How to pay for college: specific scenario

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We had cash to cover freshman year thanks to a one-time gift from a relative.

FAFSA gave us nothing due to our HHI, etc.

We cannot bring cash to the table for tuition for the next 3 years.

What’s the best way to handle this in terms of student loans or other loans?

Consider transferring to an in-state public university as tuition should be much lower.

While that would make sense financially, it’s not what the kid wants to do.

I’m playing mediator between kid and DH to gather facts and numbers to focus options and determine next steps.

So many many issues. Is the kid paying? Do you understand the parenting concept of not raising an entitled child? Or teaching your child finance 101? I’m guessing no.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We have money, and the plan was in-state tuition at the flagship (with CC and transferring in as the Plan B).

Generous relative threw a wrench into our (read: parents’) plan.

Kid opted to go out of state and loves it there, so now we are evaluating options.

While we can bring some cash to the table, we can’t cover everything…right now. (We will likely inherit some cash that we will use to help pay off student loans, but that will likely be a decade down the road).

I suppose I am wondering what the best options are in terms of loans and where to start.

House is worth $700k+ and we owe roughly $200k. Mortgage is low ($1700/month).

We won’t touch our retirement or investments. (We also both have pensions available down the road.)

You are the parent!!!!!! You are in charge when it’s your money funding their lifestyle-they don’t get a say if you can’t afford it. If they don’t want to transfer then they have to figure out how to pay if you can’t.

You really screwed up and are selfish. You overbought an expensive house and refuse to change your lifestyle. Kid has to drop out.

?

We bought a $400k house that has appreciated in value over time. Our mortgage is $1,700.

Our kid isn’t screwed.

They can take out loans or transfer in-state.

We will help. We just can’t pay $50k+ each year to cover tuition, etc. outright.

If they live at home and commute to the state flagship, we could fully cover tuition. They just don’t want to. That’s what I’m dealing with currently.

[Anonymous]

Anonymous wrote:

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.

If the student wants this - really wants this - they get a job. They go get lifeguard certification training and they work all summer and all year. With lifeguarding, you know your hours and you can get a 2nd job over the summer. They can easily demonstrate to the parents that they understand that this is a financial obligation and are committed to being a part of the solution.
Once they see what it takes, the student can see the work that it takes from everyone to go to this school. After sophomore year, if it is not something they can continue, the parents only have one year of PLUS loans.
The student needs to take on some of the financial burden. This is a compromise that the family can consider.

[Anonymous]

Anonymous wrote:

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.

This is mostly true, but not an entirely accurate statement. Merit aid is the primary channel. FAFSA filing can sometimes open up work-study or other need-based aid, sometimes. See https://www.usnews.com/education/best-colleges/paying-for-college/articles/2016-10-24/3-facts-about-aid-tuition-for-out-of-state-students. But the key factor isn’t that the school isn’t providing aid, it’s that the OP indicated that the FAFSA told them there was no aid (hence EFC was higher than OOS COA). For this to be true the combination of HHI and savings must be substantial.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

If the student wants this - really wants this - they get a job. They go get lifeguard certification training and they work all summer and all year. With lifeguarding, you know your hours and you can get a 2nd job over the summer. They can easily demonstrate to the parents that they understand that this is a financial obligation and are committed to being a part of the solution.
Once they see what it takes, the student can see the work that it takes from everyone to go to this school. After sophomore year, if it is not something they can continue, the parents only have one year of PLUS loans.
The student needs to take on some of the financial burden. This is a compromise that the family can consider.

errr. right . . . and just how much money do you think this student is going to make after getting lifeguard certification? Or waiting tables? Did you not see the comments above about how a summer's earnings are a drop in the bucket compared to the cost of an OOS private?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

This is mostly true, but not an entirely accurate statement. Merit aid is the primary channel. FAFSA filing can sometimes open up work-study or other need-based aid, sometimes. See https://www.usnews.com/education/best-colleges/paying-for-college/articles/2016-10-24/3-facts-about-aid-tuition-for-out-of-state-students. But the key factor isn’t that the school isn’t providing aid, it’s that the OP indicated that the FAFSA told them there was no aid (hence EFC was higher than OOS COA). For this to be true the combination of HHI and savings must be substantial.

NP. Well not "substantial". Anyone who has been through the process can tell you that they can get an EFC of 100%, like we did, but still be scrambling for money to pay all of the college expenses, especially with multiple kids and other factors like we had of taking care of elderly parents and SN kids. Those factors aren't included. There's an ongoing thread about at what HHI does the FAFSA computer turn off. I would say about $225. $225K in D.C. doesn't go far once you realize that over a third of that is lost to taxes. Then there is the mortgage, cars, food, etc. etc. We had to refinance our home to make it all work - and, yes, I had been saving for our kids since birth. But it still wasn't enough

[Anonymous]

Ooof sorry you are in the position, OP. You are absolutely not alone. Many other Americans are thinking through these choices as well.

I do think your child will have to face the disappointment of changing schools. I’m sorry, but it’s for the best.

[Anonymous]

OP- did you kid go OOS for the school or the location? One possibility, since you said they were the independent kind (I was too at that age- no way would I live at home). Maybe they could stay in the same state, but withdraw the inheritance money for the spring semester. It would be enough to get an apartment, if the COL isn't too high. They could work for a year and enroll in community college after that.

That is something I would have done. Just thinking out of the box here

[Anonymous]

Anonymous wrote:

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."

Why the need for the political slur? Seriously, you folks were supposed to be working on ending divisiveness. There is no need for that. Take it to politics.

and the pp is correct. This is all about life choices. The OP wasn't clear - as every parent should be - at the START of the college tour process - of telling their child exactly what they could afford and not afford. Every single college counselor will tell you this. Then tour ONLY what you can afford. It is cruel to dangle a $84K a year private slac in front of your child if the family cannot afford it.

Then, when all the applications and responses are back, you compare financial packages. Did you get any merit? How do the private packages compare to the in-state? You, as a family, make a sensible decision that is affordable. In our case, our FAFSA efc was 100% and we received no merit from top schools so we were full pay for both kids all the way. It was a struggle but we did it

One of my friends took her DD to their financial counselor so the financial counselor could lay it all out and explain to DD that the family could not afford X, a private school, but could afford Y, in-state public. And that's where she went. By taking her to the counselor, it took the heat off of mom. A good approach.

You do not get into a situation like OP is in, which means her kid must come home, do a gap year or transfer to in-state public (which she needs to start the paperwork for now). We haven't even heard if OP can afford in-state public.

[Anonymous]

Anonymous wrote:OP- did you kid go OOS for the school or the location? One possibility, since you said they were the independent kind (I was too at that age- no way would I live at home). Maybe they could stay in the same state, but withdraw the inheritance money for the spring semester. It would be enough to get an apartment, if the COL isn't too high. They could work for a year and enroll in community college after that.

That is something I would have done. Just thinking out of the box here

I mean enroll at the community college in the new state.

[Anonymous]

Anonymous wrote:

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.

That's not remotely true, particularly for private schools.

[Anonymous]

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

Crazy that we went through 10 pages of responses for getting to the only actually relevant question.

OOS can mean a lot of different things. Paying for instate can mean different things. And the difference between attending UVa and the University of North Dakota.

OP needs to lay out: current cost of attendance, what the parents can pay, what the student has been approved to borrow, and any other source of funds. There's a big difference between the parents being on the hook for an extra $20k and an extra $75k. Particularly, where an equal gift may have disproportionate impact as the younger kids will be able to get investment returns on the money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

If the student wants this - really wants this - they get a job. They go get lifeguard certification training and they work all summer and all year. With lifeguarding, you know your hours and you can get a 2nd job over the summer. They can easily demonstrate to the parents that they understand that this is a financial obligation and are committed to being a part of the solution.
Once they see what it takes, the student can see the work that it takes from everyone to go to this school. After sophomore year, if it is not something they can continue, the parents only have one year of PLUS loans.
The student needs to take on some of the financial burden. This is a compromise that the family can consider.

errr. right . . . and just how much money do you think this student is going to make after getting lifeguard certification? Or waiting tables? Did you not see the comments above about how a summer's earnings are a drop in the bucket compared to the cost of an OOS private?

But it is not to pay OOS. It is to make the loan payments on the PLUS loan.
Let's pretend after all the other stuff (Student Loan - parent contribution based on what they would pay for instate) there is a 10 K gap.
Parents take out a 10 K PLUS loan - back of the envelope that is ~$125 a month payment over 10 year.
A student absolutely can earn that amount to make a monthly payment each month.
Now - if the parents need to take out a 20K PLUS loan and the student needs to contribute $250 a month to the payment for sophomore year. That too is probably doable (with summer work).
The challenge is going to be Junior and Senior year, when they need to make a bigger payments due to larger loan amounts.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We had cash to cover freshman year thanks to a one-time gift from a relative.

FAFSA gave us nothing due to our HHI, etc.

We cannot bring cash to the table for tuition for the next 3 years.

What’s the best way to handle this in terms of student loans or other loans?

Consider transferring to an in-state public university as tuition should be much lower.

While that would make sense financially, it’s not what the kid wants to do.

I’m playing mediator between kid and DH to gather facts and numbers to focus options and determine next steps.

So many many issues. Is the kid paying? Do you understand the parenting concept of not raising an entitled child? Or teaching your child finance 101? I’m guessing no.

I mean it doesn't sound like the parents themselves grasp finance 101 so how would they have taught their kids?

[Anonymous]

If students can only take out $6k in loans a year why are all of these people walking around with $100k in student debt? I don't understand where they're getting this money.