I have no experience whatsoever with American student loans, so please help this reader if you can!
I’d greatly appreciate it.
THIS IS HER SITUATION
I am in graduate school. My tuition has been waived, and I get a stipend while I’m in school. It’s not much (about $400 twice a month), but generally, I don’t need a lot. I have the cheapest rent EVER ($292 a month, before utilities). I live pretty meagerly when I can.
It’s still rough making that money stretch for me, but I do it. I am now in my second year, and I currently do not have any loans out.
But I have very little money in my bank account at present, and I think maybe I should take out a loan after all.
This is particularly true because from May-June of 2010, I will be studying abroad. In London. So money is just going to melt out of my wallet.
SHE APPLIED FOR LOANS…
I filled out the FAFSA last spring. I didn’t accept the federal subsidized or unsubsidized stafford loans that I qualified for this semester, and I think now it’s too late to do so.
For Federal Subsidized Stafford Loans, I qualify for $4250 this semester (which I’m not sure I can still get) and $4250 next semester. I will most likely qualify for near $8000 for my summer semester, but the money wouldn’t get into my account until I’m already over there, and it seems like a pain.
For Federal Unsubsidized Stafford Loans, I qualify for $4462 this semester (which I’m not sure I can still get) and $4773 next semester.
AND SHE HAS SOME SAVINGS…
And for one last element to throw into this…
I used to work at a “real job”. I had a 401k there, but when I stopped working there the money basically moved into a savings account at Fidelity.
I believe that account contains about $3000. Also, when my grandmother died back in 1994, I was left some money. I believe that account has about $4000 in it.
HER QUESTIONS
So here’s the question… Is it better to take out loans and leave my stashed savings in the places where they are, so that they’re saved for the future? Or is it better to spend the money I have in those accounts to avoid debt?
What’s going to be better for my credit, and for me in the long run?
And if I do take out loans, should I take out the full amounts of the subsidized loans?
Should I deal with the unsubsidized at all? What do those words even mean? I’ve never had loans before (thank god for scholarships and generous parents), so I’m completely terrified of them.
Thank you in advance for any advice you can pass along.
Thanks, readers!
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BWelch
on Sep 12th, 2009
@ 5:44 PM:
If it were me, I’d use the inheritance and the 401k money before taking out a loan.
Lacey
on Jul 24th, 2010
@ 4:30 AM:
I know this is probably too late, but she is still eligible to take out her loans into the school year (or at least, that's how mine are working). If she needs to, she should take out subsidized first because they don't accrue interest the way unsubsidized loans do. She also does not have to take out the full amount if she chooses not to. Say she needs $1000 of the $4000 odd amount. She can just nab that. The way my loans work is that I don't have to pay them back until after I graduate, and can work on paying them back even before then. If she takes out the loan and then comes into some money, she can pay it back before she is required to, with no 6.8% interest (as she would if they were unsubsidized). At worst, if she really thinks she'll get into a bind, she can take out a set amount and place it into an account in case she needs it. If she doesn't use it, she can return it to her loan provider, and if she does need it, it will be there.
Based on personal experiences, I would go with the last option and try not to touch the 401K/grandmother/savings money. She may not always have access to the loans, and may later need something to fall back on/repay them later with.
Sorry it's so late; I hope it helps :/