Taking out loans twice a year to avoid some interest accumulation??

[smooki]

I'm in the process of accepting my fin aid package and was wondering if it was possible to take out a loan to cover tuition/fees at the beginning of each semester (so two times in an academic year) instead of taking out the entire year's tuition at once. That can save interest accumulation of that first semester (not a whole lot but still). Anyone have any experience/know about this?

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[Igor4sugry]

Yes, that is possible. There is a good post about exactly this question.
http://whitecoatinvestor.com/hitting-a-net-worth-of-0-as-an-intern/

 

[SigmaFS]

I believe most schools schedule disbursements for the start of each term, which eliminates unnecessary interest accrual. You request funding for the year and it's disbursed at the start of the term. Interest only accrues on the amount disbursed.

 

[RangerBob]

I wasn't aware you could even take out your entire loan in one lump sum--every school I've attended (undergrad, post-bac, med school) dispersed the loans at the start of each term.

 

[smooki]

Let's say tuition is 50K. Can I take out 25k at the start of semester 1, then take out another 25k at the start of semester 2? The idea here is to decrease as much interest accumulation as possible. So at the end of semester 1, the only interest that has accumulated is on the 25k, not on 50k. Is that possible? Or is it basically the same thing as taking out 50k at once in the beginning of the year since there are two disbursements a year? I hope I'm being clear.

Also, when are loans disbursed exactly? As soon as you accept the fin aid package? Or after you complete the MPN and necessary documents?

 

[DrMidlife]

Looked like you already got answers to those questions. If you want exact answers, contact your school's financial aid office.

In general:
1. The annual award gets divided up in equal chunks corresponding to school terms. Such as 2 chunks, one for each semester. You don't have to do anything. The world has figured out that disbursing a whole year of funds doesn't work for a lot of reasons including interest accrual.
2. You get one chunk at the start of each term. Maybe the first week. Depends on the school.
3. You can't expect to get any money until after school starts.
4. Your school's financial aid office is between you and all the money, and should be sending you very clear instructions on what you're supposed to do and what to expect.

 

[Igor4sugry]

From my experience in undergrad and med school is that financial aid offices do not make any effort at reducing our debt. Their job is like that of a bank-teller, to make sure the loan money gets to our bank accounts. Not a single financial aid person advised me to look at my actual needs and decide whether I need all the money that is awarded.

I would make a careful budget and ask your school how many times per year you can take out loan money.