Using Federal Loans to Pay Off Private Loans

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keemos
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Joined: Sat Jan 23, 2010 6:22 pm

Using Federal Loans to Pay Off Private Loans

Postby keemos » Fri Feb 26, 2010 1:52 pm

Assume that you go to law school on a full tuition scholarship (or something close to that). Can you then use the 20K Federal Stafford Loans to pay off undergraduate debt that is currently piling up due to interest. In other words, is it legal to request Stafford Loans, get them reimbursed because tuition is already paid for, and then pay off Sallie Mae or another lender which is accumulating interest while you are in school. Of course you would have to worry about paying off Federal Loans later but you would not have all that extra interest.

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homestyle28
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Re: Using Federal Loans to Pay Off Private Loans

Postby homestyle28 » Fri Feb 26, 2010 1:56 pm

It is my understanding that federal aid is limited by a schools cost of attendance. When you get a scholly this affects the remaining cost you're responsible for and thus the amount of federal aid you're eligible for. I've never seen a school where the costs include paying for other loans, so I don't think your scenario would work out. Not illegal, just not possible. There are a few legitimate reasons to request an increase in your personal costs (i.e. you have kids and pay for childcare) but again, ug debt isn't usually considered a reason.

keemos
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Joined: Sat Jan 23, 2010 6:22 pm

Re: Using Federal Loans to Pay Off Private Loans

Postby keemos » Fri Feb 26, 2010 2:08 pm

Thanks for the response

Cestjustemoi
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Joined: Thu Feb 11, 2010 4:35 pm

Re: Using Federal Loans to Pay Off Private Loans

Postby Cestjustemoi » Fri Feb 26, 2010 2:17 pm

I had a friend who did this. Your col is determined by your fin aid officer they approve your requests for "legitimate" funding. Which can cover food housing books and transportation. It's possible to get a refund over what you actually need but it won't be by very much.

AsylumPB
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Joined: Tue Jan 26, 2010 7:30 pm

Re: Using Federal Loans to Pay Off Private Loans

Postby AsylumPB » Fri Feb 26, 2010 2:30 pm

homestyle28 wrote:It is my understanding that federal aid is limited by a schools cost of attendance. When you get a scholly this affects the remaining cost you're responsible for and thus the amount of federal aid you're eligible for. I've never seen a school where the costs include paying for other loans, so I don't think your scenario would work out. Not illegal, just not possible. There are a few legitimate reasons to request an increase in your personal costs (i.e. you have kids and pay for childcare) but again, ug debt isn't usually considered a reason.


there is usually a significant difference between the cost of tuition and cost of attendance. even on a full scholly, you should still be able to borrow up to the rest of COA minus your EFC. EX: Tuition: 30,000 COA: 45,000 EFC: 5000; this still leaves you with 10k that you could borrow on a stafford loan with the lower int rate.




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