Paying for grad school, parents will assist, thoughts?

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Bbddl
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Paying for grad school, parents will assist, thoughts?

Post by Bbddl »

Thoughts and suggestions please, especially about how to structure our parent loan to daughter.

Our 22 year old has graduated debt free from a four year university due to her parents ability to plan and pay. She is now moving on to grad school in a different state. The expected total expenses, tuition, fees, housing, food etc is around 180k.

We have a five step plan to maker this happen, she will have skin in the game as we are not paying the entire 180k.

1...Federal unsubsidized loans, 40k
2...remainder of 529 plan, 10k
3...her own funds, 10k
4...gifted money from parents, 40k. Does not need to repay us.
5...a loan from her parents, 80k. She will pay us back over an undetermined term. Zero interest. Not sure how to structure this portion of the plan.

We don't want her to be one of those kids starting out in a career saddled with large debt from school.

FYI, we do have a 17 year old also, that we are planning to assist also in a similar fashion.
We are doing this as we are planning for our retirement in two years.
These plans for our two kids will not have a negative impact on our retirement funds, we are somewhat fortunate. I have a good pension and we have been super savers for our entire careers.

Thank you
alex345
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Re: Paying for grad school, parents will assist, thoughts?

Post by alex345 »

PhD or something else non-academic track? comments below for PhD only.

DW and I both have phds (physics, history) and we both got full rides + living stipend. This is standard, and I would not recommend paying your own way. If the long term goal is academia I would be hesitant to even recommend going down that path, it is very hard to get jobs unless you did your PhD at an ivy or are otherwise a superstar. In the hard sciences like I (physics) was the non-academic tech sector or academic adjacent (national labs, nasa, etc) job market is reasonable and can provide a fairly wide range of nice careers.
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Cyclesafe
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Re: Paying for grad school, parents will assist, thoughts?

Post by Cyclesafe »

#5 might be tricky.

I'm not sure whether the IRS might insist on imputing interest to the loan, increasing your taxable income. That might be OK with you, however, as you would have supported your children in a manner you feel is best for them.

If all goes well after they launch, you can always gift inter vivos to satisfy the loans, rewarding their interim decision making just when they might be contemplating their own household and when you might have a better grip on your own financial endgame.
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livesoft
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Re: Paying for grad school, parents will assist, thoughts?

Post by livesoft »

We paid for our children's master degrees which were relatively inexpensive. My son's 6 years of school were less than my daughters 3 years of undergraduate. Based on their majors the outcomes of their degrees assured / guaranteed good jobs and that happened. So parental assistance is not a problem for me.

You can have your student sign a promissory note about the loan. Even if you schedule monthly payments after graduation, if they get no job you are not going to send someone to break their leg for non-payment.
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Taz
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Re: Paying for grad school, parents will assist, thoughts?

Post by Taz »

It's nice that you are doing this and fortunate that you have the funds to help. She still is going to have $120k in loans unless you forgive the $80k over time.

There are different ways to skin a cat (or get to Dublin). We provided for a 4-year public school education figuring that they would prefer that mom and dad not have to be a burden when we get old. Any private school would require loans on their part. Grad school would also be on their dime (or their employer's). Our son earned an engineering masters at flagship state school (3+2 or 4+1 depending on how you look at it). Besides helping with a prof's & PhD candidate's research, he worked 10 hours a week as a math tutoring coordinator for $20 a hour plus a full tuition waiver the last year. Remaining 529 money paid for living expenses. The research experience resulted in a fellowship and then a job at a national lab. I doubt he will go for a PhD.

So, even if she/you are okay with having some debt, I think that she should look for fellowships or research/teaching assistant positions which provide pay, and tuition related benefits, and future career experience. Not knowing the major it's tough to go beyond general comments. (edit: grammar)
Last edited by Taz on Mon May 17, 2021 7:33 am, edited 1 time in total.
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Re: Paying for grad school, parents will assist, thoughts?

Post by carolinaman »

She is only paying $10k out of $180k for grad school. That is not much skin in the game.

$120k of debt upon graduation is not trivial, and depending upon her major, she may have difficulty paying this back.

She could work part time to offset part of the cost. Or she could work for a couple of years and save some money before pursuing her graduate degree.
oldfatguy
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Re: Paying for grad school, parents will assist, thoughts?

Post by oldfatguy »

Without knowing her degree field, it' hard to know whether or not paying back $120K seems reasonable.
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Re: Paying for grad school, parents will assist, thoughts?

Post by tigermilk »

My parents helped with undergraduate. For graduate school. I had no expectation of help from mom and dad. By then I was a big boy capable off making my decisions. I weighed my options and picked the best financial decision, which was an offer of waived tuition and stipend. Housing was on me. Had I not had that offer it would have either been no grad school or understanding the debt load I would take on.

It is great that you can provide support, but there is also a life lesson packed into all this...
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Re: Paying for grad school, parents will assist, thoughts?

Post by Nate79 »

Bbddl wrote: Mon May 17, 2021 5:52 am Thoughts and suggestions please, especially about how to structure our parent loan to daughter.

Our 22 year old has graduated debt free from a four year university due to her parents ability to plan and pay. She is now moving on to grad school in a different state. The expected total expenses, tuition, fees, housing, food etc is around 180k.

We have a five step plan to maker this happen, she will have skin in the game as we are not paying the entire 180k.

1...Federal unsubsidized loans, 40k
2...remainder of 529 plan, 10k
3...her own funds, 10k
4...gifted money from parents, 40k. Does not need to repay us.
5...a loan from her parents, 80k. She will pay us back over an undetermined term. Zero interest. Not sure how to structure this portion of the plan.

We don't want her to be one of those kids starting out in a career saddled with large debt from school.

FYI, we do have a 17 year old also, that we are planning to assist also in a similar fashion.
We are doing this as we are planning for our retirement in two years.
These plans for our two kids will not have a negative impact on our retirement funds, we are somewhat fortunate. I have a good pension and we have been super savers for our entire careers.

Thank you
What is the degree? $180k for a graduate degree is very expensive to say the least.
Nowizard
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Re: Paying for grad school, parents will assist, thoughts?

Post by Nowizard »

Basically, the same scenario we used with our two sons. Initially, we told them we would pay for their college expenses and anything they earned in scholarships would be placed in an account for their use after graduation. We were somewhat surprised that this did not stimulate a higher level of focus in high school, as they each finished about 100th in a class of 500+, performance we knew did not reflect their ability so much as our allowing them to make decisions about their focus. Our older son earned a partial grant based on academic performance and transferred to a second college.
Ultimately, he received several thousand dollars as the result of college performance, which he saved, graduated Magna Cum Laude with Phi Beta Kappa. He applied grands and assistantships to his graduate training, and we also paid for amounts not covered. He now has a Ph.D. in his chosen field.

Our younger son was less academically focused in high school and graduated about 100th, went to a state college. We covered that. The financial arrangement for graduate school was that we would cover the same amount we did for our older son, including an increase for inflation covering the intervening four years. He was responsible for the rest. He enrolled in a top 15, MBA program based on GRE's and graduated. Though an MBA program was shorter than a Ph.D. program, it was more expensive. We lent him the amount we did not cover with interest. He paid it back, and we occasionally reduced the loan by relatively small amounts for birthdays or other celebrations.

This has worked out well for all concerned. We are definitely not wealthy by the standards of many people here, but both of us worked in jobs with predictable incomes of moderate levels, never reaching six figures annually. We live in a LC state, saved regularly, invested carefully and experienced no major, unexpected expenditures. Our attitude was to focus on teaching that performance deserves recognition, teaches responsibility as well as sacrifice and our early focus was more on who our children were going to be than what they were going to do vocationally.
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Re: Paying for grad school, parents will assist, thoughts?

Post by Yarlonkol12 »

Another option, many employers, or atleast all the employers I have worked for had a tution rembursement program for advanced degrees. I think the payouts were capped and she would have to do this part time while working, but just an idea
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winterfan
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Re: Paying for grad school, parents will assist, thoughts?

Post by winterfan »

I think 120K is a lot to have in loans. If this is med school or maybe a T10 law school, I might feel differently. As a parent, I wouldn't want to be the holder of 80k in loans for my child. That seems like a weird dynamic, but that's just me. I guess it all depends on what their salary will be coming out of grad school.
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Bbddl
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Re: Paying for grad school, parents will assist, thoughts?

Post by Bbddl »

A couple of more things to consider.

The overall cost of 180k includes housing also. Housing will be between 40-45k.

She is in the medical field and will very likely be making over 100k upon graduation.
InMyDreams
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Re: Paying for grad school, parents will assist, thoughts?

Post by InMyDreams »

I've never needed to pursue it, so I'm not sure the details about how it works - but my impression is that if you work for a non-profit after graduation, there is some sort of federal loan forgiveness program - but only for federal loans.

Also, what about scholarship programs? Other low cost private loans? It might be good to have her name on a loan, and you are her back up.
http://www.peointernational.org/projects. I'm sure there are others out there.
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Re: Paying for grad school, parents will assist, thoughts?

Post by Tribonian »

carolinaman wrote: Mon May 17, 2021 7:27 am She is only paying $10k out of $180k for grad school. That is not much skin in the game.
If $10k is a significant portion of her assets, it may represent all the skin she has to contribute to the game.
livesoft
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Re: Paying for grad school, parents will assist, thoughts?

Post by livesoft »

Bbddl wrote: Mon May 17, 2021 9:43 amShe is in the medical field and will very likely be making over 100k upon graduation.
My neighbor's son went to pharmacy school. Other friends had their child get a doctorate in physical therapy. My son works for a hospital after passing the state exam/certification in his field. Such programs can be expensive, but ....

... that cost for housing and food is rather ridiculous to me. If they are going to be students, then they should find cheap housing with roommates. Sure, that's my opinion but I am not afraid to share it. :) I have friends who use the PSLF program to live high on the hog because they think they will not have to pay all that money back. They could have borrowed less with more reasonable living expenses.
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dodecahedron
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Re: Paying for grad school, parents will assist, thoughts?

Post by dodecahedron »

livesoft wrote: Mon May 17, 2021 11:41 am ... that cost for housing and food is rather ridiculous to me. If they are going to be students, then they should find cheap housing with roommates. Sure, that's my opinion but I am not afraid to share it. :)
Whether the cost of housing/food is ridiculous or not depends on how many years the grad degree program runs and also the cost of living in a safe neighborhood readily accessible to campus. (40-50K total housing/food expense for a 4-year program is entirely different than for a 1-year program.)

As a female grad student in a field which sometimes required traveling back and forth to campus late at night (when mainframe turnaround times were faster! Back in dinosaur days when using a computer required a trip to campus, but in health fields it may still be necessary to travel to/fro for on-site work these days) I felt pretty circumscribed in my choice of housing locations. (Fortunately, I lucked into a modest but reasonably well-maintained rent-controlled apartment in a pretty safe neighborhood five minutes walk from the building where I needed to do my work.)

There can also be a tradeoff between housing cost and transportation cost (especially with parking and insurance costs in many places.)
Last edited by dodecahedron on Mon May 17, 2021 11:55 am, edited 2 times in total.
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gr7070
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Re: Paying for grad school, parents will assist, thoughts?

Post by gr7070 »

Bbddl wrote: Mon May 17, 2021 5:52 am We don't want her to be one of those kids starting out in a career saddled with large debt from school.
Bbddl wrote: Mon May 17, 2021 5:52 am 1...Federal unsubsidized loans, 40k
5...a loan from her parents, 80k.
Those appear incongruous???

Do they actually need grad school?

180k is awfully pricey. Is that available for less?

Will a future employer pay for it? Can they work full time in their profession while in grad school with the need for less loans? Will the school pay for it and pay them even?

There are options.
Swimmer
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Re: Paying for grad school, parents will assist, thoughts?

Post by Swimmer »

Early in our marriage, we were the recipients of a parental loan. We signed a note that carefully spelled out the terms and were meticulous about making payments on time as agreed upon.

However, there were always subtle expectations that we didn’t see coming. “Hmmm...going on vacation? You could be making additional payments on that loan.” You get the picture.

We decided we will never extend a loan to our children. If we can afford it, we give it and are grateful we’re able to do so.

I don’t think good feelings generally come from family loans despite the original intent.
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Re: Paying for grad school, parents will assist, thoughts?

Post by miamivice »

I hold two masters degrees, working on a third, and may do a PhD. My employer has paid for all of the tuition. About $120k to date.

I'm not convinced that self-pay for graduate education makes sense.
Last edited by miamivice on Mon May 17, 2021 12:12 pm, edited 1 time in total.
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Re: Paying for grad school, parents will assist, thoughts?

Post by eye.surgeon »

My daughter just finished grad school. I paid for it because I can afford it. A debt-free education, when you are in a position to provide it without compromising your personal finances, is the greatest gift you can give your kids and will help them far more than money when you're dead and they're 60. My only requirement was that the education point towards gainful employment, which it has.
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Re: Paying for grad school, parents will assist, thoughts?

Post by supalong52 »

I also don't like the idea of a parental loan with stated terms, etc. I would tell them I will pay $80k up front. Tell them to take out a federal loan for the rest ~ $120k. If you want, you can give them an additional amount upon graduation to help pay off the loan.
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Re: Paying for grad school, parents will assist, thoughts?

Post by hi_there »

OP, do you intend to leave behind at least $80k (plus interest) to your daughter in your estate? If so, then why bother loaning her the $80k now? Why not just make it a gift? The overall financial outcome is same, but daughter won't live the next X years with a weight over her head.

The type of graduate school might affect funding strategy, due to different career outcomes. However, I assume this has been decided and it won't change at this point.
neverpanic
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Re: Paying for grad school, parents will assist, thoughts?

Post by neverpanic »

carolinaman wrote: Mon May 17, 2021 7:27 am She is only paying $10k out of $180k for grad school. That is not much skin in the game.
$10K - savings
$40K - federal loan
$80K - parent loan

Everyone has different standards of judgment, but by any measure, paying >50% of one's education is significant.
Bbddl wrote: Mon May 17, 2021 5:52 am 5...a loan from her parents, 80k. She will pay us back over an undetermined term. Zero interest. Not sure how to structure this portion of the plan.
You can structure the repayment to begin once she has a job. You should plan on charging probably 1.5-2% interest and she will be able to take the student loan interest deduction.

Here's a simple article that talks about your situation: https://blog.taxact.com/family-loans-le ... ids-money/
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Re: Paying for grad school, parents will assist, thoughts?

Post by livesoft »

dodecahedron wrote: Mon May 17, 2021 11:45 am.... As a female grad student in a field which sometimes required traveling back and forth to campus late at night ....
I get all that and we insisted that our daughter did not live alone. I'm sure all the women in the duplex that she rented with them benefited from higher safety and lower living costs. Maybe we insisted on that because my spouse had similar living arrangements when she was in grad school. Same for my son and same for myself.
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Big Dog
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Re: Paying for grad school, parents will assist, thoughts?

Post by Big Dog »

Given that this is the 'medical field' I'd max out Grad Plus loans while she is in school. If she goes to work for a non-profit, such as most hospitals, after graduation, she is on the way to having the feds cancel her loans after 10 years. If she does not go into a place which qualifies for loan forgiveness, you can then help he pay them down later.

That's a pricey program. May I inquire what degree that she will be earning?
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Re: Paying for grad school, parents will assist, thoughts?

Post by Nebraska_Drought »

What degree/field? Is there not RA/TA options for her to utilize or compete for? What is the breakdown of the expenses and over how many years? Most MS degrees are 2 years while other graduate degrees will take longer, depending on what it is. How will getting a graduate degree make her more employable and when will the "break even" point be if she were to enter the workforce now vs later?

I am in academia and RA/TA positions are a given and are competitive. I also know that from my own experience, I would not have went to grad school if I had to foot the bill. The tuition waiver and stipend (along with my wife working full time) got me through. Paying for graduate school out of pocket is questionable w/out more information on the situation.
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Re: Paying for grad school, parents will assist, thoughts?

Post by Raymond »

OP, could you be more specific about the medical field your daughter will be entering?

You sent us off on a wild-goose chase when you used the generic term "grad school", which is why several posters expressed concern about self-paying for a PhD - as I understand it, if an employer or institution isn't covering the cost, the prospective student ought to reconsider that plan.
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Re: Paying for grad school, parents will assist, thoughts?

Post by Broken Man 1999 »

eye.surgeon wrote: Mon May 17, 2021 12:10 pm My daughter just finished grad school. I paid for it because I can afford it. A debt-free education, when you are in a position to provide it without compromising your personal finances, is the greatest gift you can give your kids and will help them far more than money when you're dead and they're 60. My only requirement was that the education point towards gainful employment, which it has.
Couldn't have said it better! :sharebeer

Graduate degrees allowed DDs to APPLY for jobs, one as an entry-level hire as a member of an account team, another as a career level advancement. Their career trajectories have proven the value of their graduate degrees.

We didn't want to send our daughters out into the workforce armed only with an undergraduate degree, kinda like showing up to a gunfight with a knife. Mind you, I don't honestly believe some higher level of education is always needed for some positions, but employers can use degrees as an easy hurdle to draw from a different applicant pool. Not to mention no employer has ever asked for my position on such hiring practices. :D

I will do as much as I can (along with parents and other grandparents) to have our grandchildren exit college with no student debt, armed with the credentials that will provide value to prospective employers.

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dodecahedron
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Re: Paying for grad school, parents will assist, thoughts?

Post by dodecahedron »

livesoft wrote: Mon May 17, 2021 12:42 pm
dodecahedron wrote: Mon May 17, 2021 11:45 am.... As a female grad student in a field which sometimes required traveling back and forth to campus late at night ....
I get all that and we insisted that our daughter did not live alone. I'm sure all the women in the duplex that she rented with them benefited from higher safety and lower living costs. Maybe we insisted on that because my spouse had similar living arrangements when she was in grad school. Same for my son and same for myself.
I am not sure how insisting I did not live alone would have made a difference to my safety.

I am not thinking so much of my safety in my apartment itself but rather my safety traveling back and forth alone on foot in the neighborhood between my living quarters and where I was working late at night. Just because I was living with a roommate did not mean I had company walking to and from where I was working late at night.

I am grateful that I was able to afford an apartment just a 10 minute walk from the campus building where I toiled late at night, and my entire walking route was on a well-lit street with a great deal of pedestrian traffic at all hours (pretty much 24/7.)

(That said, my parents had no say in the matter as generous fellowship support combined with rent control at the time made it possible for me to afford to pay for my graduate education without parental assistance.)
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Re: Paying for grad school, parents will assist, thoughts?

Post by Watty »

Bbddl wrote: Mon May 17, 2021 5:52 am The expected total expenses, tuition, fees, housing, food etc is around 180k.
In her calculations it is also important to also factor in the lost income while she is in grad school.

Depending on what she could earn with just an undergraduate degree that could bring the total cost up to $300K or more.

She will also have additional interest on the student loans after she graduates.

I don't know what that means in the big scheme of things but it will take awhile for her to break even financially.
Bbddl wrote: Mon May 17, 2021 5:52 am ......She will pay us back over an undetermined term. Zero interest. Not sure how to structure this portion of the plan.
It is a bit late to be figuring this out when she is already packing her bags to go to grad school. If you cannot afford to give her the money than you should really have a set payment schedule. If you do not them it can be real awkward if a few years after she graduates she decides to spend money on other things like an expensive vacation or car.
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Re: Paying for grad school, parents will assist, thoughts?

Post by Freetime76 »

Watty wrote: Mon May 17, 2021 8:19 pm
Bbddl wrote: Mon May 17, 2021 5:52 am The expected total expenses, tuition, fees, housing, food etc is around 180k.
In her calculations it is also important to also factor in the lost income while she is in grad school.

Depending on what she could earn with just an undergraduate degree that could bring the total cost up to $300K or more.

She will also have additional interest on the student loans after she graduates.

I don't know what that means in the big scheme of things but it will take awhile for her to break even financially.
Bbddl wrote: Mon May 17, 2021 5:52 am ......She will pay us back over an undetermined term. Zero interest. Not sure how to structure this portion of the plan.
It is a bit late to be figuring this out when she is already packing her bags to go to grad school. If you cannot afford to give her the money than you should really have a set payment schedule. If you do not them it can be real awkward if a few years after she graduates she decides to spend money on other things like an expensive vacation or car.
OP: You sound so proud! :sharebeer
Ok, so the horse is out of the barn, as in you’re asking about the loan, not the ROI on the unknown major and career track
(...ROI should be lost earnings, lost retirement investments, plus actual expenses tuition, lab fees, books, living *minimally*). Far a grad student: I expect to enjoy Ramen and free bagels in the break room, ok to live alone, but it better be cheap, take the bus or ride a bike). In my world, the only grad school *possibly* worth it’s salt is paid for by the program (such as the sciences) or by an employer or earned while working and cash-flowed so the student knows they really want it and precisely what it’s good for...

Ok, rant aside, I wouldn’t want the loan. I’d want to own my education which means paying for it/getting my own loans at this point (not for undergrad, that is more fundamental for many students). A parental gift would be welcomed. Heck, in grad school, a gift of toilet paper, coffee, and a pizza would be bliss. You’re never too old for your parents to buy you dinner!

If I had a student loan, a parental gift after graduation would be welcomed even more (I.e. we know I completed the program and my car probably is dying while my employed-for-the-last-however-many-years friends are making noises about when am I going to buy a house, plus the nauseating realization of basically nothing saved for retirement...and, umm, I won’t mention the B-word).

In the end your adult child will be approaching...wait how many years is this?...30? with the debt. A lot of debt. No matter how you slice it. It’s not going to be paid off quickly, unless you all go Dave Ramsey...in which case there won’t be a family loan in the first place :D ).

If you’re doing a loan anyway, please write down the terms, official-like: amount, term, when payments begin, interest rate, and keep track of the balance. Then it’s in place as a debt should it not be paid back in your lifetimes, like that never happens, right? No interest owed may have tax ramifications (you may want to gift it to her).

Ugh, I still say either give money or stay out of it. Owing mommy and/or daddy really is a bummer :oops: been there, done that...and my debt was just a few months in duration - for convenience - at a much more established point in life with great relationships all around.

For a college graduate, the amount just feels like “funny money”...no real idea of how hard it is to pay back large debts with the rest of life staring you in the face ($100K is nice, but it’s like $1M, not the stellar ride it used to be). I understand not wanting that for you kid, but they’re still going to OWE (worse, they’ll owe YOU).
Please spell out new acronyms. Thank you.
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Re: Paying for grad school, parents will assist, thoughts?

Post by Cruise »

OP: Seems like you have the money and motivation to accomplish this mission. Good for you and daughter.

How would you feel if your daughter never received her terminal degree and could not repay you? I ask because she either is going to a rigorous program which did not think enough of her qualifications to give her a full ride, or she is going to a diploma mill that specializes in separating students from their parents’ money. I know of several of the latter in the “medical field” whose students have a low licensure exam pass rate.

I hope your daughter and you will be pleased with the outcome of her graduate education.
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Re: Paying for grad school, parents will assist, thoughts?

Post by dogagility »

Bbddl wrote: Mon May 17, 2021 9:43 am A couple of more things to consider.

The overall cost of 180k includes housing also. Housing will be between 40-45k.

She is in the medical field and will very likely be making over 100k upon graduation.
Don't know what field this is, but it may be something similar to an Anesthesiology Assistant program (or other physician assistant programs). Very easy to get employment north of 100K starting with some of these degrees.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
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