For those who have money saved...

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
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brose
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For those who have money saved...

Postby brose » Tue Mar 29, 2011 3:39 pm

How are you going to distribute it so it gets your the farthest?

I have a good amount saved (roughly equal to 1.5x the yearly amount of tuition at the school I'm attending). I don't want to lose it all up front and pay out my tuition but I was considering using it for COL and just taking out loans for tuition and paying off the interest each year. Can anyone think of a better way so that I can get the most out the money?

BlueDiamond
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Re: For those who have money saved...

Postby BlueDiamond » Tue Mar 29, 2011 3:41 pm

"gift" it to someone before applying for fafsa.. get the full fafsa amount of $20,500 per year.. pay off COL and any school-provided loans first.. profit

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brose
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Re: For those who have money saved...

Postby brose » Tue Mar 29, 2011 3:42 pm

Too late. My EFC was 10K so yeah. I still qualified for the 20.5k which I think is pretty common.

BlueDiamond
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Re: For those who have money saved...

Postby BlueDiamond » Tue Mar 29, 2011 3:44 pm

in that case COL will be included in what you have to borrow from the school.. so just borrow less and have lower interest payments after graduation

Edit: sorry if these seems unhelpful.. but just sit down and work out the numbers :/ nobody likes doing it.. except mathy people.. but theyre weird

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brose
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Re: For those who have money saved...

Postby brose » Tue Mar 29, 2011 3:46 pm

Yeah, as I said, I was planning on just taking out loans for tuition and living on the money I have saved (I will have excess when I graduate) and that way I'll have a nest egg to live on if I don't get a job (god forbid).

I just see a lot of talk on here about using subsidized loans to pay for other loans and thought maybe that could apply to me but I don't see how it can.

Bumi
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Re: For those who have money saved...

Postby Bumi » Tue Mar 29, 2011 3:55 pm

brose wrote:How are you going to distribute it so it gets your the farthest?

I have a good amount saved (roughly equal to 1.5x the yearly amount of tuition at the school I'm attending). I don't want to lose it all up front and pay out my tuition but I was considering using it for COL and just taking out loans for tuition and paying off the interest each year. Can anyone think of a better way so that I can get the most out the money?


For unsubsidized loans, you are paying interest from the origination of the loan. If you have $50k sitting around getting 0.5% APR while you're taking out $45k in loans, some of which are at 7.9%, you are losing money.

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Stonewall
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Re: For those who have money saved...

Postby Stonewall » Tue Mar 29, 2011 3:58 pm

are you going to wake? cuz you'll be able to bank a lot with the low COL

duckmoney
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Re: For those who have money saved...

Postby duckmoney » Tue Mar 29, 2011 4:03 pm

Mathematically you're best off taking off only the subsidized loans and paying the rest out of pocket until all your funds dry up, then paying the remainder with however many loans you need. This will leave you with the smallest amount of debt at graduation. Although I know it will be painful to see all your savings dry up.

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sanetruth
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Re: For those who have money saved...

Postby sanetruth » Tue Mar 29, 2011 4:03 pm

if your money is not invested while your loans are gaining interest, then you are 'losing' money, clearly. if, however, you are planning on investing the money while you incur interest from loans and trying to beat the interest, keep in mind the taxes you will pay on any capital gains, which could be a deal breaker.

CM612
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Re: For those who have money saved...

Postby CM612 » Tue Mar 29, 2011 4:04 pm

I'm in a similar situation. I've been playing with the numbers a lot. The main thing I've found is that the earlier you take out the loan, the longer it's accruing interest (unless it's the subsidized) and it makes a big difference in the total you'll need to repay. I think what I'll end up doing is taking out the subsidized loan and use savings to pay tuition/COL for as long as possible. I'm trying to hold off on the loans that will accrue interest for as long as possible.

Another thing I've had to consider is that psychologically I can't really handle living on loans without guilting myself every time I want to go to the bar or a movie so I'm hoping to allocate loans to tuition and savings to COL.

Lastly, don't forget about summers/studying for the bar when doing your calculations. You may get an unpaid internship one (or god forbid, both) summers so keep in mind that loans won't cover those time periods.

HTH. Good luck! Every time I sit down to number crunch I feel like I end up grumpy for the next few days.

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brose
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Re: For those who have money saved...

Postby brose » Tue Mar 29, 2011 5:47 pm

Yeah; the subsidized loans are 8.5k, so it is kind of emotionally draining to think that all my $$ will be gone. I might keep a small portion of it just to mentally help myself... boo. I guess this is why I saved it, sooo I'll keep thinking of that.

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txadv11
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Re: For those who have money saved...

Postby txadv11 » Wed Mar 30, 2011 11:03 am

FYI I have heard that subsidized loans (8,500) are going away, and we should count on the 20,500 as totally unsubsidized.

Anonymous Loser
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Re: For those who have money saved...

Postby Anonymous Loser » Wed Mar 30, 2011 11:20 am

BlueDiamond wrote:"gift" it to someone before applying for fafsa.. get the full fafsa amount of $20,500 per year.. pay off COL and any school-provided loans first.. profit


For this "gifting" strategy to have any effect on eligibility, a borrower must have an annual adjusted gross income above $50,000 and assets that exceed approximately $80,000. This is because assets are not considered unless a borrower's AGI is above a certain threshold, and even once that threshold is passed, a factor of .20 is applied to assets to arrive at the EFC.

In the OP's case, even with significant savings, he/she qualified with for the maximum amount of subsidized Stafford loans, which is the best possible outcome. In other words, even of the OP's EFC was 0, he/she would have received exactly the same federal loan package. I'm not sure why posters on TLS are so hung up on assets, it is only in extreme cases that assets alter the mix of federal educational aid.

HWS08
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Re: For those who have money saved...

Postby HWS08 » Wed Mar 30, 2011 12:13 pm

I am going to take the max amount of federal loans I can because they have the lowest interest rates. The rest of tuition I'll cover through private loans. Then I am going to keep my savings that aren't in a 401(k) in my money market account and draw on it for living expenses. I don't feel comfortable spending all of my money in the first year because I want some COH in case of an emergency. I'll probably transfer a lump sum every two weeks because that's how I get paid now so I'm used to that type of cash flow management.

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brose
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Re: For those who have money saved...

Postby brose » Wed Mar 30, 2011 12:18 pm

HWS08 wrote:I am going to take the max amount of federal loans I can because they have the lowest interest rates. The rest of tuition I'll cover through private loans. Then I am going to keep my savings that aren't in a 401(k) in my money market account and draw on it for living expenses. I don't feel comfortable spending all of my money in the first year because I want some COH in case of an emergency. I'll probably transfer a lump sum every two weeks because that's how I get paid now so I'm used to that type of cash flow management.


I might do a hybrid mixture of this.

I will still have savings once I pay my first and second year tuition with the subsidized and the rest with my own money.

I don't like the idea of taking out 12k the first year and possibly the second (for a total of 24k) while itsgrowing at a rate of almost 7%. I'm not going to be making that much on my savings anyway. If I'm fearful that I'm reaching close to zero at the end of my second or beginning of third year, I might take out the full federal and grad plus loan and live off that (and I will probably have significant loan money left over), and proceed to live off of that after graduation, then pay it off once I get a job and start taking home my own money. The payments and interest accrued are much more lower on 40-50k (after three years) than 110k (after three years)... I'll take it!

Thanks for the help guys.

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brose
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Re: For those who have money saved...

Postby brose » Wed Mar 30, 2011 12:22 pm

txadv11 wrote:FYI I have heard that subsidized loans (8,500) are going away, and we should count on the 20,500 as totally unsubsidized.


Well, I wish my schools knew this in my aid packages...

HWS08
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Re: For those who have money saved...

Postby HWS08 » Wed Mar 30, 2011 12:24 pm

brose wrote:
HWS08 wrote:I am going to take the max amount of federal loans I can because they have the lowest interest rates. The rest of tuition I'll cover through private loans. Then I am going to keep my savings that aren't in a 401(k) in my money market account and draw on it for living expenses. I don't feel comfortable spending all of my money in the first year because I want some COH in case of an emergency. I'll probably transfer a lump sum every two weeks because that's how I get paid now so I'm used to that type of cash flow management.


I might do a hybrid mixture of this.

I will still have significant savings once I pay part of my tuition with the subsidized and the rest with my own money.

I don't like the idea of taking out 12k the first year that's growing at a rate of almost 7%, since I'm not going to be making that much on my savings anyway. If I'm fearful that I'm reaching close to zero at the end of my second or beginning of third year, I might take out the full federal and grad plus loan and live off that (and I will probably have significant loan money left over), then live off that after grad and pay it off once I get a job and start taking home my own money.

The payments are much more manageable on 40-50k than 110k... I'll take it!


For sure. Sounds like you have pretty significant savings, so congrats. I'm not too worried about investing my savings because there isn't anything out there with an interest rate higher than the interest rates on loans, except a 401(k) and then it's a PITA to get your money. Don't forget that your 2L job will probably be paid and there's a slim chance your 1L summer job will (or you may be able to get a stipend from your school for public interest), so that will help stretch your savings too. If I can swing that I may be able to wait until 3L before I have to start borrowing to cover COL on top of tuition.

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Flips88
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Re: For those who have money saved...

Postby Flips88 » Wed Mar 30, 2011 12:26 pm

txadv11 wrote:FYI I have heard that subsidized loans (8,500) are going away, and we should count on the 20,500 as totally unsubsidized.

Source?

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pjo
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Re: For those who have money saved...

Postby pjo » Wed Mar 30, 2011 12:33 pm

HWS08 wrote:I am going to take the max amount of federal loans I can because they have the lowest interest rates. The rest of tuition I'll cover through private loans. Then I am going to keep my savings that aren't in a 401(k) in my money market account and draw on it for living expenses. I don't feel comfortable spending all of my money in the first year because I want some COH in case of an emergency. I'll probably transfer a lump sum every two weeks because that's how I get paid now so I'm used to that type of cash flow management.



Why are you taking out private loans? Private loans don't qualify for IBR and therefore if you ever had to fall back on IBR you would basically be screwed.

--Also, @ OP, I'm in a similiar situation. I plan on taking out stafford $20,500 for the first year and using my savings to cover COL and the extra tuition. My projections show that I'll save something like $2500 in interest, but more importantly I'll have a bit of peace of mind having total loans amounts of 120k instead of 200k when all is said and done. I highly doubt that you could properly invest your money to beat the 8.5% interest on the grad plus, at least not without taking on more risk than you should on a 3yr investment.

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bk1
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Re: For those who have money saved...

Postby bk1 » Wed Mar 30, 2011 12:36 pm

Flips88 wrote:
txadv11 wrote:FYI I have heard that subsidized loans (8,500) are going away, and we should count on the 20,500 as totally unsubsidized.

Source?


I hadn't heard of it but from this (--LinkRemoved--), it makes sense considering for 2012-2013 the interest rates are the same for subs and unsubs.

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txadv11
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Re: For those who have money saved...

Postby txadv11 » Wed Mar 30, 2011 12:38 pm

Flips88 wrote:
txadv11 wrote:FYI I have heard that subsidized loans (8,500) are going away, and we should count on the 20,500 as totally unsubsidized.

Source?


ASW last weekend, the financial aid representative said it is possible, that changes could come as soon as July 1, 2011.

HWS08
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Re: For those who have money saved...

Postby HWS08 » Wed Mar 30, 2011 12:45 pm

pjo wrote:
HWS08 wrote:I am going to take the max amount of federal loans I can because they have the lowest interest rates. The rest of tuition I'll cover through private loans. Then I am going to keep my savings that aren't in a 401(k) in my money market account and draw on it for living expenses. I don't feel comfortable spending all of my money in the first year because I want some COH in case of an emergency. I'll probably transfer a lump sum every two weeks because that's how I get paid now so I'm used to that type of cash flow management.



Why are you taking out private loans? Private loans don't qualify for IBR and therefore if you ever had to fall back on IBR you would basically be screwed.

--Also, @ OP, I'm in a similiar situation. I plan on taking out stafford $20,500 for the first year and using my savings to cover COL and the extra tuition. My projections show that I'll save something like $2500 in interest, but more importantly I'll have a bit of peace of mind having total loans amounts of 120k instead of 200k when all is said and done. I highly doubt that you could properly invest your money to beat the 8.5% interest on the grad plus, at least not without taking on more risk than you should on a 3yr investment.


The same reason most people take out private loans...my money saved+amount of federal loans I think I'll be eligible to borrow are less than the estimated COL+tuition at my school. Even if I did spend all of my savings the first year I don't think it will be enough to cover everything. My EFC is pretty high, so I'm not holding my breath for getting a lot of federal loans.

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Flips88
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Re: For those who have money saved...

Postby Flips88 » Wed Mar 30, 2011 1:06 pm

HWS08 wrote:
The same reason most people take out private loans...my money saved+amount of federal loans I think I'll be eligible to borrow are less than the estimated COL+tuition at my school. Even if I did spend all of my savings the first year I don't think it will be enough to cover everything. My EFC is pretty high, so I'm not holding my breath for getting a lot of federal loans.

I thought GradPlus loans would cover up to the cost of attendance after maxing out the Subsidized/unsubsidized Stafford loans?

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bk1
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Re: For those who have money saved...

Postby bk1 » Wed Mar 30, 2011 1:08 pm

Flips88 wrote:
HWS08 wrote:
The same reason most people take out private loans...my money saved+amount of federal loans I think I'll be eligible to borrow are less than the estimated COL+tuition at my school. Even if I did spend all of my savings the first year I don't think it will be enough to cover everything. My EFC is pretty high, so I'm not holding my breath for getting a lot of federal loans.

I thought GradPlus loans would cover up to the cost of attendance after maxing out the Subsidized/unsubsidized Stafford loans?


That is my understanding as well however it seems that every so often some people's loan amounts don't actually come up to the full CoA.

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Flips88
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Re: For those who have money saved...

Postby Flips88 » Wed Mar 30, 2011 1:09 pm

bk1 wrote:
Flips88 wrote:
HWS08 wrote:
The same reason most people take out private loans...my money saved+amount of federal loans I think I'll be eligible to borrow are less than the estimated COL+tuition at my school. Even if I did spend all of my savings the first year I don't think it will be enough to cover everything. My EFC is pretty high, so I'm not holding my breath for getting a lot of federal loans.

I thought GradPlus loans would cover up to the cost of attendance after maxing out the Subsidized/unsubsidized Stafford loans?


That is my understanding as well however it seems that every so often some people's loan amounts don't actually come up to the full CoA.

That person also said they have a 401k and an MMA already, so they're either rich already or older...




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