,000 if I remember right). Then it pays to keep your credit as stellar as possible.

 

[Sol Rosenberg]

More queestions.....

OK, I went to the Financial Aid homepage of one of the Med. Schools that I am interested in. They list Cost of Living for On Campus/Off Campus/Live with Parents. Is this Cost of Living = COA? They also talk about daycare allowances for parents with children, computer allowances, clothing allowances, etc. Does all this add to COA? Is tuition, therefore, separate from COA (so that the max. amount of loans per year is tuition + COA,) or is the COA that you are talking about different (and, perhaps, includes all of these things.)

So, bottom line is that I could pretty safely expect to be able to borrow the max. in Unsub. Stafford loans as long as that max. is not above my school's COA, REGARDLESS of my savings, number of houses, etc. Therefore, for reasons like you are saying (tax consequences, etc) it makes no sense to try to "hide" savings in a 401k. I could just keep it in more liquid form (like savings accounts, CDs, etc.)

Thanks for your help so far...

Jota

 

[medicalbound]

More queestions.....

OK, I went to the Financial Aid homepage of one of the Med. Schools that I am interested in. They list Cost of Living for On Campus/Off Campus/Live with Parents. Is this Cost of Living = COA? They also talk about daycare allowances for parents with children, computer allowances, clothing allowances, etc. Does all this add to COA? Is tuition, therefore, separate from COA (so that the max. amount of loans per year is tuition + COA,) or is the COA that you are talking about different (and, perhaps, includes all of these things.)

So, bottom line is that I could pretty safely expect to be able to borrow the max. in Unsub. Stafford loans as long as that max. is not above my school's COA, REGARDLESS of my savings, number of houses, etc. Therefore, for reasons like you are saying (tax consequences, etc) it makes no sense to try to "hide" savings in a 401k. I could just keep it in more liquid form (like savings accounts, CDs, etc.)

Thanks for your help so far...

Jota

COA includes everything (aside from a few items mentioned in a sec). The Cost of Attendance is the cost to attend the school (e.g. tuition, books, equipment, living allowance, etc.) As you stated, there are specific increases to budget that may be allowed. These include childcare, computer expenses, healthcare expenses, etc. and differ by school. These are allowed and are above and beyond the COA and are added to your unsubsidized loan amounts. These are typically handled as a reimbursement where you turn in the receipts and they cut you a check for the allowable expense. There are caps to these amounts as well that depend on the school.

You are correct in your summation that you are eligible for the max amount of unsubsidized fed loans regardless of assets. Your assets will make you ineligible for grants and subsidized loans, but does not affect your ability to get the full COA for your school.

If you exceed the max amount of fed loans, you'll need to apply for private loans and even they will not exceed the COA.

I went through the same exercise that you are going through now on deciding what to do with savings, retirement, and home ownership and I know it's not fun. Bottom line is that we're not entirely screwed by the $$ and assets we've acquired up to this point.

 

[Sol Rosenberg]

I went through the same exercise that you are going through now on deciding what to do with savings, retirement, and home ownership and I know it's not fun. Bottom line is that we're not entirely screwed by the $$ and assets we've acquired up to this point.

Excellent. Thanks a lot for your help!

 

[FDoRoML]

Hm, a quick aside here... some things are true, some are not. I'm coming off of working for 10 years to MS1 next month, so I've had to deal with all of this... and my husband has and will continue to work, so no grants for me!

CoA will be listed on some med school's websites as either COA, or "student budget" and be sure you find the correct in-state vs resident designation. Also keep in mind the COA goes up every year (not because they get generous and give you money to live off of, but more because the tuition and fees rise yearly). If you have a kid/kids you can get an extra allowance in your budget (lets you borrow more to live), and the same goes for if you purchase a laptop. This is basically saying waht you can borrow through Stafford, GradPLUS, and Alternate (private) loans. Grad PLUS and private loans are credit based, so keep up with that, although I've found the GradPLUS to be a heck of a lot more forgiving as far as APR-- it's fixed while private loans are variable, and with the rates shooting up weekly these days, that is kind of scary.

If you're like me and need extra money above the COA (seriously, it's tough living on what they allow if you have a spouse/ family) there are at least 2 options I've found. One is the Maximizer from BoA and the other is Tuition Answer from Sallie Mae. They're both credit based and you will most likely need a cosigner if you don't plan on working while in med school. See what each does for you but know that BoA's rates are based on LIBOR and SM's rates are based on Prime... so don't be fooled by the deceptively sweet rates at SM (they are pretty much on par with BoA, maybe slightly lower on average by about 0.5 or 1 point). One exception is the origination fee... BoA's is much higher (but the range is also based on credit history and income).

Key to the BoA and SM loans above is they DO NOT count against your cost of attendance and do not have any effect on your federal aid (the school is not asked any info and they don't send any to the school letting them know what you're borrowing). And for med school-- they want to lend you $$.

If you have any questions about what I've mentioned just let me know. Fin Aid can be a huge headache if you're used to controlling your own finances... so many unknowns. I STILL don't know exactly how much my COA is and the breakdown of my loans because they haven't finalized things at the school yet. So, I'm approved but in a holding pattern until the med school lets them know (the "award letter" they send is an estimate, not the final cost). Sooooo much fun.