Reader Dilemma: To take or not to take, student loans….

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.