Student Loan Question

[LivingAlmostLarge]

I am wondering if DH and I should apply for FASFA this year and another $8500. Right now he has $17k in subsidized Stafford loans. He is probably going to graduate summer 2009 or fall 2009.

So far he's in his 5th semester, and we've paid about $45k total - $17k. Last year his 1098T was $28k tuition. So we're making a lot of headway.

Right now I have $12.5k in cash to pay for $6k this semester, and $10k over the summer. I believe we can cash flow it. We also do a payment plan for each regular semester but not the summer, which we have to prepay.

I am not sure if we should take out the $8500. DH doesn't, but I don't think we can swing everything he wants if we don't.

Meaning no vacation this year, and yes he really wants one. It will cost us I am guessing $5-6k for 3 weeks. We will likely buy tickets to go home this year at Christmas and that is the majority of it (hawaii/canada).

What are the pros and cons of taking out more student loans? Should we do it? Should I say it's either his vacation or no loans?

Yes we have a bit of slack in our budget, but most of it will come from savings. I prefer not to decrease our retirement savings, or long term savings because we had 2 older cars (99 and 00) I have been putting aside a bit of cash to repair/replace them (just had $800 repair bill). But if needed I could probably pay cash for our trip.

Should I bank on an increase of salary coming to repay the $8500? Right now we're aiming to pay off all loans within 1 year of graduation. Rates on student loans are also dropping.

[disneysteve]

Obviously, the con of taking out more loans is just that - you have more loans.

What about a less costly vacation? Why do you need a 3-week vacation? I've 43 years old and the longest vacation I've ever had was 2 weeks and I've only done that 4 times in my life.

If you did a 1-week vacation for no more than $2,000, would that solve the problem and eliminate the need for the extra loan?

[Snowgirl]

The general advice will be to save, but I'll risk my contrary personal opinion! This is based on my understanding of your life from your blog (retirement saving going on, ...), because I would not necessarily advocate the same thing for others.

I think I would take the loan, a 24.5k student loan is not really that much. If you can swing payments over 10k a year while your DH is still in school, you'll be able to pay that within a year or 2 after graduation. That is, if your DH gets a good paying job (just curious, what is he studying?). And I've understood that you DH is from our beautiful Canadian country , so part of vacation would probably be family visits? Those are important, and for me, vacations in general are VERY important. Sure, you could cut the length, but would that be much cheaper? If your DH is working & going to school, this away time will help him go back in top shape.

But then, who am I to advise on that, I never had to get student loans...

[LivingAlmostLarge]

DH is working and going to school for an MBA. Definitely going to increase income.

The reason for such long vacations Disneysteve, is I'm from hawaii and DH from canada. And I can't go home for less than 1 week and 1 week to canada without it costing us an arm and a leg. It takes me 16 hours to fly from the east coast to Hawaii and usually more with layovers. See the problem? And 4-6 hours coast to coast for DH.

And my parents have visited me oncein 2+ years. And they aren't coming again for another 2+ years. My in-laws visit for long periods, but I'm going home to see my grandma, great-grandma, etc. DH and I visited before we moved his grandparents in Hong Kong. Now it's harder.

So yes it does cost us a lot to visit family. The tickets home at Christmas run us about $1500/each if not more. Then dog kennelling for 2 dogs for 3 weeks is $1000.

[Daylily]

As with so many questions on these boards, only you can really answer this for yourself. Looking back, I shouldn't have borrowed as much in student loans as I did. The money I borrowed for grad school was so that I could live more comfortably than I did as an undergraduate. Over the years, I've regretted that I borrowed as much as I did. Granted, my total balance was nowhere near what students borrow today and now I am down to just around $3k balance. Still, I have a pang of regret that I borrowed more than I really needed to.

[disneysteve]

The reason for such long vacations Disneysteve, is I'm from hawaii and DH from canada. And I can't go home for less than 1 week and 1 week to canada without it costing us an arm and a leg.

Got it. Makes it kind of tough. On most jobs, a 3-week vacation isn't even an option. Teachers are probably the only folks who consistently have that kind of time off.

In the grand scheme of things, you aren't talking about a large amount of money. I finished school with over $100,000 in loans (and that was in 1990 dollars). Only you know your situation and your comfort level, but it sounds like it is doable to me.

[LivingAlmostLarge]

DH gets 4 weeks a year. We are having trouble even using it and we can only rollover 1 week a year. So it's use it or lose it.

And we feel so guilty just saving money and staying at home instead of travelling with so much time off.

[InDebtInDC]

I am wondering if DH and I should apply for FASFA this year and another $8500.

I do not understand the scope of this question.

You should always apply for the FAFSA: FAFSA - Free Application for Federal Student Aid

It's FREE and doesn't cost you anything. Why are you wondering if you should submit a FAFSA?

As for taking on additional loans, I think you should take as many subsidized loans as possible because the government is subsidizing at least a portion of the loan. Save as much as possible. After graduation if you have any left over you can decide whether you want to pay back early or use the money some other way.

My recommendation is to borrow as much as you can and save the leftover. If you should lose your job, become sick, go back to school, student loans are the only type of loan you can defer. The same cannot be said about mortgages, CC, car loans, etc.

Plus the interest rate is much lower on student loans as compared to other types of personal loans and the interest may be tax deductible.

[LivingAlmostLarge]

Interesting perspective and one to consider.