Taking out student loans for Masters or not?

[Deal Guy]

Does anyone know, if you take out student loans for college, if it affects your credit and how?

My main question is,  if you have enough in your savings to just cover you for college, are you better off burning your savings and not be able to invest that money elsewhere, or are you better off not touching that money and rather taking out interest free student loans to cover your college fees+ ? (obviously im only asking if you take a credit hit)

So basically,1) how does big student loans affect your credit score (or doesn't it),
            and 2)given the choice would you rather use up your savings, or go for the loans?

All input would be greatly appreciated.

[MarkS]

I don't think that having a student loan has any affect on your credit.

That being said, the question is:

1)what % are you earning on your savings
2) What particular need (if any) are you saving your savings for
3)If you were to borrow, are you just going to use your savings when you graduate to pay up or will you pay it off over 10 years from your salary?

The way I view it, is if your money is just sitting around making 1 or 2 percent, and you don't have any foreseeable need for the $$, spend some of it up front - leaving a chunk for the future just in case. When you graduate you can decide if you want to now just pay off the rest or start accumulating interest.

Now if you need to buy a car or a house and you really need the cash, it may be worth it to take out the loans because you need $$. However, simply for the sake of having a savings account, it's not worth it to leave a sizable unneeded amount of money in an account earning 1.5% whille you pay 6% on money you borrowed.....

[Deal Guy]

I don't think that having a student loan has any affect on your credit.

That being said, the question is:

1)what % are you earning on your savings
2) What particular need (if any) are you saving your savings for
3)If you were to borrow, are you just going to use your savings when you graduate to pay up or will you pay it off over 10 years from your salary?

The way I view it, is if your money is just sitting around making 1 or 2 percent, and you don't have any foreseeable need for the $$, spend some of it up front - leaving a chunk for the future just in case. When you graduate you can decide if you want to now just pay off the rest or start accumulating interest.

Now if you need to buy a car or a house and you really need the cash, it may be worth it to take out the loans because you need $$. However, simply for the sake of having a savings account, it's not worth it to leave a sizable unneeded amount of money in an account earning 1.5% whille you pay 6% on money you borrowed.....

1) 1-2%
2) Hopefully towards a down payment for a home.
3) Probably just use up the savings upon graduation, in a year or 2 from now.

So basically you are recommending that if you will need to use up nearly your entire savings, that you are better off just taking out the loans. Correct?

Are you sure that it has no affect on your credit? Will it not show up on your credit report that you have a outstanding loan of $20k or more, that is not being paid at the moment, and will therefore lower your credit since you are using up a big amount of your credit, and will cause banks to hesitate to give you credit cards or mortgages, since you already need to pay up a large student loan?

[AsherO]

Are you sure that it has no affect on your credit? Will it not show up on your credit report that you have a outstanding loan of $20k or more, that is not being paid at the moment, and will therefore lower your credit since you are using up a big amount of your credit, and will cause banks to hesitate to give you credit cards or mortgages, since you already need to pay up a large student loan?

I'm not sure how exactly it will affect your credit, but I'm quite sure loan are factored differently when calculating your credit score, and it's probably (at least partially) related to the utilization issue you mention.

[Deal Guy]

I'm not sure how exactly it will affect your credit, but I'm quite sure loan are factored differently when calculating your credit score, and it's probably (at least partially) related to the utilization issue you mention.

That's what i think. Therefore, im trying to get advice here if I shoud go ahead with the loans or not.
Thanks MarkS and AsherO.

[MarkS]

1) 1-2%
2) Hopefully towards a down payment for a home.
3) Probably just use up the savings upon graduation, in a year or 2 from now.

So basically you are recommending that if you will need to use up nearly your entire savings, that you are better off just taking out the loans. Correct?

Are you sure that it has no affect on your credit? Will it not show up on your credit report that you have a outstanding loan of $20k or more, that is not being paid at the moment, and will therefore lower your credit since you are using up a big amount of your credit, and will cause banks to hesitate to give you credit cards or mortgages, since you already need to pay up a large student loan?

I'm not positive about the credit rating.
If you are realistically considering buying a house in the next few years, definitely take out whatever interest free amounts you can take. Then when you graduate you can decide if it's worth starting to pay 6% to keep the loans as loans, or if you aren't in the ballpark of buying a house anymore just use your savings then to pay it up.

My main point is that many people say that they want to just pay it up over 10 years while they have a job, because they're afraid to touch their savings. I originally thought that way until I realized that giving up the 1% interest I was making, beats paying 6%. I look at it as the best way to 'invest' my money!! I'm 'making' (by not spending) 6% by paying up my loans!

[Deal Guy]

I'm not positive about the credit rating.
If you are realistically considering buying a house in the next few years, definitely take out whatever interest free amounts you can take. Then when you graduate you can decide if it's worth starting to pay 6% to keep the loans as loans, or if you aren't in the ballpark of buying a house anymore just use your savings then to pay it up.

My main point is that many people say that they want to just pay it up over 10 years while they have a job, because they're afraid to touch their savings. I originally thought that way until I realized that giving up the 1% interest I was making, beats paying 6%. I look at it as the best way to 'invest' my money!! I'm 'making' (by not spending) 6% by paying up my loans!

You are definitely saying good. Part of my question must be then, is if due to having a high credit utilization (20k+ of student loans), will that give me a lower credit score and thus cause the bank to give me a worse rate on a future mortgage, since i believe the higher your credit score the lower mortgage rate, or is that something not true?
 Anyone ever affected negetively by having a student loan, in any way?

[boruch]

Student loans do show up on your credit report but they use a different calculation. Definitely not the same as a cc. Your financial aid office/advisor in your college/university should be able to give you more info. Mine was very helpful.

On (Most) student loans you don't start paying interest until you graduate. Keeping this in mind you can do the following:

-Take a student loan and start paying it of monthly, immediately. This way if you finish paying it of before you graduate you avoid paying any interest. This way you don't pay everything at once so you have some cash on hand in case of a rainy day.

-You don't start paying your loan off immediately but you invest (some) of your savings. (Stocks,funds etc.) When you graduate you start paying it off and you use your investment+profit to effectively lower your interest cost on your student loan. Be very careful though. Your investment might loose money...than you are stuck with even higher cost ...

- A combination of the two. To lower your risks.

[AJK]

I originally thought that way until I realized that giving up the 1% interest I was making, beats paying 6%. I look at it as the best way to 'invest' my money!! I'm 'making' (by not spending) 6% by paying up my loans!

+1

On (Most) student loans you don't start paying interest until you graduate.

But on most (aside from Federally subsidized) you are charged interest, you just may not be required to begin paying for it right away.

[boruch]

That's correct. The financial aid offices at the colleges are there for a reason. They are very helpful and can help you apply for federal loans and grands etc. Many people don't realize how much money they can save just by meeting and sitting down for an hour or two with an financial aid advisor at their college / university.

I agree that filling out countless forms to apply is a big headache. I hate that part!! (My wife hates it even more so I land up with both...) But's very important.
Good luck.

[mercaz1]

it will affect your credit score
its still better to take the loans and invest your savings somewhere else

[AJK]

its still better to take the loans and invest your savings somewhere else

That's such a misleading statement I don't even know where to begin.

[mercaz1]

if you take a subsidized loan at 6% you technically can beat that rate in the market
it was a very simple statement without any commentary

[AJK]

if you take a subsidized loan at 6% you technically can beat that rate in the market

Another, equally misleading (ridiculous) assertion IMHO.
 

it was a very simple statement without any commentary

Precisely. That's not problem.

[mercaz1]

y is that a ridiculous assertion
i said technically able to beat the market
past perfomance does not guarantee future results

[Dan]

Please let me know where I can beat 6%.

[MarkS]

Please let me know where I can beat 6%.

+1

[AJK]

Which brings us back to your original assertion:

its still better to take the loans and invest your savings somewhere else

That assumes a) you know the rate at which he is borrowing money, and b) that you can beat that rate in the market. To accomplish that, you'd have to be omniscient for the first issue, and given the market as of late, your middle name would have to be Warren Buffett, for the second.

[mercaz1]

over the 1 to 2 years that a typical masters program takes you can invest your money making 6%
im assuming 6% interest bec im pretty sure that is what the federal rate for loans is now i may be wrong
my middle name is not warren buffet thats my father

[AJK]

over the 1 to 2 years that a typical masters program takes you can invest your money making 6%
im assuming 6% interest bec im pretty sure that is what the federal rate for loans is now i may be wrong

Wait, you're assuming you can invest your money at 6% because that's what the federal government charges on its loans?

Oiy.