Ask Terry Questions Student Loans

Student Loans

By Terry Savage on March 10, 2020 | College Savings / Student Loans

My daughter is choosing between two colleges. College A costs less but the full $5500 in Stafford loans are unsubsidized. College B costs about $5000 more a year but $3500 of the Stafford loans are subsidized. How much will the subsidized loans in college B close the gap with the cost of college A?

Terry Says

Wow, I was never good at this kind of math problem. But here are a few things to consider. Unsubsidized means you will accumulate interest on the loan while in school. At current Stafford loan rates, over 4.5 percent, that can add a considerable amount to the balance over four years of college.
Both types of loans start repayment within 6 months of graduation. I’ll let you get a math professor to do the math, but that’s the critical issue.
I have one more question for you: Are these the ONLY loans being taken out for college? (Because if you are taking a PLUS loan, you are really taking on a huge burden, way beyond Stafford loans because of the rate and the initial disbursement fee on PLUS loans.)
I personally think that if these are the only loans you’re taking on, the student should get to make the choice of where he/she wants to attend. That’s priceless!

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