How to pay for college: specific scenario

[Anonymous]

"I was just hoping someone might have navigated the loan options and would weigh in.

I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for."

Okay, lots of people here don't know how this works. I do.

The most that this student can borrow for sophomore year is currently $6,500. Junior and senior year it will be $7,500 for each of those years. ANYTHING borrowed beyond this will have to be done by the parent. The parent has two main ways to borrow, the first is using the federal Parent Plus loan that is super easy to qualify for and can be in amounts that are completely out of whack with the parents' ability to repay the loan. A single mom on food stamps can borrow $55K/year to send her kid to Michigan as an OOS student, for example. Now, it would be absolutely foolish to borrow that much money, but the current system allows this if you go the federal loan route. Here is a great article that describes the program and its faults. https://www.nytimes.com/2022/09/17/your-money/parent-plus-loans.html

Alternatively, you can borrow through the private lenders. The terms and rates are often better than with Parent Plus. Keep in mind that these loans are only given to parents deemed to be credit worthy. And in both cases, federal or private, the loans will count against the parents' Debt-to-Income ratio if you need to access your credit over the decades that you're servicing those loans. It will also impact on your ability to take out private loans to help your other students when they go to college. Should something happen and you need to buy a different house, you'll have a hard time qualifying for a loan given how much debt burden YOU are carrying. Your student will not be able to take over that debt burden until they earn enough to be convince the lender that they are credit worthy for that huge sum of unsecured debt. If I were one of your younger children, I'd probably hate your for the rest of your life for screwing me over in favor of the oldest child. Never mind that this oldest child got that big influx of cash as an inheritance and blew it on the expensive school instead of spreading it out over the 4 years to completely cover an affordable school.

https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized

This line in what you wrote sends chills down my spine. "I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for." It tells me that you have no idea what you're doing. It is NEVER a debt they'll be on the hook for. It is YOUR debt. There are thousands of examples of kids who promised their parents that they'd pay off the loans the parents foolishly took out on their behalf who don't pay them back. Whether it's because the student doesn't earn enough, gets sick and can't work, has a baby and needs to pay for child care, has a lawsuit judgment issued against them, whatever. YOU are legally responsible for that money and should never agree to borrow the money unless you know that if something goes wrong, you can and will cover the payments yourself, even if that means screwing over your other children and your parents and even your spouse financially.

You do NOT NOT NOT need to finance it. Very few parents are foolish enough to finance (kick the payment down the field till a later date) something like attending an expensive school. This is essentially a luxury. In any sane person's book, you don't finance fluff. You finance things that will improve your financial standing. The time to belt tighten so that your eldest child could go to an expensive school instead of an affordable one was 18 years ago. You missed that chance. It's gone. Move on.

[Anonymous]

OP, how much is the Cost of Attendance right now
How much do you need to borrow?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Here's what I would do in your position. Explain to kid that you only saved enough for in state. So give him two options: 1) transfer and go in state for free or 2) you pay for next year out of your 529 and kid takes out loans for the following two years. It's a great deal.

Correct. That’s basically what we are discussing.

I was just hoping someone might have navigated the loan options and would weigh in.

I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for.

35 years ago I was in a similar situation.
I got accepted to a private school that I really wanted to go to. If I went In-State, it would have been free as we qualified for Pell Grants.
My parents took out a HELOC that I needed to make the payments on that covered the difference between the aid that they school offered and tuition.
I hustled all summer - every break - during the school year etc. to make sure I never missed a payment

Are we living 35 years ago?
Not sure what your point is,

Seriously. My son’s entire summer job earnings wouldn’t pay for one month of his tuition.

The point was that I made a choice and I lived with it. My parents took out a HELOC for $28,000 at 9.8% and I made a payment of $366 a month every month starting my 1st month of school for 10 years. The minimum wage at the time was $3.35 / hour. I had 3 jobs over the summers as I needed to make at least $3000 (I would work throughout the year as well)
When I graduated, my loans were due as well. Between the payment to my parents and the student loan payments I did not have a lot of financial flexibility each month.
The OP can do a similar option for her child - but they need to spell it our so everyone understands who is on the hook for what.

[Anonymous]

Anonymous wrote:"I was just hoping someone might have navigated the loan options and would weigh in.

I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for."

Okay, lots of people here don't know how this works. I do.

The most that this student can borrow for sophomore year is currently $6,500. Junior and senior year it will be $7,500 for each of those years. ANYTHING borrowed beyond this will have to be done by the parent. The parent has two main ways to borrow, the first is using the federal Parent Plus loan that is super easy to qualify for and can be in amounts that are completely out of whack with the parents' ability to repay the loan. A single mom on food stamps can borrow $55K/year to send her kid to Michigan as an OOS student, for example. Now, it would be absolutely foolish to borrow that much money, but the current system allows this if you go the federal loan route. Here is a great article that describes the program and its faults. https://www.nytimes.com/2022/09/17/your-money/parent-plus-loans.html

Alternatively, you can borrow through the private lenders. The terms and rates are often better than with Parent Plus. Keep in mind that these loans are only given to parents deemed to be credit worthy. And in both cases, federal or private, the loans will count against the parents' Debt-to-Income ratio if you need to access your credit over the decades that you're servicing those loans. It will also impact on your ability to take out private loans to help your other students when they go to college. Should something happen and you need to buy a different house, you'll have a hard time qualifying for a loan given how much debt burden YOU are carrying. Your student will not be able to take over that debt burden until they earn enough to be convince the lender that they are credit worthy for that huge sum of unsecured debt. If I were one of your younger children, I'd probably hate your for the rest of your life for screwing me over in favor of the oldest child. Never mind that this oldest child got that big influx of cash as an inheritance and blew it on the expensive school instead of spreading it out over the 4 years to completely cover an affordable school.

https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized

This line in what you wrote sends chills down my spine. "I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for." It tells me that you have no idea what you're doing. It is NEVER a debt they'll be on the hook for. It is YOUR debt. There are thousands of examples of kids who promised their parents that they'd pay off the loans the parents foolishly took out on their behalf who don't pay them back. Whether it's because the student doesn't earn enough, gets sick and can't work, has a baby and needs to pay for child care, has a lawsuit judgment issued against them, whatever. YOU are legally responsible for that money and should never agree to borrow the money unless you know that if something goes wrong, you can and will cover the payments yourself, even if that means screwing over your other children and your parents and even your spouse financially.

You do NOT NOT NOT need to finance it. Very few parents are foolish enough to finance (kick the payment down the field till a later date) something like attending an expensive school. This is essentially a luxury. In any sane person's book, you don't finance fluff. You finance things that will improve your financial standing. The time to belt tighten so that your eldest child could go to an expensive school instead of an affordable one was 18 years ago. You missed that chance. It's gone. Move on.

But the OP can set up an plan that the child makes payments to them starting next August against the loan. Maybe they decide that for the 1st 5 years, the student is responsible for 75% of the payment each month and after that they are responsible for 100%. or something else. Whatever it is - the child can be required to do something - and if after the sophomore year if the payments are too much, they can make a choice to transfer.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is insane. What do you mean you couldn’t “rein in” your kid. You should have said”we can not afford this.”

Your choices now are your kid transfers or you take out expensive Parent Plus loans or you pull cash from your investments/savings. Those are your choices.

This is exactly right. My heart breaks for this kid. OP, why didn’t you say no? I highly doubt the kid and the relative would’ve done this behind your back. You didn’t want to be the bad guy last year and caused this issue.

Sigh

We told our kid they would need to use loans to cover whatever we can’t cover. Now I’m trying to help friends tire out the best approach.

Nobody was blindsided.

There’s still part of me that remains hopeful they’ll transfer.

Your kid can’t get loans beyond the $5500 unsubsidized federal loans (or whatever it goes up to each year. ) No one is going to lend your child, with no income and no collateral, that kind of money. Telling a 17 or 18 year old they will have to take out a loan — where literally none are available — is irresponsible and misleading and plain bad parenting.

+1

Kids cannot take out loans to cover anything beyond about $26,000. Even if they were willing to do that through taking over Parent Plus loans post-college, no high school senior is in a position/ has life experience to enable him to understand what that means in reality.

Every family I know including us told their kids what their budget was for college, and many of us including me had to say “no“ to schools that we couldn’t afford. It’s just the way it is. There’s no need to “rein in” the kid. There’s just the word no, which should not come as a surprise if you have shared what your budget is to begin with.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The best options are federal loans, because they are the only loans you can enjoy any forgiveness/repayment plans on. I wouldn’t even think of taking out a home equity loan or retirement loan in your situation.

I don’t think we qualify for federal loans based on HHI and investments.

Is the college a private college or an out of state public college?

Regardless you would qualify for Parent Plus loans if you want to take them out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It would help to know your income OP.
And how many kids do you have.

A quick FAFSA calculation says that if they get no aid for an OOS public school, their HHI is at least $250K. Or maybe a little less if they have substantial investments, in which case they're cash-rich.

This statement makes no sense. NO ONE gets need based financial aid at an out of state public school. They may get merit money but not need based aid.

[Anonymous]

OP, without being harsh I think it’s important to be direct. You need to model responsible financial decision making for four child now. You cannot take out loans for an expensive school when they also need room and board. You have too many other dependents and your own retirement.

Be direct with your child that it is no longer affordable. Teach them what a crushing weight debt is and refuse to take on the debt yourself. You need to take the lead and teach them.

You simply cannot afford to put your own finances at risk simply for an OOS school.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Tell is your income you selfish clown

HHI near $180.

4 kids.

Dc metro area.

Supporting elderly parents who didn’t save for retirement. I won’t make that mistake.

If your child is attending a private school, you may qualify for some financial aid at that income level. It might not be a lot, but they may be able to offer you like a $10,000 annual discount, if you can prove you are providing support for elderly parents.

Our HHI was $165000 but no elderly parents and only 2 students, and several private colleges with COA of $60000 to 70000 came in with offers bring coast of attendance down to about $40,000 to $42,000.

[Anonymous]

What’s your child hoping to do after college? If you’re talking about going into debt for the child and having them take out loans, discuss salaries for their field at the same time. Based on the decision the child made in this situation, they may not have a realistic vision of what kind of financial impact debt repayment will have on their life, especially if they’re a (XXXX Studies major, XXXX History major, etc.)

[Anonymous]

Anonymous wrote:

Anonymous wrote:"I was just hoping someone might have navigated the loan options and would weigh in.

I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for."

Okay, lots of people here don't know how this works. I do.

The most that this student can borrow for sophomore year is currently $6,500. Junior and senior year it will be $7,500 for each of those years. ANYTHING borrowed beyond this will have to be done by the parent. The parent has two main ways to borrow, the first is using the federal Parent Plus loan that is super easy to qualify for and can be in amounts that are completely out of whack with the parents' ability to repay the loan. A single mom on food stamps can borrow $55K/year to send her kid to Michigan as an OOS student, for example. Now, it would be absolutely foolish to borrow that much money, but the current system allows this if you go the federal loan route. Here is a great article that describes the program and its faults. https://www.nytimes.com/2022/09/17/your-money/parent-plus-loans.html

Alternatively, you can borrow through the private lenders. The terms and rates are often better than with Parent Plus. Keep in mind that these loans are only given to parents deemed to be credit worthy. And in both cases, federal or private, the loans will count against the parents' Debt-to-Income ratio if you need to access your credit over the decades that you're servicing those loans. It will also impact on your ability to take out private loans to help your other students when they go to college. Should something happen and you need to buy a different house, you'll have a hard time qualifying for a loan given how much debt burden YOU are carrying. Your student will not be able to take over that debt burden until they earn enough to be convince the lender that they are credit worthy for that huge sum of unsecured debt. If I were one of your younger children, I'd probably hate your for the rest of your life for screwing me over in favor of the oldest child. Never mind that this oldest child got that big influx of cash as an inheritance and blew it on the expensive school instead of spreading it out over the 4 years to completely cover an affordable school.

https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized

This line in what you wrote sends chills down my spine. "I recognize I will need to finance it if that’s what my kid chooses. But I won’t do that unless they realize it’s a debt they’ll be on the hook for." It tells me that you have no idea what you're doing. It is NEVER a debt they'll be on the hook for. It is YOUR debt. There are thousands of examples of kids who promised their parents that they'd pay off the loans the parents foolishly took out on their behalf who don't pay them back. Whether it's because the student doesn't earn enough, gets sick and can't work, has a baby and needs to pay for child care, has a lawsuit judgment issued against them, whatever. YOU are legally responsible for that money and should never agree to borrow the money unless you know that if something goes wrong, you can and will cover the payments yourself, even if that means screwing over your other children and your parents and even your spouse financially.

You do NOT NOT NOT need to finance it. Very few parents are foolish enough to finance (kick the payment down the field till a later date) something like attending an expensive school. This is essentially a luxury. In any sane person's book, you don't finance fluff. You finance things that will improve your financial standing. The time to belt tighten so that your eldest child could go to an expensive school instead of an affordable one was 18 years ago. You missed that chance. It's gone. Move on.

But the OP can set up an plan that the child makes payments to them starting next August against the loan. Maybe they decide that for the 1st 5 years, the student is responsible for 75% of the payment each month and after that they are responsible for 100%. or something else. Whatever it is - the child can be required to do something - and if after the sophomore year if the payments are too much, they can make a choice to transfer.

out of what funds is the child making payments to the parents?????? She is not employed. She has no money. And FWIW it's the parents that are on the line for Parent Plus loans - not the student.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How does one :

#1. Not make enough to qualify for aid, but yet not have any money to pay for college?
#2 have a low mortgage and still can’t swing it?

What kid of parents does this to their kid and starts them off in life with a mountain of debt? So freaking irresponsible!

We do have money saved to cover some college costs. We just can’t cover everything for OOS tuition.

It’s not like our HHI has always been what it is today. (Think: nonprofit salaries. Heck, I started out at $44k in the early 2000s.)

We didn’t have family money. Nobody helped us buy a home. Daycare is expensive. Life is expensive.

Who knew privileged people were so openly hostile and judgmental? While I’m not looking for a pity party, this thread has been very eye-opening.

Many of us have similar situations and we still managed to save the entire amount for a state school and taught our kid's common sense and college costs. I made less than you in non-profit work and still managed to save. Some of it is about life choices. No one has ever helped us...even in a real emergency and we've also paid for an SN child's private therapies and supported an elderly relative. Not all of us have privilege. We have our priorities. We take a vacation every 4-5 years at best, drive older cars, DIY our homes, buy small fixer-uppers in less desirable areas, eating out is Taco Bell, etc.

[Anonymous]

OP, you said you are “mediating” between DH and your child. Is DH making this decision?

Also, so this your child or stepchild?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How does one :

#1. Not make enough to qualify for aid, but yet not have any money to pay for college?
#2 have a low mortgage and still can’t swing it?

What kid of parents does this to their kid and starts them off in life with a mountain of debt? So freaking irresponsible!

We do have money saved to cover some college costs. We just can’t cover everything for OOS tuition.

It’s not like our HHI has always been what it is today. (Think: nonprofit salaries. Heck, I started out at $44k in the early 2000s.)

We didn’t have family money. Nobody helped us buy a home. Daycare is expensive. Life is expensive.

Who knew privileged people were so openly hostile and judgmental? While I’m not looking for a pity party, this thread has been very eye-opening.

Many of us have similar situations and we still managed to save the entire amount for a state school and taught our kid's common sense and college costs. I made less than you in non-profit work and still managed to save. Some of it is about life choices. No one has ever helped us...even in a real emergency and we've also paid for an SN child's private therapies and supported an elderly relative. Not all of us have privilege. We have our priorities. We take a vacation every 4-5 years at best, drive older cars, DIY our homes, buy small fixer-uppers in less desirable areas, eating out is Taco Bell, etc.

Your family sounds about as exciting as Mike Pence and his fam. OP, don't let these classless clowns get under your skin.

As Mike Tyson once said, "Social media made y'all way to comfortable with disrespecting people and not getting punched in the face for it."

[Anonymous]

I didn't see it posted anywhere, but hopefully the kid is at least pursuing a marketable degree. The worst is making a crippling financial commitment to a degree without any earning potential.