Transferring student loans from private to federal
September 25, 2014 1:28 PM   Subscribe

Can I take out graduate Federal loans and use them to pay off my private loans from undergraduate, since my graduate school is entirely paid for?

I have 57K in federal loans and another 81k in private loans from when I was an undergraduate (I was part of that millennium generation of students who was bombarded with raising tuition costs that federal loans were no where near enough to cover). I am currently in graduate school (PhD in physics), and my tuition and living expenses are paid for. What I would like to do is take out federal graduate loans and use them to pay off my private loans, as suggested here. However, I am getting a notice that “you are close to reaching your student loan aggregate limit.” Does this mean that I'm essentially screwed in regard to my plan?
posted by Shouraku to Education (6 answers total)
 
There is an aggregate limit to federal loans; it depends on whether they are subsidized or unsubsidized and if you are independent or dependent. I assume you are independent, so...from the Department of Education:

The annual loan limit for graduate students is "$20,500 (unsubsidized only)" and the total aggregate limit is "$138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study."

So, your total loan amount might be over the limit, yes, and certainly over the annual limit.
posted by epanalepsis at 1:46 PM on September 25, 2014


The graduate aggregate limit includes all federal loans received for undergraduate study.

Not to thread sit, but I think that I may have explained this poorly. Only 57k of my loans are from the government. What I am wondering is if that means that I can sill take out 81k in federal loans (over time, not all at once, and within the annual limits) and use that to pay off my 81k in private loans.

138k - 57k = about 81k
Which is the amount that I have in private loans, that I would like to transfer, over time, to government loans.
posted by Shouraku at 1:50 PM on September 25, 2014


I think technically, federal loans are supposed to be used to pay for education and expenses that you undergo after taking the loans out? Isn't that kind of the concept of a loan? I feel like I remember reading something recently saying that they could be only used for this purpose (while considering whether it was technically legit to use money I had left over from loans to pay for my expenses now that I am no longer a student).

Plus, will you even be able to get the federal loan if you can't demonstrate that you need it for tuition and living expenses, which you say are already covered?

Upshot to my answer: I actually don't know the answer to your question but if we are talking about whether what you are proposing is technically legal, I would guess no.
posted by thesnowyslaps at 2:01 PM on September 25, 2014


I actually don't know the answer to your question but if we are talking about whether what you are proposing is technically legal, I would guess no.

This is a very important point, and one that I am wondering myself. This method was discussed on mefi here and no one seemed to address the legality or feasibility of it.
posted by Shouraku at 2:05 PM on September 25, 2014


I believe you would be able to get that money, when I was a well funded phd student the school offered me the full annual limit every year. I always took a bit of it. I believe the limits (annual and lifetime) are only for the federal loans, so you should be able to take out the remaining 81k at 20k (or something) a year to hit the federal limit.

I think it could be technically legal too. It depends how you think about the money. The money you get through your grad school stipend, pot A, is all dedicated to paying off your private student loans. The new government loans you are taking out, pot B, are dedicated to paying for your housing, food, and bills while in graduate school. A permissable use of loan monies.
posted by pseudonick at 2:32 PM on September 25, 2014 [1 favorite]


I don't know how the aggregate loan limits work, but I would be very surprised if Federal loan limits took into account Private loans.

My understanding and experience of Federal loans is that they essentially cut you a check and they never audit what you spent it on. I seriously doubt there would be a problem. A little of the creative accounting @pseudonick mentioned would solve any problems.

The Federal government makes loans and services their repayment. I've never heard of them auditing loan holders. I'd be pretty surprised to find out that they have an audit department at all.

As long as you pay them back, I think you're fine.
posted by cnc at 3:57 PM on September 25, 2014 [2 favorites]


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