Using Grad-plus loans to pay back UG private loans

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operagrl71
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Joined: Fri Sep 02, 2011 4:39 pm

Using Grad-plus loans to pay back UG private loans

Postby operagrl71 » Thu Feb 09, 2012 4:50 am

So after 4 years struggling under the yoke of my UG private loans (high interest rate, limited deferment options, in-eligibility for IBR/loan forgiveness, forbearance fees etc. etc.) I had this possibly-bright idea that I could use excess $s from Grad-plus loans to pay off my private loans - i.e. consolidate all of my debt within federal loan programs so that all my loans would be eligible for the more forgiving repayment options...

A few questions:

1. If I receive scholarship $$s can I still borrow the full cost of attendance budget, or is scholarship money factored in such that I would only be allowed to borrow whatever portion of the budget remains after scholarship $$s are subtracted?

2. I know general consensus seems to be that one should borrow as little as possible, but assuming I can borrow the full budget despite scholarships, and/or am able to live frugally enough to not utilize the full budget, is my plan as laid out above feasible/advisable??


Thanks in advance for the input!

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dingbat
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Re: Using Grad-plus loans to pay back UG private loans

Postby dingbat » Thu Feb 09, 2012 9:19 am

Law schools calculate a COA amount (tuition, books, cost of living, etc.)
That is the maximum you are eligible for through a combination of scholarships and loans.

Let's say COA is $65k and you are awarded $10k in scholarship. The maximum you can borrow is now $55k.

If you can afford it, the plan you laid out below is feasible. As long as you are using a lower-interest loan to pay off a higher interest loan, it makes total sense.
If both your new loan and your old loan are at the same interest rate, it could make sense if the new loans have better stipulations (such as eligibility for loan forgiveness), but realise that you do need to pay an origination fee to take out a loan, so it's not a straight-up swap.
If the new loan is at a higher interest rate, it's probably not a good idea.

Personally, I will always recommend taking out a lower interest rate loan to pay off a higher interest rate loan.

tliles
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Joined: Wed Jan 04, 2012 5:34 am

Re: Using Grad-plus loans to pay back UG private loans

Postby tliles » Fri May 25, 2012 2:37 am

dingbat wrote: As long as you are using a lower-interest loan to pay off a higher interest loan, it makes total sense.
Agreed, I'd base that decision mainly on the difference in interest rates

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20130312
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Re: Using Grad-plus loans to pay back UG private loans

Postby 20130312 » Fri May 25, 2012 8:35 am

Disclaimer: I'm not a lawyer. The following isn't legal advice. Consult a real attorney.

It would be outright fraud for you to take out a student loan to pay back other loans. Read the details of your student loan and what you signed. It most likely says that you promise to only use the loan for the cost of attending school and other uses (especially paying off higher interest loans) are expressly prohibited.

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dingbat
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Re: Using Grad-plus loans to pay back UG private loans

Postby dingbat » Fri May 25, 2012 11:24 am

InGoodFaith wrote:Disclaimer: I'm not a lawyer. The following isn't legal advice. Consult a real attorney.

It would be outright fraud for you to take out a student loan to pay back other loans. Read the details of your student loan and what you signed. It most likely says that you promise to only use the loan for the cost of attending school and other uses (especially paying off higher interest loans) are expressly prohibited.

This never occurred to me, but I agree wholeheartedly
Read the fine print




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