Question about USAFA loan to C2C cadets

[batmom]

Question???
My C3C- and soon to be C2C son just mentioned that he has an opportunity to receive a Loan from the govt. of about $30,000. I am having very mixed feelings about his taking out this loan, since we were recently able to get him a used car for this summer, and he really doesn't have an immediate need for this loan. If he doesn't need the loan right now, can he postpone this until a later date when he might need the money, such as a down payment on a home?
Please let me know as much as you can about these loans.
Thanks so much,
batmom

 

[Texasrocks]

my firstie just took one this semester to help him get started with living arrangements furniture...

 

[Christcorp]

He can get the loan up til the time he graduates. (That was what I found to be true a couple years ago; but that could change).

Next: It's not a government loan. It's a loan from USAA bank. It's just one of their incentives. If your son/daughter isn't a member of USAA bank, they would need to become a member. I believe also that it requires that their military paycheck be "Direct Deposit" into that USAA account.

Next: Starting upon graduation is when they start taking the money back each pay check. I.e. He could get the loan in his C2C year, and be almost 2 years before any payments would start getting pulled out.

Finally: One of the good reasons for the loan is because as a new Lieutenant in the air force, there are no "Dormitories" for him/her to live in. The loan can help in helping to furnish an apartment, deposits, etc... However, there are no rules on what you can use the money for. I've seen people who (In my opinion) squander it on a brand new car. But I also know individuals who didn't need the money, but the interest rate is so low, that they took the loan anyway and deposited $5,000 to fund a ROTH IRA and another $5000 in CD's. The next year they took more and did the same thing. .

I don't know what the interest rate is today, but when my son took the loan in 2010-2011, it was around 0.5% or something like that. Definitely something to think about.

 

[raimius]

With no student loans, you should have plenty of money for the single LT life, if that's the plan.
If the rate is low enough, you can pretty easily make more than the interest in investments. It's also really nice to have a few grand in a "reserve" account.
I think my loan costs are around $1800 in interest, and I've made $4K+ on the portion that I invested. Since I'm a single guy, it's pretty easy to live within my paycheck, so the loan payments isn't a hardship.

Now, the downside is if you don't commission, the rates go WAY up. If, for some reason, you wind up out of the military, that loan payment could suddenly become a big deal.

There are a few banks that offer similar "career starter loans." USAA is the big one at USAFA, but I think Wells-Fargo and Navy Federal do similar programs.