College Cost

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raveon
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College Cost

Post by raveon » Mon Mar 30, 2020 11:45 pm

A family member got into Duke. I looked at the financial aid package. Pretty decent offer. Student was offered "Direct Subsidized Loan" and "Duke Education Assist Loan". These loan amounts are very small (about $5K/year). Rest is grant. The expected family contribution is $21K/year (parent is $19K/year, student is $2K/year). If the parent can't afford to pay the $19K/year, what option does the student have besides applying of external grants/scholarships? Is it possible for the student to get a private loan on their own? What are typical interest rates these days?

Worst case scenario, I will pay the family contribution for the student (had setup a 529 plan setup for the kid 12+ year ago for this eventuality) or loan the money at 0% (if student insists on paying it back after getting a job).

Never had to think about loans during my college years so not sure what the private loan situation is and/or how they work.

livesoft
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Re: College Cost

Post by livesoft » Tue Mar 31, 2020 12:28 am

education tax credits of $2500 per year

Student can certainly work for more than $2K a year. I made more than that back in the 1970's per year as a college student working part-time.
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MoneyMarathon
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Re: College Cost

Post by MoneyMarathon » Tue Mar 31, 2020 3:40 am

raveon wrote:
Mon Mar 30, 2020 11:45 pm
If the parent can't afford to pay the $19K/year, what option does the student have
If the parents can't afford to pay, then the #1 priority should be to appeal the financial aid decision.

If the parents want to finance their expected contribution, a private loan generally requires a cosigner with income and good credit. If the parents want to be repaid for their expected contribution, that would be an agreement between the parents and the student, not between the bank and the student.

The most important real option they have is not to attend the expensive school. Young adults have stars in their eyes over the names of colleges. Most likely someone would need to give them a real talk about how much money this is, for them to understand what they're deciding between.

oldfort
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Re: College Cost

Post by oldfort » Tue Mar 31, 2020 12:15 pm

It will be impossible for the student to get a private loan on their own.

oldfort
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Re: College Cost

Post by oldfort » Tue Mar 31, 2020 12:21 pm

MoneyMarathon wrote:
Tue Mar 31, 2020 3:40 am
raveon wrote:
Mon Mar 30, 2020 11:45 pm
If the parent can't afford to pay the $19K/year, what option does the student have
If the parents can't afford to pay, then the #1 priority should be to appeal the financial aid decision.
Unless the family's financial situation has changed dramatically since they filled out the CSS profile and FAFSA, I wouldn't count on an appeal being successful.

2cents2
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Re: College Cost

Post by 2cents2 » Tue Mar 31, 2020 12:25 pm

raveon wrote:
Mon Mar 30, 2020 11:45 pm


Worst case scenario, I will pay the family contribution for the student (had setup a 529 plan setup for the kid 12+ year ago for this eventuality) or loan the money at 0% (if student insists on paying it back after getting a job).
If you use the 529 plan money, it will impact financial aid for the following year. I believe it counts as income for the student. The recommendation I have seen is to use the 529 money (with account owners other than parents) for the last year of school.

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Re: College Cost

Post by Jack FFR1846 » Tue Mar 31, 2020 12:28 pm

I have looked many times and in short, all private student loans advertised assume a cosigner. So the parent is still on the hook. Perhaps a loan could be found without a cosigner, but looking at a few banks and credit unions, I think you're talking north of 10%. Even at that, the loan may require payments starting a month after the check is issued. Deferred payment loans will likely carry higher interest rates than this.

People here often say "You can get loans for college but you can't get loans for retirement". In reality, a student may not be able to even be able to get enough of a loan to cover community college. (I have a son in community college).
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TomatoTomahto
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Re: College Cost

Post by TomatoTomahto » Tue Mar 31, 2020 12:32 pm

Depending on what the student is studying, and his/her ability to impress employers (getting accepted to Duke means the smarts are there), the student might make a surprising amount of money while in school. Mostly this money will be made after sophomore year. The pay for interns can be astounding.
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UpsetRaptor
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Re: College Cost

Post by UpsetRaptor » Tue Mar 31, 2020 12:51 pm

2cents2 wrote:
Tue Mar 31, 2020 12:25 pm
raveon wrote:
Mon Mar 30, 2020 11:45 pm


Worst case scenario, I will pay the family contribution for the student (had setup a 529 plan setup for the kid 12+ year ago for this eventuality) or loan the money at 0% (if student insists on paying it back after getting a job).
If you use the 529 plan money, it will impact financial aid for the following year. I believe it counts as income for the student. The recommendation I have seen is to use the 529 money (with account owners other than parents) for the last year of school.
That only applies if it's a grandchild. If OP is a parent of the kid, not only does it not count as income, those 529 funds will be removed from parent assets in next year's calculation, so it might actually help.

OP didn't state the relationship though.

ETA: Whoever was saving the 529 funds, if not to help out if the kid got into a school like Duke, with a reasonable amount of grant money to boot, then what the heck other purpose are you saving 529 funds for? Maybe postgrad? Just use them here, IMO.

Topic Author
raveon
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Re: College Cost

Post by raveon » Tue Mar 31, 2020 3:28 pm

OP didn't state the relationship though.
The student is my nephew. So I am his uncle.

jj45
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Re: College Cost

Post by jj45 » Tue Mar 31, 2020 6:15 pm

Students can get Federal Direct loans with limits of $5,500 for the first year with no more than $3,500 subsidized. The amounts grow in successive years https://studentaid.gov/understand-aid/t ... d#how-much Since you said the total was about $5K/year it sounds like there is some room for more Federal Direct Loans.

However much the student was offered in Direct Subsidized Loans is subtracted from the $5,500 and they can get a Direct Unsubsidized Loan for the rest on their own with no cosigner needed. My understanding is that approval is automatic. The difference between the two types of Federal Direct loans is Subsidized loans have interest paid by the Feds while the student is in school, so no interest accrues until after graduation. Unsubsidized loans have interest charged to the loan and while in school no payments are required but the balance grows.

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cockersx3
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Re: College Cost

Post by cockersx3 » Tue Mar 31, 2020 6:54 pm

Very unlikely that your nephew will be eligible for any private tuition loans without a co-signer.

One option would be to seek out any local charitable organizations that offer loans directly to students, as their "underwriting" standards sometimes allow for students to get loans directly. (Believe the charity handles any payments that students cannot make.)

I was in a situation similar to your nephew (20+ years ago), and my school guidance counselor suggested a local one to me as an option. Got around $7500 per year in loans under my name, paid it all back over 10 years. My parents refused to pay for any of my college expenses, so if it wasn't for options like these my life would have been radically different. Will forever be grateful for that as an option, thinking seriously about trying to do something similar with any legacy I leave behind - seems like a great way to have a powerful impact on a larger population of kids than would be reachable through straight scholarships.

The Broz
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Re: College Cost

Post by The Broz » Tue Mar 31, 2020 7:46 pm

MoneyMarathon wrote:
Tue Mar 31, 2020 3:40 am
raveon wrote:
Mon Mar 30, 2020 11:45 pm
If the parent can't afford to pay the $19K/year, what option does the student have
The most important real option they have is not to attend the expensive school. Young adults have stars in their eyes over the names of colleges. Most likely someone would need to give them a real talk about how much money this is, for them to understand what they're deciding between.
This is something that people apparently do not consider nearly as much as they should. Just because you get admitted to the school is not a reason to commit yourself to a lifetime of debt. The unfortunate reality is that not all of us can afford the finer things in life. That's how life is. You don't want the 28 year old version of this kid to hate the 18 year old version for making a decision like this.

Also - what about going to community college for 2 years, and working as much as possible during those two years (nights/weekends/summers)?

oldfort
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Re: College Cost

Post by oldfort » Tue Mar 31, 2020 10:03 pm

The Broz wrote:
Tue Mar 31, 2020 7:46 pm
MoneyMarathon wrote:
Tue Mar 31, 2020 3:40 am
raveon wrote:
Mon Mar 30, 2020 11:45 pm
If the parent can't afford to pay the $19K/year, what option does the student have
The most important real option they have is not to attend the expensive school. Young adults have stars in their eyes over the names of colleges. Most likely someone would need to give them a real talk about how much money this is, for them to understand what they're deciding between.
This is something that people apparently do not consider nearly as much as they should. Just because you get admitted to the school is not a reason to commit yourself to a lifetime of debt. The unfortunate reality is that not all of us can afford the finer things in life. That's how life is. You don't want the 28 year old version of this kid to hate the 18 year old version for making a decision like this.
$21k/year is a bargain. My state's public flagship is about $30k/year for in-state and $50k/year for out of state.

erictiger12
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Re: College Cost

Post by erictiger12 » Tue Mar 31, 2020 10:26 pm

We pay $36K a year for in-state school CS major.

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UpsetRaptor
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Re: College Cost

Post by UpsetRaptor » Tue Mar 31, 2020 10:26 pm

raveon wrote:
Tue Mar 31, 2020 3:28 pm
OP didn't state the relationship though.
The student is my nephew. So I am his uncle.
Then 2cents2 is right, if you use your 529 funds to pay for the tuition, it'll count as student income that year and quite possibly adversely affect the financial aid calculations on FAFSA in later years, assuming Duke's calculations use FAFSA as a basis in some way (which may or may not be the case, I don't know). That calculation is based on prior prior calendar year income, so if you wait to start using the 529 until after Jan 1 of his sophomore year, then it would not adversely affect financial aid, assuming he does 4 years. Usually this means you can start paying on his third semester without problem.

Normchad
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Re: College Cost

Post by Normchad » Tue Mar 31, 2020 10:32 pm

College is ridiculously expensive. IMO, it’s definitely worth it, but there has got to be a better way.

I am hopeful that the current outbreak will accelerate changes in higher education, that will make it reachable for more people, and not result in debilitating indebtedness.

For us, we saved a lot, and ultimately took the lowest cost option we could find.

NotWhoYouThink
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Re: College Cost

Post by NotWhoYouThink » Wed Apr 01, 2020 10:00 am

If the family can't afford the EFC and you are not willing to pay an increasing amount in later years, then this student can't afford Duke. If you are willing to pay more, then great for you!

Duke will use both FAFSA and CSS to determine the student's ability to pay. They will, properly, give more aid money to students who do not have rich uncles willing to help pay. So for Freshman year, the students family, including you, will have to come up with $19K.

The student can't get more loans without a co-signer. Please don't be that co-signer, it's a trap. The student's parents can get loans. but I would not advise this. If they can't pay for college they probably haven't saved for retirement, either. And these loans will not be dischargable in bankruptcy, so they are a very bad idea.

You might play with the formulas Duke will have on their website. One question that will be asked in future years, and was probably asked this year, is how much help the family expects to get from other family members to pay for college in the next year. Maybe this year the student could have truthfully answered "$0", but next year the student and the Duke financial aid office will know better. They may expect you to pay $19K next year and still expect the family to come up with the $19K Duke calculates they could afford. Then what will you do?

There aren't many private scholarships that add up to much, and most are only for one year.

So - if you are willing to pay ever increasing amounts up to the full cost of attendance, you are very generous and the student can attend Duke. If not, I think that any student that can get into Duke probably has applied to other schools that will offer him merit money. At least I hope so. Otherwise, this might be a good time to take a gap year and try again.

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