Student Loans

[stoney508]

So my Fiance is finishing up college in December and we will be moving in togther. She has student loans through Great Lakes and we are checking out the amounts hopefully this weekend. She has an amount of money that her parents have set aside from her as well as some from her grandparents on both sides.

What we are wondering is if she pays this towards the loan in one lump sum will she have to immediatly start paying the remaining balance off or will she still get the first 6 months of forbearance?

The reasons for holding off paying the 6 months is to increase an emergency fund save for our wedding as well as save for a down payment for a car that she will need. Her car now is basically on its last legs and its unsafe to drive in the winter.

[disneysteve]

I'm not sure of the answer to your actual question, but why not just use the lump sum as her EF, to buy the car, and to pay for the wedding? Then at the end of the 6-month forbearance, pay the loan as scheduled.

[stoney508]

Because the money she is getting is from a 529 plan as well as money specifically put away for student loans from her grandparents. And I believe with those accounts she gets a tax break for using it towards student loans instead of something else.

[thomasdan]

My Wife school loan was with MOHELA. I'm not to sure if the policy is the same as your wife.

when we were paying her school loans. Back in June,2013 we made a $2000 dollar payment.. MOHELA send us an email saying that her next payment isnt due till DEC 2014. but i think every day/month leading up to Dec 2014 was still building intrest we had to pay back.

So the best thing to do is have your wife call customer service to double check the policy.

[disneysteve]

529 money can't be used to pay student loans. It must be used to pay qualifying educational expenses directly.

[stoney508]

529 money can't be used to pay student loans. It must be used to pay qualifying educational expenses directly.

I do not know all of what her parents have for her but what happens with a 529 plan when they are finished with school?

I plan on taking a look at her loans with her soon to see what they look at. We are not married yet so I am not going to pry to much about what her parents have set aside for her but I knew one thing was a 529 plan.

[sakirehman]

Student loan

I do not know all of what her parents have for her but what happens with a 529 plan when they are finished with school?

I plan on taking a look at her loans with her soon to see what they look at. We are not married yet so I am not going to pry to much about what her parents have set aside for her but I knew one thing was a 529 plan.

You have to think about alternative sources of finance. You can not depend fully on others. Just try to have a job may be part time that can help you. I'm doing the same. Paying my own expenses through my earnings.

[disneysteve]

I do not know all of what her parents have for her but what happens with a 529 plan when they are finished with school?

Any money remaining in a 529 that hasn't been used for qualified expenses can either be transferred to another beneficiary or cashed out with a penalty and taxes. If there are no siblings for the parents to give the money to, it makes the most sense for her to use that money between now and the end of her schooling to cover any appropriate costs. It beats paying the penalty and it sure beats taking out student loans. I have to wonder how she ended up with loans if her parents had 529 savings for her.

money specifically put away for student loans from her grandparents

She could just park that money in savings during the forbearance period and then when she enters repayment, use it to make a lump sum payment.

Do the loans continue to accrue interest during forbearance? If so, she could use the money from her grandparents to at least make the interest payments so that the principal of the loan doesn't rise before she starts repayment.

[stoney508]

She already has a job that she will continue to have the job until she finds better full time employment. She may be able to increase her hours but she will not know until that time since she starts the job on Wensday and she has had a job to pay for utilities.

DS she has an older sibling and has already finished college I have asked her why she was takiing out student loans also if she had money already set aside for her college and that is all handled from her parents end. The money she does have is probably in one account and is being used to pay for her rent as of right now. I think they monitored how much money was distributed between the both of them and then when they both finish they will split the money evenly between the 2 of them.

On your other comment I am trying to figure out her loans because she has been a little ignorant about the loans herself and does not know the amount and I personally dont know if they are subsidised or unsubsidised loans. So I wouldnt know if they are accuring interest right now from the conversations I have had with her in the past I believe they are. I dont want to start her off the way I did with 37k in student loans accuring interest so I am asking if anyone knows before I have her contact them.

We might end up having her start her payments right away anyways it all matters on a lot of things that are up in the air right now. Im trying to get her a head start on knowing whats up before then unlike I did.

[disneysteve]

DS she has an older sibling and has already finished college I have asked her why she was takiing out student loans also if she had money already set aside for her college and that is all handled from her parents end. The money she does have is probably in one account and is being used to pay for her rent as of right now. I think they monitored how much money was distributed between the both of them and then when they both finish they will split the money evenly between the 2 of them.

Sounds like the parents don't understand how 529 plans work. If the money isn't spent on educational expenses, there will be a 10% penalty and ordinary income taxes on any earnings the account has accrued (not on the contributions).

she has been a little ignorant about the loans herself and does not know the amount and I personally dont know if they are subsidised or unsubsidised loans. So I wouldnt know if they are accuring interest right now

She should definitely get all of her loan documents together and review them. A good way to do this is to schedule a meeting with the financial aid office at her school. They can do an exit interview where they review everything and explain the terms and conditions of her debt.

If she has loans that are accruing interest, she should do everything she can to pay the interest even if she can't pay the principal yet. Allowing the interest to be tacked onto the principal is what really sinks a lot of people.

[stoney508]

Sounds like the parents don't understand how 529 plans work. If the money isn't spent on educational expenses, there will be a 10% penalty and ordinary income taxes on any earnings the account has accrued (not on the contributions).

I really have no idea because its there money and im not about to go in there expecting them to let me know that information freely. I am not married to there daughter yet and technically I don't think they know that I know about the money they have for her. I understand that and im not about to pry.

She should definitely get all of her loan documents together and review them. A good way to do this is to schedule a meeting with the financial aid office at her school. They can do an exit interview where they review everything and explain the terms and conditions of her debt.

If she has loans that are accruing interest, she should do everything she can to pay the interest even if she can't pay the principal yet. Allowing the interest to be tacked onto the principal is what really sinks a lot of people.

I will see if she wants to set up an exit interview with her finacial aid office. I know that may have helped me out a little just to have a grasp of the terms and conditions.

With her new job she may be able to pay the interest accuring but as of right now she doesnt even know the amounts of her debt which is what we are going to look at this weekend. She did go to a community college first and then transfered to a state college so the price is going to be lower than mine but im not sure by how much.

[stoney508]

Well me and the fiance just looked up the loans she has and it looks like she will have anywhere between 10k-16k left on her loans after she pays them down which will help us out dramatically when living together. That leaves me with 23k to pay off on mine. She may take on a part time job when she is looking for a full time position after she graduates but thats an unknown. I hope to have my lones under 23k by the time we get married but thats going to be tough.