How Much Aid to Borrow

 

Every semester students are issued refunds for their estimated living expenses for that term.  Many students will accept the full amount of their aid (oftentimes loans) because they aren't sure what their budget will look like a month or two down the road.  It can be difficult to calculate a reliable budget, especially if students are not from the Boston area. Students usually go about this challenge in one of two ways:

Solution 1

Many students accept the full amount of their aid because they know that they can return any federal loan funds up to 120 days after they disburse.  This gives them approximately 4 months to work out a viable spending plan, and get on track with their expenses.  If they have more than what they need for the remainder of the semester, they simply drop by the Office of Financial Aid to fill out a reduction memo, and make a payment to the Bursar for the return amount.  Students do not accrue any interest, nor do they incur any processing fees on the amounts that they return.

Solution 2

Some students will request a reduction in their financial aid package before the funds disburse.  This means that the initial refund amount is smaller, but they are not completely giving up their eligibility.  They may come back to the Office of Financial Aid at any point throughout that semester, and request an additional disbursement up to their original eligibility.

With all of the related costs to borrowing student loans such as interest and capitalization, it is important to limit borrowing to only what is necessary. It is highly recommended that students create spending plans in order to organize their budgets for the year, which in turn aids in keeping borrowing at a minimum. There are several worksheets and websites out there to assist you in this activity. Some helpful resources include:

 

  • Mint.com — This tool organizes and categorizes your spending for you; just link your various accounts and watch it do the work. You can set limits for yourself for various categories, i.e. coffee or groceries, and you will be sent alerts when you near your thresholds to keep your spending in check.
  • AAMC Interactive Budget Worksheet — A simple way to compile your expenses and determine your borrowing needs.

Did you know?

A typical student borrowing federal loans can expect to pay back 167% of what they borrowed over approximately a 10 year period!  By limiting borrowing now, and paying for expenses out of pocket, students can avoid this 67% increase due to interest and fees.

Planning for $uccess and Financial Wellness Newsletter

 

2017 Winter Newsletter