How strict are federal loan rules?

Parents Forum
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<p>Hmm, parents should know about this :)</p>

<p>I’m a junior and I was awarded federal subsidized loans for the year that is ending this month (06-07). When the year started I wasn’t planning on any loans but my financial position has changed so I will be activating the entire $5,000 loan to help pay for my apartment over the summer. In case anyone is wondering I am expecting to land a paid internship as well, but I probably wouldn’t see any money until the end of June, so the loan is necessary.</p>

<p>First question: I figure that since this is a subsidized loan and the interest gets paid while I’m still in school, I might as well take the entire amount they’re awarding me now (for any emergencies), and just save any unused amount for next year. Since they are paying the interest, there would be no disadvantages to this, correct?</p>

<p>Second question: If I am correct above, then I would have a large amount of money just sitting there. Rather than do that, I’d prefer to take the amount I need now and put the rest in bonds, CD, etc. Not really to make money, since the yield would be pretty small, but just for the experience. Or ideally I’d want to create a really diverse stock portfolio and just see where it goes, giving myself a loss limit, say 15%. Again, this is just for the experience, so I wouldn’t mind a small loss and trading fees.</p>

<p>That was a long setup but here’s the question: Would this be against the federal loan rules? I feel like it would be okay since I wouldn’t be frivolously spending it. The money would still be there for the purpose of future educational expenses, I just wouldn’t be doing nothing with it in the meantime. I don’t want to run into loan misuse problems though.</p>

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<p>ucbhi, subsidized loan money is not disbursed to you – it is paid to the school, in 2 payments – one in the fall, one in the spring. If there is an excess of loan proceeds over amounts owed, then the college bursar will provide that to the student in the form of a refund. </p>

<p>I don’t think you can “activate” your 06-07 loan at this point, when the semester is over. I might be mistaken, but I think that it is simply too late.</p>

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<p>I actually went to the Aid office today to ask them and they basically said that it’s hands-off and not strict.</p>

<p>All of my fees are already paid btw, so I was already expecting to just get the refund. I also asked them a while back about receiving the loan and that’s fine as long as I do it before the very end of the semester.</p>

<p>So I finally accepted the loan today. Hopefully it all goes down smoothly :)</p>

<p>Thanks for the response.</p>