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Can someone explain College loans to me?


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So, my son "received" eligibility for some unsubsidized federal loans.  He will need to take at least some of them.  Does anyone know if he has to take them all at once, or can accept that he wants access to them and only take what he needs (for  instance if he earns a lot this summer).  Otherwise, I suppose he will have to take them and repay them, right?

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The Federal Student Aid website has info on Direct Subsidized and Unsubsidized Loans, and on Accepting Aid. From that second link, here is the question and answer that looks like it applies to your situation:

Is it okay to accept less loan money than the school offered?

Sure! You should borrow only what you need. If your living expenses are not going to be as high as the amount estimated by your school, you have the right to turn down the loan or to request a lower loan amount. In the aid offer, the school will tell you how to do this. 

Some very general financial aid tips:  

  • a student does not need to accept all parts of the financial aid package offered
  • the order in which to accept aid that minimizes future debt/financial impact on a student is:
  • 1.  "free money": Federal Pell grants, State grants, Scholarships
  • 2. subsidized Federal loans: 
  • Perkins subsidized loan (5% fixed interest; interest and repayment starts 9 months after stopping school)
  • Stafford/Direct Subsidized loan (4.45% fixed interest; interest and repayment starts 6 months after stopping school)
  • 3. UNsubsidized Direct Federal loans (4.45% fixed interest; interest starts immediately upon taking out the loan)
  • 4. Direct Parent PLUS loan (7% fixed interest; interest starts immediately upon taking out the loan)
  • 5. private loan, bank/money lender (fixed or variable interest, from 4.5% to 15%; interest starts immediately)
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Yes, we did this for a parent loan we were approved for.  We were approved for much more than we needed, and then we didn't end up needing any.  We did go ahead and "accept" it at the beginning just in case, because we are self-employed and sometimes income varies.  But when it came time, we just called the school and said we were paying cash instead.

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