Using the loan to pay for school [house payment, food, books, etc] and using the stipend (and whatever little part-time money i make) i would otherwise use to pay for school to invest is breaking the law??

Educational loan money is supposed to be used only for tuition and fees, as I understand it. Parking it in a bank account doesn't qualify; I think you're technically supposed to return money that isn't used for educational expenses, but who really does that?

cameron2003 said:WHat would people do if they had enough money for grad school and didnt need a loan? Is it still advantageous to use a loan rather than pay cash?


I am thinking about doing the same thing. I will start my grad program in 2008 and I will have saved 80-90K after tuition and books is paid. I will not be able to work for the 28 mo. that the program takes to complete, but my car is paid off and I have no debt so I am looking at rent,utilities, and food. Is the 6.80% locked in regardless of rate changes by the fed? I am thinking by 2008 I will be able to get between 7.5-8% for a CD so it would make sense to take out the 138K loan and get a 200K CD at 8%. That will leave me with 18-28K to live on and my wife will be working also during the 2 years. Of course this all depends on interest rates being were I think they will be by then.

sinik said:JeebusSaves said:Educational loan money is supposed to be used only for tuition and fees, as I understand it. Parking it in a bank account doesn't qualify; I think you're technically supposed to return money that isn't used for educational expenses, but who really does that?This much I know is not true. The Feds know exactly how much my tutition & fees are, and yet they gave me stafford loans in excess of that.

You're right about that, actually. My tuition is much higher than the max Stafford loans, so my private loans are limited by tuition, fees, etc. But Staffords only depend on your grade level and dependent/independent status, so if you're in state/other cheap school you can take out more. My bad on that one.

filliy said:I was truthful on my FAFSA. I've worked myself down to almost no cash (engagement ring, wedding expenses, pumping 401k, max IRA cont, debt payoff) I'm could live without loans, but it'd be below fatwallet level and well below poverty level. The cost $ is set by the school not by you (unless you show additional qualified ie not luxury condo rent) expenses above the school limit. So everyone in that class has the same loaning ability less scholarships etc. I'd seem to me the Feds are counting on the schools to make sensible decisions for loan amounts.

Educational loan money is supposed to be used only for tuition and fees, as I understand it. Parking it in a bank account doesn't qualify; I think you're technically supposed to return money that isn't used for educational expenses, but who really does that?

Isn't there a major logic problem with not being allowed to park it in a bank account? You get a $4200 loan at the beginning of the semester. Your rent is $500 a month, food is $50 a week, books are $500 on credit cards. You have to take that loan and prepay all your food, housing, and credit cards? Totally impractical..

What I meant was keeping the money parked in a bank account beyond the schoolyear. During the year it's obviously fine.

phongdx said:"As we know, everything changed this year -- Federal interest rates skyrocketed, UHEAA is no longer an option, the new Graduate PLUS loan program was created, and the rules have drastically changed for in-school consolidation"

I'm also starting school in the fall. I consolidated my loans with UHEAA last year(thank you fatwallet) and was wondering why they are no longer an option for school loans?

Thanks

If you have a loan with them or a Utah connection, they are still an option. However, if you check out the incentives they're offering now, they're nowhere near as nice as they were last year.

No, the term just gets shortened.

orick said:isles1 said:
At face value, it does not look as good as Wachovia, but the language of the Wachovia rebate worries me:

"180 days after full disbursement, a 3% interest credit in an amount equal to your origination fee will be subtracted from your accrued interest."

Well, what if my accrued interest is LESS than my origination fee? Thoughts?

Your accrued interest after 180 days will be equal to approximately 1/2 the interest rate on the loan. For Wachovia, that's 3.95% of the loan principal. Your origination fee is 3%.

I understand the math part of it

My concern was if I made payments towards the loan prior to "180 days after full dispursement." In my case, that will be about 8 or 9 months from the start of the Fall semester, and the first dispursement. Payments typically are applied to accumulated interest, then to the principle balance.

I like to make payments to cover the interest so the principal does not increase, thus creating higher interest accrual.

It looks like the term of the Origination Fee credit may preclude my ability to make such payments if I want the 3% credit.

isles1 said:I am deciding between PNC and Wachovia, as I am unconcerned with incentives that do NOT decrease my interest rate or give me credits while in-school since I will consolidate within 6 months of graduation.

I'm not sure about the fully-private consolidation options, but it appears that federal consolidation rates are no longer a good deal: http://www.federalconsolidation.org/Interest.htm

This makes the National City 6.8% fixed rate look pretty darn good.

isles1 said:orick said:isles1 said:I am deciding between PNC and Wachovia, as I am unconcerned with incentives that do NOT decrease my interest rate or give me credits while in-school since I will consolidate within 6 months of graduation.

This makes the National City 6.8% fixed rate look pretty darn good.

I do not believe this rate has been confirmed. Likely an error since GRADPlus req. % is 8.5 to start. Might be a mixup between Stafford and PLUS on their site.

Good if it is correct, however.

That was my thought at first, but this morning I called (800) 622-5097 and spoke to a real person. Confirmed. There is a 3% origination fee (no rebate like Wachovia does). http://www.nasfaa.org/publications/2006/cnnationalcity040306.html