Saturday, May 17, 2008

Changing the subject

So, tell me about student loans.  I know nothing.  

Back in the day, many moons ago in my home country, the government actually paid you to go to college.  They used to hand out "student grants". Can you believe it?  I mean, OK, it was means tested, so not everybody got paid money to live on, but everybody's tuition was free.  Not that a full student grant was quite enough to live on, but you could manage not to go into debt if you had a part time job as well.

And I gotta tell a story here about my dear old dad.  My dad was going through college at the same time I was - at night school.  He'd been doing it for quite a while before I went away to university, and finally graduated the year before I did.  (Go dad!!)  So, he had decided to become a teacher for his second career and he quit his first job at the start of summer.  In other words, he was technically unemployed for a while there.  And when we reapplied for financial aid, as you had to do every year (cos I had a partial student grant even when he was working), voila, unemployed dad = full grant for Sarah.  Then he started working for the local education authority, who were the very people that paid out the student grants, but they didn't actually notice until nearly a full academic year later that papa was no longer unemployed.  Now, OK, technically, you were supposed to tell them when you found work but he, uh, "forgot" to tell them on the basis that he thought they'd automatically know they were writing him a paycheck as well as giving his daughter a full grant.  Once they realized, of course they asked for most of the money back.  By which time, dad said that I'd spent all the money (true) and he couldn't afford to pay it all back at once (umm, perhaps not entirely true), so he'd have to set up a payment plan.  Which was his devious aim all along.  So pops, bless his scheming heart, managed to get a free loan.  And because he had kept paying me the money that he had paid me all along (parents were supposed to make up the difference between a partial student grant and a full grant), I was able to quit my part time job in my final year and concentrate on my drinking, er, studying.  Hehehe.   I did end up slightly in debt by the time I started work, but it wasn't anything major, and was mostly caused by me going off on vacation and buying new work clothes and shit like that.

Anyhoo.  Where was I?  Oh yes, are there any restrictions on what your student loan can be used for?  Say, hypothetically speaking, you have enough money for tuition and you might be able to get by on a combination of work and being a slumlord.  So you don't know if you'll need a loan during your first year.  Might, might not, depending on how that whole slumlord/renting a room out thing goes.  Should you apply for a loan in advance, and use it for the tuition on the basis that some loans are restricted and must be used for actual college expenses and not living expenses?  Or just wait and see what you need?  What's the difference between all these bewildering types of offerings?  Also, do you just keep getting new, small loans as you go along, so you end up with a bundle of loans?  Or do you look at the situation and work out that you'll need X thousands throughout the entire time you'll be studying, and apply for one loan in advance?  How does one sort out what the best option would be?  I've tried doing some googling, but am completely confused.  Especially as most 18-year old students don't have access to things like a home equity line of credit - if I got one of those, could that have better terms than a student loan?

Or, can you just point me towards a good website that explains the whole situation?


Rachel said...

Not sure if this is too obvious, but is where I got my loans for grad school. I was able to use the loan for both living expenses and tuition. Some loans have restrictions and others don't. There is also a difference in public and private loans.

Good luck sorting through all of it!

Anonymous said...

Hey Sarah, I'm no student loan expert, but I have an idea that I do that might really help. email me if you'd like

Jenny (HeidN)

hedgetoad said...

You can use loans for living expenses, they're included in "financial aid package" - once you've filled out the FASFA, you should know where you stand, but they do factor it in.

There are two types of student loans, government backed and private. Depending on how much your tution is, you may qualify for government loans - which are better than private. I don't know if I'd use a home equity line of credit... government backed student loans have a much lower interest rate that pretty much everything else. Privat loans can be more tricky, but both offer a multitude of payment plans to ease the payback burden.

The two things you want to remember are 1. things move really fast in those financial aid offices, especially at private schools. Ask lots of questions! and 2. don't take out loans that will cost you more than you make after graduation.

Debbie said...

Here is a link to the overview of the federal direct loan program. With federal loans, it has to be an accredited school to get the money.

If you already know where you are going to school, you should check with them first as they can tell you if they are an eligible facility and what kind of financial aid you might be able to get. If they are recognized by the feds, you basically can get the loan and can use it for any expense though there is a max amount you can borrow. I paid for grad school with loans and was able to pay tuition and use the rest on some living expenses. In retrospect, I wish I'd borrowed less as payback is a bitch. And with federal loan debt, they *never* go away. You either pay them off or they will get the money back. I work for the government now and deal with people all the time who thought they didn't have to repay but are not getting tax returns and have federal benefits garnished to repay old loans.

Good luck!

Sam said...

You can use student loan money to smoke crack, if you'd like. Fill out the FAFSA (don't pay for it, just go directly to their site and do it) and the money is awarded on a yearly basis and paid out per semester. You have to fill out a FAFSA every year. Remember that student loan debt is "good" debt and is typically low interest. Depending on your income and assets you might have trouble getting grants, but still be eligible for loans.