<p>I accepted loans this semester at 4.5% interest. I have old loans at 6.8% interest. I want to pay my bills by working, and use the new loans to effectively refinance the old ones. Is that legal?</p>
<p>if the loans (new ones) are refunded to you as an overpayment, you can do anything you like with the money. If you haven’t paid the college, it will first apply the new loans to the tuition, and only give you the overage (if any).</p>
<p>But there is really no difference. Work and use that money to pay the 6.8% loans directly with your earnings.</p>
<p>I thought you can’t do just anything you want with the money. I thought taking it to a strip club is illegal, if it can be proven. I thought the money had to be used for school and living expenses. I just figured since using the loan to pay off another student loan is kind of similar to not taking it in the first place, that would make that an exception.</p>
<p>I plan to work 20 hours per week while in school full time and apply for food stamps. They will ask about my financial aid, and thus will know I used it to pay off my other student loans. That is why I need to know if that is legal, since I will be telling them. Normally financial aid offices don’t really look into what people spend it on, even if there are some stated rules.</p>
<p>Your college loans will be disbursed to your college. They will be used to pay for any billable expenses by the college. YOU will only get any leftover funds once the bills have been paid. </p>
<p>I realize that they will first take all their billable expenses and I get the left overs. I’ve been to college before. My question was just about how much latitude I have with the left overs, especially when I know in advance that an authority will be seeing exactly where I use them since I’ll be showing them the records to qualify for the additional aid.</p>
<p>What records will you be showing to qualify for aid? The school doesn’t ask where you are spending your money.</p>
<p>I plan to apply for food stamps. I think the office will say I don’t qualify because I’m receiving financial aid. That is where I show them that I used my new loans to pay off my old loans, and that my 20 hour job pays my rent but not my food. If it is illegal for me to spend the loans that way, they might tip someone off since I just showed them my bank statement as evidence.</p>
<p>Food stamp office will ask for income (and where it is from). A loan, student or otherwise, is not income.</p>
<p>But it makes no sense to borrow more money to pay off other loans. Yes, the interest rate is higher, but you’ll have origination fees and it may not save you anything.</p>
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<p>This is incorrect - those two situations aren’t similar. It’s more like refinancing. That’s pretty much exactly what you are doing.</p>
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<p>No, it is not illegal to do this. You won’t get arrested.</p>
<p>However, I don’t think it will matter. This varies by state. In many states, full-time college students cannot get food stamps except in a few select situations. Some states that do consider full-time college students don’t consider your federal loans to be income, and so they won’t count it when deciding whether or not you will qualify for food stamps. But for the ones that do, the fact that you used new student loans to repay old student loans won’t matter to them. They don’t care what you choose to do with your income; what they care about is whether or not you earn enough income to afford to eat. It’s basically equivalent to saying - “Oh sure, I make $70,000, but I spent $60,000 on a new car so I’m under the federal poverty limit now with the amount I chose to set aside for food and rent.”</p>
<p>See here:</p>
<p><a href=“Students | Food and Nutrition Service”>http://www.fns.usda.gov/snap/students</a></p>
<p>It’s kind of unfair and weird for you to expect to get food stamps because you want to lower your educational loan interest rate by two points.</p>
<p>I’m pretty close to my student loan cumulative limit. If I don’t turn down the loans or use them to refinance, the $5000 in loans I get this semester will put me over the limit, and I won’t get loans next semester. Then I’ll be in this exact same situation either applying for stamps or having to work even more hours. I have 4 semesters to go, so I might as well get used to my future schedule now. </p>
<p>Some states award stamps as long as someone is working at least 20 hours per week and making below a certain amount. 20 hours will make it harder to get the grades, but I don’t see any other options.</p>
<p>The origination fee is 1%, I think, vs a 2% per year savings on the refinance. It will pay for itself in 6 months.</p>
<p>It will still only work if you have saved enough to pay your current tuition so that you get an overage on the new amount you borrow. Say you borrow $7500. You’d get $3750 the first semester. Is your tuition more than that? Will you get an overage?</p>
<p>Your question was is it legal. Yes. Will it happen? Unlikely. You cannot get a ‘refund’ of student loans if you haven’t paid your current tuition. If you have money saved to pay your current tuition, why not just pay the loans at 6.8% now and not wait for the float until you get your overage in Sept/Oct? </p>
<p>The food stamp issue is entirely different. That issue is do you qualify with your income. A loan is not income.</p>
<p>Yes, you can. You can do whatever you please with whatever the financial aid office gives to you after applying loan proceeds to your billed expenses. </p>
<p>As to what it does for eligibility for other things, I don’t know. It depends on the rules of those programs. How the food stamp offices will look at this transaction in terms of eligibility for food stamps, I have no idea. I have a friend who has lived on borrowed money for years and also gets food stamps but that may be a state by state thing. You have to talk to the programs that deal with determining that eligibility. </p>
<p>You won’t have any trouble with getting the loan if you are eligible. If you are eligible for them you can take them as long as COA limits are not exceeded. If you can “beat” COA, good for you. I can take out PLUS up to my son’s COA and spend the money on anything I so please as long as his direct billed amounts at college are paid first,with no choice about that since the proceeds are funneled through the school and they will take that before permitting any overages to be returned. I can use the money to go to the Bahamas, buy a new wardrobe, go out to dinner, go on a spending spree, give to my other kids. Doesn’t matter. </p>
<p>The food stamp application will ask for your income. </p>
<p>The SMART thing for you to do is put that loan money in the BANK to help pay your expenses for the subsequent three terms, since you won’t be eligible for further aid. </p>
<p>Either that…or don’t take OUT any other loans if you don’t need them. You are already at the max…and that isn’t good either.</p>
<p>I think your plan to pay off loans with loans borders absurd…and it sounds like you are planning to do this to be eligible for food stamps. Your income isn’t going to change if you have or don’t have loan balances. Income is what will determine food stamp eligibility. </p>
<p>I don’t know if the food stamp application ONLY asks for income; could it also ask for assets. I know that my friend had to list what her income sources were, any and all income as they knew she did not live on air alone. There were issues involving how she qualified for the food stamps and she would have to go through some verification process at times. </p>
<p>I don’t think the plan to pay off loans with loans is absurd, Thumper. I’ve done the same myself, when I got a offer for a zero or low interest rate and had something with a higher interest rate that I could pay off with the new credit card/loan. We paid off a car loan some years ago, had about $1800 left on it during those high interest years and got an offer of a zero interest for a year card with a $3K limit Paid off the car loan, and just paid put aside money to pay off that credit card when the 11th month came along. Also paid off some student loans. We saved about a hundred dollars total in 11 months in interest charges, which at that time for us was a nice little bonus. We had to be disciplined in putting the money away to pay off that teaser card, or it would have all been a waste since that interest rate was absurdly high after the one year hiatus. I don’t think the OP is doing this to be eligible for food stamps either; s/he’s just replacing an outstanding loan with one with a lower interest rate and saving the interest amount paid.</p>
<p>To the OP, do the numbers. With the origination fee for the new loan, loss of IRS interest deduction, weigh out what the actual dollar savings is going to be. Try to take all factors into account… I know some undergrads who did take out DIrect Loans at the very last month of their senior year to use towards grad schools for extra money for that, since the rates are a little bit more favorable. Gave them $7500 more that first year of grad/prof school over the $20K or so available for that. So, yes, some creative thinking can result in additional funds and can maybe save you money, but do be aware that a lot people go through some crazy financial gymnastics for a savings of very little that can put them at risk for a lot of other issues including some real pain in the neck situations. You have to weight what’s worth doing.</p>
<p>Cpte…it’s absurd to take out and pay off loans if the reason for doing so is to qualify for food stamps.</p>
<p>I’m not doing the loan thing for food stamps. I’m doing the loan swap to save on interest. My question was whether the loan swap would jeopardize my stamp eligibility.</p>
<p>I qualify for the full Pell grant. If I save any money, earned or loan, by the time of the next FAFSA application, my Pell grant is reduced by 50% on the dollar.</p>
<p>Although loans don’t count as income, I suspect that the money from them in my bank counts as assets, both for food stamps and for the Pell grant.</p>
<p>Traveller…just make sure you pay your tuition and fees, and buy your books before you FILE your next FAFSA. You can even pay your rent in advance. </p>
<p>"Cpte…it’s absurd to take out and pay off loans if the reason for doing so is to qualify for food stamps. "</p>
<p>I agree. But, I did not get the impression that the OP was contemplating doing this to qualify for food stamps but to save money on the lower interest rates. It seemed to me he was concerned doing so would jeopardize his food stamp eligibility which he already has. And I don’t see how any of us can address that issue since it can vary from place to place as to what it takes, what the rules are for food stamps. That’s something the OP has to research specifically. </p>
<p>If you save proceeds of your school loan, that amount does not count for FAFSA asset purposes. You do have to make it clear that these are loan proceeds from school loans and you can never let the amount you are so claiming to dip below that amount in the account. In other words, if you deposit $1000 of school loan proceeds into your checking/savings account, that amount cannot go under $1000 at any time between then and when you report it, in order for you to shield up to $1000 of the money sitting there the day you fill out FAFSA The instant the account goes under $1000, the lowest amount in that account is what is not countable assets for FAFSA purposes on the day you complete that app. It’s often easier just to open a savings account and put DIrect loand and other fin aid money in there, and not mix it with other funds. That way, whatever is in that account is protected from the 20% asset hit on EFC when you fill out FAFSA.</p>
<p>So, no, the money from school loan, PELL proceeds that you get back from the school do not count as assessible assets for PELL and future financial aid. </p>
<p>Now for food stamps, I don’t know. As I said a few times already, those rules are particular to whatever agency is handling this. Perhaps there is a general federal rule, but I don’t know. This is not a food stamp forum. You need to talk to someone who knows those rules well, and knows them as they pertain to you.</p>
<p>You cannot have more than $2,000 in assets and receive food stamps.
You should be able to receive them as a full time student who qualifies for work study and who is working a minimum of 20 hrs a week. </p>
<p>Emerald, I don’t think that is the case in NY. </p>
<p>“In New York State, SNAP now allows you to have more money in a checking or savings account, or even a retirement account or college savings account, without affecting your eligibility for SNAP benefits. Most households applying for SNAP benefits no longer have to pass a savings/resource test in order to get SNAP benefits. This means that the household’s assets (stocks, savings and retirement accounts, etc.) are not considered when determining eligibility. Please note that if you apply for SNAP benefits, you may still be asked to provide information regarding such resources.”</p>
<p>That is why i am telling the OP that he has to check his state laws for food stamps. Some crazy mixed up rules for Medicaid and for SNAP in this state. They do not check assets for medicaid either unless it’s for nursing home type benefits. Then they do.and some rules kick in. </p>