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What is the best way to determine the amount of graduate student loans I should take out, and allocate the loans I am awarded towards tuition and repaying my loans?

For my first semester of graduate school, I received a $14,000 unsubsidized student loan. My cost for attending school was $6,000, so I will be receiving a refund check from the school for roughly $8,000. Should I use the $8,000 from the refund to start paying back the loan? Or should I use it to pay my expenses for my next semester? I'm also curious why the loan amount I received is so much higher than my actual costs for the semester. Are there better ways to take out student loans?



College Tuition, Debt
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January 2018

Like you, I was given loans in excess of tuition for grad school. This was because my income at the time applied allowed me to take out more financial aid, which is likely the same case with you. You have three options:

1) Give the money back. This is the simplest option because you take on the least debt. This is the route you should probably go with if you are already financially stable and don't need the extra money.

2) Use the extra money as a cushion to pay for living expenses while you are in school. This is what most people do, but this is a slippery slope.

3) Invest the extra money in a taxable brokerage account. When the time comes to start paying back loans, make your payments from this account so that the student loans don't immediately affect your cash flow, possibly allowing you several years for your income to grow and support the payments. This is what I did, and it has worked out very well. 

Best of luck!

January 2018