Subsidized Loan

[Anonymous]

I am now officially on the verge of "freaking out."

My daughter will be a freshman at a university this year. I have another daughter who will be a sophomore, though she opted to go to community college first.

In Sept. of last year, we lined up a HELOC to help pay for the pending college costs of this year. Because of the rapidly declining property values in Arizona, however, the lender froze our HELOC this past June. So, we went into scramble mode.

The freshman received a letter from the university listed her financial aid offer. She accepted the subsidized Stafford loan ONLY, and signed the Master Promissory Note. The loan was approved and pending disbursement.

Meanwhile, she also qualified for a program we have here in Arizona which grants a full tuition waiver to HS students who maintain a certain GPA, and meet certain other requirements.

I called the university yesterday because the tuition waiver was not showing up on her account. They had made an oversight and promised to correct it.

Well, they DID, but now her subsidized loan offer has disappeared, even though she already accepted it and was counting on it (of course) for class costs, books, fees, etc.

I can't reach them by phone. I get a message that they are experiencing "high call volume," and am told to try later and promptly disconnected.

Anybody know anything about this stuff? This is very confusing, of course. She has already accepted the loan AND sign the note. What happens now? She still needs the loan funds. Will the university work with us, or are we now officially screwed? Can we go for unsubsized funds? They offered only $460 per semester in unsubsidized funds, which is less than she will need. Can we get more? I thought this was not tied to "financial need," so why couldn't we get a larger loan?

Would we do better to just get a loan from another source (BofA, Citi, Discover, etc.)? Do we even have time for that? And since she signed a "Master" promissory note already, does that save us time---and can we just use the same note regardless of the lender we go through?

I thought we had this all taken care of when we got the HELOC. Then, I thought it was all going to be okay because between the tuition waiver and the subsidized loan, we were still in good shape.

Now, we are at the 11th hour, and it all seems to be unravelling. I would appreciate information from anyone with actual knowlege of this type of financing.

[Anonymous]

Sounds like your only issue is with your second daughter's school.

The federal Stafford loans have subsidized and unsubsidized loans.  The subsidized loans are need-based only.  Unsubsidized are not.  Another difference is that no interest accrues on the subsidized loans while you're in school or in the six month deferment after graduation.  Unsubsidized starts accruing at disbursement.  Subsidized are better than unsubsidized, but unsubsidized are still cheap.

I think promissory notes are lender specific based on my own experience.  "Master" doesn't really mean anything except that it is the agreement for that loan.

Really, you have to speak to the university before making any sudden movements that will cost you and your daughter more than it should.  Private loans with any of the banks you named should really only be a last resort.  As a parent, you may also be eligible for PLUS loans--which I would look at before private loans in your daughter's name.  Stafford loans (and PLUS loans) are available at a variety of banks, it's worth comparing terms.

So the university is frustrating.  You can ask if they will increase your eligibility on the unsubsidized, but you can only take out what the university approves you for on the federal loans.  My question is whether the subsidized loan can only be used for tuition.  If it can only be used for tuition, then it makes sense that the "need" for the loan would go away because of the tuition credit.  I don't have an answer on that one because my loans were always for so much that the subsidized and unsubsidized always covered tuition, and then private loans covered the rest of tuition and my other expenses.  Tuition usually (unfortunately) mean only tuition--not board, room, fees, books, etc. 

It also sounds like this could just be a foul up by the school again--in fixing one thing, they screw up another.  Happens all the time (like the person at my school who returned the LOAN CHECK to the loan originator with a request to CANCEL the loan, which then required me to do the whole process again).  Don't assume that they really know what they're doing.  Some are experts, some are idiots.

I don't think you need to be in full freak out mode just yet, but you need more information.  Just keep calling.  Good luck.

[LynnInMN]

August's are crazy at school financial aid offices.  When I worked as an FA officer, no time was allowed off work and overtime was pretty well mandatory.  We had to get the job done.  So it will take time to get thru to someone. 

Sounds like your daughters FA package needs to be redone.  No big deal.

Checks are no longer "sent back" to guarantors.  FA is all done thru funds transfers now and it really doesnt take that long.  But you and your daughter need to be working hard to get thru to the FA office.  Get her involved too....it is her education and student loan debt. 

[Anonymous]

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jesslyn wrote:

 Some are experts, some are idiots.

I don't think you need to be in full freak out mode just yet, but you need more information.  Just keep calling.  Good luck.

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Thank you so much for your response. Meanwhile, I have received a couple of emails from the college main campus and from the ancillary campus that my daughter will attend. The main campus individual seems to fall into the latter group, and the ancillary campus employee appears to fall into the former. Guess who I've decided to communicate with.

I'm sure this will work out. It's just frustrating that I have spent all summer dotting "i"s and crossing "t"s, only to have Murphy's Law jump up right at the finish line once again. Sigh.

[Anonymous]

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LynnInMN wrote:

August's are crazy at school financial aid offices.  When I worked as an FA officer, no time was allowed off work and overtime was pretty well mandatory.  We had to get the job done.  So it will take time to get thru to someone. 

Sounds like your daughters FA package needs to be redone.  No big deal.

Checks are no longer "sent back" to guarantors.  FA is all done thru funds transfers now and it really doesnt take that long.  But you and your daughter need to be working hard to get thru to the FA office.  Get her involved too....it is her education and student loan debt. 

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I can certainly appreciate the pressures and time constraints. I was an escrow officer for nearly 30 years and I know exactly what it's like to have 50 things to accomplish, and only time to do 30 of them. The last week of every month was insane for us. Never once, however, did we install (or even consider installing) a telephone program that would blurt out a "we're too busy for YOU" message and then disconnect the caller. That's absurd no matter HOW busy they are.

My daughter is very much involved in this process, and has been from the beginning. I wouldn't have it any other way. She was, however, working yesterday and I was not. No sense in waiting for her next day off to handle a problem with such a short fuse.

In fact, both of my daughters are fully involved in their own college issues and their own finances. Sometimes I have to drag them into it kicking and screaming, but someday they'll thank me. Or spend $150 an hour wailing about it to some counselor. Either way. BUT, I'll know that my nagging about finances now is the reason that they HAVE the $150 an hour to spend.

[xelda]

Schools put a limit on how much financial aid each student is allowed.  They basically come up with their own estimates of how much a student should spend on tuition, books, campus fees, room and board.  For me, my estimated cost of attendance was around $19,000 for the whole year.  So after the $12,500 I was awarded in federal loans, any scholarships or loans I receive can't exceed $6500.  Otherwise, the school could deduct from the $12,500 I was originally rewarded, regardless of the promissory note I signed.

What some people do is apply for private loans with banks that mail the check directly to them instead of having the loan certified and disbursed by the school.  But if it's not school-certified, the loan interest isn't tax-deductible like normal school loans are.

So you should check to see what your daughter's Cost of Attendance is and use that as a guideline.

[LynnInMN]

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xelda wrote:

Schools put a limit on how much financial aid each student is allowed.  They basically come up with their own estimates of how much a student should spend on tuition, books, campus fees, room and board.  For me, my estimated cost of attendance was around $19,000 for the whole year.  So after the $12,500 I was awarded in federal loans, any scholarships or loans I receive can't exceed $6500.  Otherwise, the school could deduct from the $12,500 I was originally rewarded, regardless of the promissory note I signed.

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Actually when student loans are packaged, any scholarships awarded are subtracted first, before any federal aid is awarded. After the EFC is subtracted  Pells and grants are awarded first (if the student is eligible, Then subsidized staffords.  Unsubs and PLUS loans are last.  But fee money is always first in the calculation.