College loan advice?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
UncleBogle
Posts: 92
Joined: Sun Jul 15, 2018 7:53 pm

College loan advice?

Post by UncleBogle » Tue Oct 09, 2018 5:28 am

What are folks doing for in regards to paying college tuition when income precludes allowing their child to qualify for loans?

We have saved for her education, and have paid for her first year of college, but want make sure that she has some skin in the game.. Though she will be working during college, her earnings will be "peanuts" compared to the tuition.

My feeling has been that you can always take out a loan for college, but you can't get a loan for retirement. But now it seems that loans are not available.

Any suggestions?

strafe
Posts: 849
Joined: Sat Mar 03, 2007 12:49 pm

Re: College loan advice?

Post by strafe » Tue Oct 09, 2018 5:47 am

Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.

livesoft
Posts: 63093
Joined: Thu Mar 01, 2007 8:00 pm

Re: College loan advice?

Post by livesoft » Tue Oct 09, 2018 5:59 am

401(k) loan
HELOC
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
vineviz
Posts: 2366
Joined: Tue May 15, 2018 1:55 pm

Re: College loan advice?

Post by vineviz » Tue Oct 09, 2018 6:09 am

strafe wrote:
Tue Oct 09, 2018 5:47 am
Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.
+1
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Grt2bOutdoors
Posts: 19546
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: College loan advice?

Post by Grt2bOutdoors » Tue Oct 09, 2018 6:10 am

She’s working during college plus studying - imo, as someone who did the same in college and grad school, your child has plenty of “skin” in the game. She may be competing against those whose parents gave them a free ride and don’t need or want to work. If you have the means, pay for school but don’t think for a second that a loan signifys having something “invested”, all it means is you have a larger burden and a portion of it is being paid away instead of towards oneself. The banks are happy to take your money, but why let them? What have they done to “earn” it? A loan is a shackle, life comes with plenty of hurdles, why add one more?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 19546
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: College loan advice?

Post by Grt2bOutdoors » Tue Oct 09, 2018 6:14 am

vineviz wrote:
Tue Oct 09, 2018 6:09 am
strafe wrote:
Tue Oct 09, 2018 5:47 am
Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.
+1
That would require the OP to co-sign or effectively guarantee the loan. OP wants to avoid that because in keeping with the line “you can have a loan for college but you can’t get one for retirement”. A guarantee requires the OP to pay up if loan goes bad, that may affect retirement plans.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

SchruteB&B
Posts: 50
Joined: Mon Jul 02, 2018 7:48 am

Re: College loan advice?

Post by SchruteB&B » Tue Oct 09, 2018 6:57 am

Grt2bOutdoors wrote:
Tue Oct 09, 2018 6:14 am
vineviz wrote:
Tue Oct 09, 2018 6:09 am
strafe wrote:
Tue Oct 09, 2018 5:47 am
Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.
+1
That would require the OP to co-sign or effectively guarantee the loan. OP wants to avoid that because in keeping with the line “you can have a loan for college but you can’t get one for retirement”. A guarantee requires the OP to pay up if loan goes bad, that may affect retirement plans.
My understanding is that the student can get the federal loan on their own, no cosigner. But only $5500 per year. Beyond that, yes, students will generally need cosigner.

User avatar
vineviz
Posts: 2366
Joined: Tue May 15, 2018 1:55 pm

Re: College loan advice?

Post by vineviz » Tue Oct 09, 2018 7:13 am

Grt2bOutdoors wrote:
Tue Oct 09, 2018 6:14 am
vineviz wrote:
Tue Oct 09, 2018 6:09 am
strafe wrote:
Tue Oct 09, 2018 5:47 am
Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.
+1
That would require the OP to co-sign or effectively guarantee the loan. OP wants to avoid that because in keeping with the line “you can have a loan for college but you can’t get one for retirement”. A guarantee requires the OP to pay up if loan goes bad, that may affect retirement plans.
I guess I'm assuming the OP was being realistic: they want to buy something (a college education for their child) for which they can't afford to pay cash. As with any other purchase, that leaves a tradeoff of deciding between avoiding the purchase or taking on debt and I suspect the OP knows this.

Direct unsubsidized federal loans don't require a co-signer, as others mentioned.. PLUS loans are loans that the parent takes out themselves, so obviously parents are on the hook for those. Either way, though, the family DOES qualify for student loans, even if they have no FAFSA-based financial need.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

NextMil
Posts: 525
Joined: Wed Dec 13, 2017 12:33 pm

Re: College loan advice?

Post by NextMil » Tue Oct 09, 2018 7:18 am

Grt2bOutdoors wrote:
Tue Oct 09, 2018 6:10 am
She’s working during college plus studying - imo, as someone who did the same in college and grad school, your child has plenty of “skin” in the game. She may be competing against those whose parents gave them a free ride and don’t need or want to work. If you have the means, pay for school but don’t think for a second that a loan signifys having something “invested”, all it means is you have a larger burden and a portion of it is being paid away instead of towards oneself. The banks are happy to take your money, but why let them? What have they done to “earn” it? A loan is a shackle, life comes with plenty of hurdles, why add one more?
+1

SimonJester
Posts: 1691
Joined: Tue Aug 16, 2011 12:39 pm

Re: College loan advice?

Post by SimonJester » Tue Oct 09, 2018 7:44 am

NextMil wrote:
Tue Oct 09, 2018 7:18 am
Grt2bOutdoors wrote:
Tue Oct 09, 2018 6:10 am
She’s working during college plus studying - imo, as someone who did the same in college and grad school, your child has plenty of “skin” in the game. She may be competing against those whose parents gave them a free ride and don’t need or want to work. If you have the means, pay for school but don’t think for a second that a loan signifys having something “invested”, all it means is you have a larger burden and a portion of it is being paid away instead of towards oneself. The banks are happy to take your money, but why let them? What have they done to “earn” it? A loan is a shackle, life comes with plenty of hurdles, why add one more?
+1
I could not agree more with this.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

smitcat
Posts: 2126
Joined: Mon Nov 07, 2016 10:51 am

Re: College loan advice?

Post by smitcat » Tue Oct 09, 2018 8:04 am

UncleBogle wrote:
Tue Oct 09, 2018 5:28 am
What are folks doing for in regards to paying college tuition when income precludes allowing their child to qualify for loans?

We have saved for her education, and have paid for her first year of college, but want make sure that she has some skin in the game.. Though she will be working during college, her earnings will be "peanuts" compared to the tuition.

My feeling has been that you can always take out a loan for college, but you can't get a loan for retirement. But now it seems that loans are not available.

Any suggestions?
What ideas/options have the college admissions folks supllied to her?

Jack FFR1846
Posts: 8122
Joined: Tue Dec 31, 2013 7:05 am

Re: College loan advice?

Post by Jack FFR1846 » Tue Oct 09, 2018 8:17 am

Stafford loans.

$5500 first 2 years.
then $6500
then $7500
Bogle: Smart Beta is stupid

StealthRabbit
Posts: 139
Joined: Sat Jun 13, 2009 1:25 am

Re: College loan advice?

Post by StealthRabbit » Tue Oct 09, 2018 11:16 am

Personal preference:

1) I consider 18 YO to be an adult,
2) It is very ez for students to get loans, usually interest deferred of free until graduation. (and puts their 'skin-in-the-game' (under your guidance / ONLY for EDU, not for living expenses / frills)
3) You can always choose to repay AFTER they complete their studies (keeps your funds WORKING while they are in school)
4) There are other ways to fund edu, and there are some VERY excellent CHEAP U's (Wyoming as a resident...<$6k) Get a J-O-B (and experience) for a yr before college (Lots of $80k + energy jobs in WY!)
5) Even Walmart is subsidizing employee's edu... VA medical, Military
6) International options.

otherwise... plan early. (many ways)
I matched my kids wages 100% into their Roths from age 12. = ~ $16k by age 18 (not touched / considered by FAFSA)
Our state offers FREE FT college instead of sitting around on your duff in High School. (if you pass a college entrance examine grade 9 - 10)
https://en.wikipedia.org/wiki/Running_Start

Nate79
Posts: 3756
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: College loan advice?

Post by Nate79 » Tue Oct 09, 2018 11:29 am

A student taking out loans is not "skin" in the game. It is the exact opposite. Most college students have no clue how much they are taking out in loans, how much their school costs, and when they get out they get hit with reality. So much for skin in the game. Skin in the game would be working and directly paying the bills for college as well as sitting down every semester to discuss the financial situation of paying for college. Written amounts for each semester, totals, and what it's going to take to pay off the student loans.

Better yet, stay out of debt.

Jack FFR1846
Posts: 8122
Joined: Tue Dec 31, 2013 7:05 am

Re: College loan advice?

Post by Jack FFR1846 » Tue Oct 09, 2018 11:31 am

@stealthrabit: Besides Stafford, what loans can a student get WITHOUT a cosigner in any state? I ask because we have looked at banks, credit unions and a number of student loan providers and found none.
Bogle: Smart Beta is stupid

SchruteB&B
Posts: 50
Joined: Mon Jul 02, 2018 7:48 am

Re: College loan advice?

Post by SchruteB&B » Tue Oct 09, 2018 11:36 am

Jack FFR1846 wrote:
Tue Oct 09, 2018 11:31 am
@stealthrabit: Besides Stafford, what loans can a student get WITHOUT a cosigner in any state? I ask because we have looked at banks, credit unions and a number of student loan providers and found none.
Curious as well. I have not seen that it is easy for an 18 year old to acquire loans without a cosigner.

StealthRabbit
Posts: 139
Joined: Sat Jun 13, 2009 1:25 am

Re: College loan advice?

Post by StealthRabbit » Tue Oct 09, 2018 12:36 pm

Jack FFR1846 wrote:
Tue Oct 09, 2018 11:31 am
@stealthrabit: Besides Stafford, what loans can a student get WITHOUT a cosigner in any state? I ask because we have looked at banks, credit unions and a number of student loan providers and found none.
Ours used Stafford (which was adequate for their needs)
They also had some availability of State U specific funding. + work study + jobs (during school and summers)


High risk, high pay in summers - ~$30k - $40k (Alaska Fishing (% of catch (more risky than salary) / wildland firefighting - skilled certifications / fire engine bosses / EMT / paramedics - they did this while in HS as sponsored interns)

Kids lived at Fire Stations as 'resident volunteers' during college. (Free housing + a little pay + a LOT of interruptions (700+ calls / yr)

StealthRabbit
Posts: 139
Joined: Sat Jun 13, 2009 1:25 am

Re: College loan advice?

Post by StealthRabbit » Tue Oct 09, 2018 12:58 pm

Nate79 wrote:
Tue Oct 09, 2018 11:29 am
A student taking out loans is not "skin" in the game. It is the exact opposite. Most college students have no clue how much they are taking out in loans, how much their school costs, and when they get out they get hit with reality. So much for skin in the game. Skin in the game would be working and directly paying the bills for college as well as sitting down every semester to discuss the financial situation of paying for college. Written amounts for each semester, totals, and what it's going to take to pay off the student loans.

Better yet, stay out of debt.

Ah yes... differing of perspectives. (That is a good thing)

"Personal preference:"


Our kids were home schooled + farm projects since age 8-10, so had businesses (including loans) LONG before college, so were well aware of debt (they also had built their own homes (including mortgages prior to college). College... as in age 16 in WA State. (instead of HS)

Our kids continually expressed how they held U and profs to a much higher std than their peers, because our KIDS were paying 100% for every class, and they were wasting 100% of the "butt-time' in college (away from their businesses). (That is "SKIN - in -the-game" (and bucks (even more costly TIME / opportunity costs)) )

I'm not too worried.. our kids were well respected by their U's and ambassadors / reps for their colleges and frequently requested speakers / advocates for outside events / parent (student) visits and tours....

10+ yrs beyond college, the kids still are community servants, / volunteers, as well as making well in their own way, homes, leadership in jobs / own companies... (including still paying on their 2.7% consolidated student loans :mrgreen: ). They had made over 500% on equivalent to college loan amounts on stock trades during college. Both are very prudent bogleheads, well on their way to FIRE (as they have been since age 12).

But... they are NOT impressed that their parents made (?) them pay their own college..

Too bad... I consider we 'equipped' them well enough to do so :wink:

(Moreso, they were 'disillusioned' by thinking college was important to financial / career success. They are very CLEARY aware (now)... that is not the case, and was not a great use of their time OR money) I went back for another master's program while the kids were in college. I concur that college certainly is NOT the learning / valuable experience is used to be. (Largely watered down by 'entitled' and inexperienced schools, profs, and students)

Jack FFR1846
Posts: 8122
Joined: Tue Dec 31, 2013 7:05 am

Re: College loan advice?

Post by Jack FFR1846 » Tue Oct 09, 2018 1:20 pm

StealthRabbit wrote:
Tue Oct 09, 2018 12:36 pm
Jack FFR1846 wrote:
Tue Oct 09, 2018 11:31 am
@stealthrabit: Besides Stafford, what loans can a student get WITHOUT a cosigner in any state? I ask because we have looked at banks, credit unions and a number of student loan providers and found none.
Ours used Stafford (which was adequate for their needs)
They also had some availability of State U specific funding. + work study + jobs (during school and summers)


High risk, high pay in summers - ~$30k - $40k (Alaska Fishing (% of catch (more risky than salary) / wildland firefighting - skilled certifications / fire engine bosses / EMT / paramedics - they did this while in HS as sponsored interns)

Kids lived at Fire Stations as 'resident volunteers' during college. (Free housing + a little pay + a LOT of interruptions (700+ calls / yr)
Ok, I get working and my son had done that along with a very good major specific well paid internship over the summer. But as I asked, we have found zero loans he can take by himself without a cosigner except for Staffords. If adding a cosigner, he could buy a Lamborghini. I'll also add that work-study is "need based federal financial aid" which we don't qualify for.
Bogle: Smart Beta is stupid

sco
Posts: 826
Joined: Thu Sep 24, 2015 2:28 pm

Re: College loan advice?

Post by sco » Tue Oct 09, 2018 11:45 pm

Jack FFR1846 wrote:
Tue Oct 09, 2018 1:20 pm
StealthRabbit wrote:
Tue Oct 09, 2018 12:36 pm
Jack FFR1846 wrote:
Tue Oct 09, 2018 11:31 am
@stealthrabit: Besides Stafford, what loans can a student get WITHOUT a cosigner in any state? I ask because we have looked at banks, credit unions and a number of student loan providers and found none.
Ours used Stafford (which was adequate for their needs)
They also had some availability of State U specific funding. + work study + jobs (during school and summers)


High risk, high pay in summers - ~$30k - $40k (Alaska Fishing (% of catch (more risky than salary) / wildland firefighting - skilled certifications / fire engine bosses / EMT / paramedics - they did this while in HS as sponsored interns)

Kids lived at Fire Stations as 'resident volunteers' during college. (Free housing + a little pay + a LOT of interruptions (700+ calls / yr)
Ok, I get working and my son had done that along with a very good major specific well paid internship over the summer. But as I asked, we have found zero loans he can take by himself without a cosigner except for Staffords. If adding a cosigner, he could buy a Lamborghini. I'll also add that work-study is "need based federal financial aid" which we don't qualify for.
Why would a bank loan this money to your student with no idea if they would even finish school, pay it back, or even get a better job?
That's why they are asking for the parents signature.

OnTrack2020
Posts: 301
Joined: Mon Mar 20, 2017 10:24 am

Re: College loan advice?

Post by OnTrack2020 » Wed Oct 10, 2018 6:36 am

Well, this is what we did. We had some, but not much, money saved up for college--around $24,000. Our son wanted to attend a private university. We gave him our blessing, and I really struggled with how we were going to pay for it; however, with scholarships it brought the price close to what it would cost at our state university. He is receiving around $20k per year in scholarship money

So, we basically divided the $24k over the 4-year time period of college, so $6k per year and then found/are finding a way to come up with the rest.

His freshman year, $6k + $5.5k loan (which we did not have to co-sign), he worked during previous summer, sold some stock, work-study.

Sophomore year, $6k + $0 loan, he worked during previous summer, bonus money from previous spring, previous year-end dividend money, work-study.

Junior year, $6k + $0 loan, he worked during the summer but didn't make very much, bonus money from previous spring, work-study, some previous year-end dividend money, and me putting aside money every payday to go toward tuition.

We will follow the same "routine" for his senior year. After his freshman year, we didn't want him to take out any more loans. At the time, we just didn't know how things were going to work out financially for 4 years--that's why we had him take out a loan. Once we figured out to spread the money out over the 4-year period, it became a little easier to see how things would work and made tuition more manageable.

We have another son in college at a community college, but he lives on-campus about an hour from home. We probably had around $20k or so, maybe a little less, saved up for him. We are able to pay his tuition, room, and board without stressing too much. But even at a community college, if living on-campus, the expenses add up quickly. But we do believe it's been beneficial for him, and didn't want him to have to commute during the winter months.

User avatar
GoldStar
Posts: 650
Joined: Wed May 23, 2018 10:59 am

Re: College loan advice?

Post by GoldStar » Wed Oct 10, 2018 6:53 am

strafe wrote:
Tue Oct 09, 2018 5:47 am
Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.
This is my understanding as well. Provided you fill out FAFSA you will be offered an unsubsidized ($6K I think) loan. Interest starts accruing immediately unlike subsidized loan.
Personally- I agree with others that state a loan isn't really skin in the game.
I also hate the "you can borrow for college but not for retirement" mantra- a lot of folks who can afford to save for both college and retirement simultaneously use this as an excuse and miss out on 529 tax advantaged savings.

Jack FFR1846
Posts: 8122
Joined: Tue Dec 31, 2013 7:05 am

Re: College loan advice?

Post by Jack FFR1846 » Wed Oct 10, 2018 7:41 am

I disagree that the student having a loan in their name only is not skin in the game. Why? That was me, although not only loans but paying my way 100%. I always had in mind that if I didn't pass a class, not only would I have to take it again, but I'd have to pay for it again. I got mostly A's.

In my previous student life, I pretty much loafed through high school and community college. I was smart enough to be a solid B student in high school and in community college, where I was more interested in my job at the ski/bike shop than my studies where tuition was $200 per semester.

I'm going to continue pressing the question.....What loans besides Stafford can a student get without a cosigner? I suggest none. A PLUS loan is the parent's loan, not the student's. My son receives Stafford loans, but $7500 doesn't pay a $67,000 full boat cost of attendance.
Bogle: Smart Beta is stupid

NotWhoYouThink
Posts: 2101
Joined: Fri Dec 26, 2014 4:19 pm

Re: College loan advice?

Post by NotWhoYouThink » Wed Oct 10, 2018 8:20 am

Agree with above observations that students can only get federal loans (5500/5500/6500/7500) without co-signers. Unless there is demonstrated family financial need and Perkins loans become an option, but OP indicates that is not the case here.

Probably having students take out a loan or not makes more difference to the parent's feelings about whether they were adequately tough on their kids than it does to kids' motivation or success. Stafford loans are affordable to pay back if you graduate and get a job. In our case, we worry about how much we should support/help/interfere in their finances post graduation, so having them take out loans when we had the money to pay and they were working hard anyway didn't make sense to us.

The baffling thing about this thread is the thought that someone sent their kid to college, paid for the first year, and then started considering changing the deal. Seems like if you are going to make your kid pay for college you should let her know that BEFORE SHE SELECTS A COLLEGE, not spring a change order on her after the choice has been made and the coursework started. So what's really going on here?

sco
Posts: 826
Joined: Thu Sep 24, 2015 2:28 pm

Re: College loan advice?

Post by sco » Wed Oct 10, 2018 9:14 pm

If there is a concern about cashflow, I see no problem having the student take out their own 5500/6500/7500 loans. If the parents then find out that they can pull it together adequately, nothing keeps them from paying the loan off. Do you lose a little in the 1% origination and possibly some interest? Sure. But If you are just nervous about not knowing exactly what your budget will look like when they leave the nest, it seems like a reasonable option.

Everyone says it is cheaper when they move out, and so Room/Board really isn't a huge change. I have my doubts but would be happy if this was the case.

Remember you can run the money through a 529 that you pay directly, but not money that you use to pay off a students loan.
Consider max 529 contributions, and then immediately paying tuition out of the 529 if available in your plan, and you have state taxes.

User avatar
whodidntante
Posts: 4339
Joined: Thu Jan 21, 2016 11:11 pm

Re: College loan advice?

Post by whodidntante » Wed Oct 10, 2018 9:27 pm

You can go to SoFi or your bank and take out a nice, juicy life lesson. Make sure to tell them about your enormous income. I bet they won't have a problem with it.

User avatar
teen persuasion
Posts: 653
Joined: Sun Oct 25, 2015 1:43 pm

Re: College loan advice?

Post by teen persuasion » Thu Oct 11, 2018 7:06 am

sco wrote:
Wed Oct 10, 2018 9:14 pm
If there is a concern about cashflow, I see no problem having the student take out their own 5500/6500/7500 loans. If the parents then find out that they can pull it together adequately, nothing keeps them from paying the loan off. Do you lose a little in the 1% origination and possibly some interest? Sure. But If you are just nervous about not knowing exactly what your budget will look like when they leave the nest, it seems like a reasonable option.

Everyone says it is cheaper when they move out, and so Room/Board really isn't a huge change. I have my doubts but would be happy if this was the case.


Remember you can run the money through a 529 that you pay directly, but not money that you use to pay off a students loan.
Consider max 529 contributions, and then immediately paying tuition out of the 529 if available in your plan, and you have state taxes.
I'd say you are right to be skeptical. Room and board were $12k/ yr when DD1 started college in 2008; it's approaching $15k with DS4 now. That's only for the 8 months of a standard fall/spring academic year. There's no way I save $1500+/month on food and utilities while they are on campus. Maybe $100.

HereToLearn
Posts: 218
Joined: Sat Mar 17, 2018 5:53 pm

Re: College loan advice?

Post by HereToLearn » Thu Oct 11, 2018 4:32 pm

teen persuasion wrote:
Thu Oct 11, 2018 7:06 am
sco wrote:
Wed Oct 10, 2018 9:14 pm
If there is a concern about cashflow, I see no problem having the student take out their own 5500/6500/7500 loans. If the parents then find out that they can pull it together adequately, nothing keeps them from paying the loan off. Do you lose a little in the 1% origination and possibly some interest? Sure. But If you are just nervous about not knowing exactly what your budget will look like when they leave the nest, it seems like a reasonable option.

Everyone says it is cheaper when they move out, and so Room/Board really isn't a huge change. I have my doubts but would be happy if this was the case.


Remember you can run the money through a 529 that you pay directly, but not money that you use to pay off a students loan.
Consider max 529 contributions, and then immediately paying tuition out of the 529 if available in your plan, and you have state taxes.
I'd say you are right to be skeptical. Room and board were $12k/ yr when DD1 started college in 2008; it's approaching $15k with DS4 now. That's only for the 8 months of a standard fall/spring academic year. There's no way I save $1500+/month on food and utilities while they are on campus. Maybe $100.
You are absolutely correct!

$16K R&B this year. The water & corresponding sewer bills decline a bit when the children are away at school, the food bill definitely drops, car insurance & gas decline, but the total savings are NOWHERE near the cost of R&B.

megabad
Posts: 828
Joined: Fri Jun 01, 2018 4:00 pm

Re: College loan advice?

Post by megabad » Thu Oct 11, 2018 5:08 pm

UncleBogle wrote:
Tue Oct 09, 2018 5:28 am
What are folks doing for in regards to paying college tuition when income precludes allowing their child to qualify for loans?

We have saved for her education, and have paid for her first year of college, but want make sure that she has some skin in the game.. Though she will be working during college, her earnings will be "peanuts" compared to the tuition.

My feeling has been that you can always take out a loan for college, but you can't get a loan for retirement. But now it seems that loans are not available.

Any suggestions?
The way you phrased your OP implies that this is a skin in the game question and not a financial one. My suggestion to getting a child to have "skin in the game" is the same for a 20 year old as it is for a 12 year old---set boundaries and then let the child be free to experience the consequences. When child is 12--"I expect you to stop playing on your phone and do your homework or I will take your phone away". When child is 20--"I expect you to finish college in 4 years or Mommy and Daddy will run out of money and you will get no more". Alternatively--"I expect you to use your "peanuts" to buy books and in return, I will cover the rest". By the time child is in college, this should be enough skin in the game for them to get the point, but otherwise, they will learn very quickly.
Last edited by megabad on Thu Oct 11, 2018 5:10 pm, edited 1 time in total.

smitcat
Posts: 2126
Joined: Mon Nov 07, 2016 10:51 am

Re: College loan advice?

Post by smitcat » Thu Oct 11, 2018 5:09 pm

HereToLearn wrote:
Thu Oct 11, 2018 4:32 pm
teen persuasion wrote:
Thu Oct 11, 2018 7:06 am
sco wrote:
Wed Oct 10, 2018 9:14 pm
If there is a concern about cashflow, I see no problem having the student take out their own 5500/6500/7500 loans. If the parents then find out that they can pull it together adequately, nothing keeps them from paying the loan off. Do you lose a little in the 1% origination and possibly some interest? Sure. But If you are just nervous about not knowing exactly what your budget will look like when they leave the nest, it seems like a reasonable option.

Everyone says it is cheaper when they move out, and so Room/Board really isn't a huge change. I have my doubts but would be happy if this was the case.


Remember you can run the money through a 529 that you pay directly, but not money that you use to pay off a students loan.
Consider max 529 contributions, and then immediately paying tuition out of the 529 if available in your plan, and you have state taxes.
I'd say you are right to be skeptical. Room and board were $12k/ yr when DD1 started college in 2008; it's approaching $15k with DS4 now. That's only for the 8 months of a standard fall/spring academic year. There's no way I save $1500+/month on food and utilities while they are on campus. Maybe $100.
You are absolutely correct!

$16K R&B this year. The water & corresponding sewer bills decline a bit when the children are away at school, the food bill definitely drops, car insurance & gas decline, but the total savings are NOWHERE near the cost of R&B.
One potential solution if for your son/daughter to apply to be an RA starting with the second year at school. They will need to start inquiring and making their desires known well before the next year begins.

sco
Posts: 826
Joined: Thu Sep 24, 2015 2:28 pm

Re: College loan advice?

Post by sco » Thu Oct 11, 2018 11:54 pm

teen persuasion wrote:
Thu Oct 11, 2018 7:06 am
sco wrote:
Wed Oct 10, 2018 9:14 pm
If there is a concern about cashflow, I see no problem having the student take out their own 5500/6500/7500 loans. If the parents then find out that they can pull it together adequately, nothing keeps them from paying the loan off. Do you lose a little in the 1% origination and possibly some interest? Sure. But If you are just nervous about not knowing exactly what your budget will look like when they leave the nest, it seems like a reasonable option.

Everyone says it is cheaper when they move out, and so Room/Board really isn't a huge change. I have my doubts but would be happy if this was the case.


Remember you can run the money through a 529 that you pay directly, but not money that you use to pay off a students loan.
Consider max 529 contributions, and then immediately paying tuition out of the 529 if available in your plan, and you have state taxes.
I'd say you are right to be skeptical. Room and board were $12k/ yr when DD1 started college in 2008; it's approaching $15k with DS4 now. That's only for the 8 months of a standard fall/spring academic year. There's no way I save $1500+/month on food and utilities while they are on campus. Maybe $100.
Good to hear my suspicions are correct? Although I would prefer to be incorrect.

R&B is such a scam. Wouldn't we all love to own a 600 room unit, and charge people 4k for 3 months, for a shared room. And more if they need a random week here or there.

User avatar
teen persuasion
Posts: 653
Joined: Sun Oct 25, 2015 1:43 pm

Re: College loan advice?

Post by teen persuasion » Fri Oct 12, 2018 6:59 am

Yep.

I will say every school has different policies, some better than others. One school required every freshman to live on campus, even if their parents lived nearby. Some have the same price for all dorms, regardless of era/conditions/size/amenities (no cheaper options). Others have a flexible variety of housing options (weekly rates over the summer due to short term classes, off campus apartments with no board requirements). Some had more flexible board options: if you didn't use your full allotment of weekly meals, you could cash them in weekly. Others are less flexible: lose any unused meals, and the price difference between 14 meals per week vs 19 per week is only $50 a semester (no real savings option, encourages taking the most expensive choice even if it's wasteful).

My kids have generally all eventually realized that getting out of traditional dorms and into an apartment with friends was the best option. Buying their own food and cooking was much cheaper than board, and for those that could choose a non-campus apartment the cost of even a large apartment split 5 or so ways was less expensive than a standard college per person room fee. And they didn't have to move out several times a year.

DS4 did a stint as an Orientation team leader one summer. That came with free housing and board for the summer, at least while he was actively involved. He did have to move in and out of dorms on the fringes of the semesters, though.

strafe
Posts: 849
Joined: Sat Mar 03, 2007 12:49 pm

Re: College loan advice?

Post by strafe » Fri Oct 12, 2018 6:09 pm

Grt2bOutdoors wrote:
Tue Oct 09, 2018 6:14 am
strafe wrote:
Tue Oct 09, 2018 5:47 am
Are you certain about not qualifying for loans?
Neither the federal unsubsidized direct loan nor the parent PLUS loan is need-based. You can obtain these loans regardless of the expected family contribution (EFC) amount.


That would require the OP to co-sign or effectively guarantee the loan. OP wants to avoid that because in keeping with the line “you can have a loan for college but you can’t get one for retirement”. A guarantee requires the OP to pay up if loan goes bad, that may affect retirement plans.
Federal Direct Unsubsidized loans are made to the student and do not involve a co-signer.

UncleBogle
Posts: 92
Joined: Sun Jul 15, 2018 7:53 pm

Re: College loan advice?

Post by UncleBogle » Fri Oct 12, 2018 10:18 pm

NotWhoYouThink wrote:
Wed Oct 10, 2018 8:20 am
Agree with above observations that students can only get federal loans (5500/5500/6500/7500) without co-signers. Unless there is demonstrated family financial need and Perkins loans become an option, but OP indicates that is not the case here.

Probably having students take out a loan or not makes more difference to the parent's feelings about whether they were adequately tough on their kids than it does to kids' motivation or success. Stafford loans are affordable to pay back if you graduate and get a job. In our case, we worry about how much we should support/help/interfere in their finances post graduation, so having them take out loans when we had the money to pay and they were working hard anyway didn't make sense to us.

The baffling thing about this thread is the thought that someone sent their kid to college, paid for the first year, and then started considering changing the deal. Seems like if you are going to make your kid pay for college you should let her know that BEFORE SHE SELECTS A COLLEGE, not spring a change order on her after the choice has been made and the coursework started. So what's really going on here?
Don't be baffled - I'd be happy to explain. I make a good income(thank God) and unless something catastrophic were to occur, I can pay for her entire education. But the question is: Should a parent pay for a child's entire education?

This is a personal choice, and as you can see in the thread, there are differing opinions. Some feel that kids should not have to pay anything, others feel that it shows some financial responsibility on the part of the child. Everyone raises their children differently.

Similar to most folks that I come across, I contributed to my own education. I never saw this as "unfair" or a "change of rules", it was part of being a family and pitching in. Just like doing chores, or eating your lima beans, I looked at it as shouldering a little bit of the burden for the family and showing some respect to the folks that payed for virtually everything else in my life.

But I digress. Although our daughter is a straight A student, with many accolades, she received no scholarship from her university. She didn't play sports and didn't fit the demographics for the scholarships they were offering. As suggested by the admissions office, she put in the application for student aid/loans - it was no surprise that all that was offered was a Stafford loan.

My wife and I had sat our daughter down previously and explained that for the first year of college, we would be taking care of the full amount, however during the subsequent years, she would be taking out Stafford loans and "kicking in" a percentage of her summer job earnings to help pay for college. So there was no "rule changing", she just wasn't going to get a free ride.

UncleBogle
Posts: 92
Joined: Sun Jul 15, 2018 7:53 pm

Re: College loan advice?

Post by UncleBogle » Fri Oct 12, 2018 10:27 pm

smitcat wrote:
Thu Oct 11, 2018 5:09 pm
HereToLearn wrote:
Thu Oct 11, 2018 4:32 pm
teen persuasion wrote:
Thu Oct 11, 2018 7:06 am
sco wrote:
Wed Oct 10, 2018 9:14 pm
If there is a concern about cashflow, I see no problem having the student take out their own 5500/6500/7500 loans. If the parents then find out that they can pull it together adequately, nothing keeps them from paying the loan off. Do you lose a little in the 1% origination and possibly some interest? Sure. But If you are just nervous about not knowing exactly what your budget will look like when they leave the nest, it seems like a reasonable option.

Everyone says it is cheaper when they move out, and so Room/Board really isn't a huge change. I have my doubts but would be happy if this was the case.


Remember you can run the money through a 529 that you pay directly, but not money that you use to pay off a students loan.
Consider max 529 contributions, and then immediately paying tuition out of the 529 if available in your plan, and you have state taxes.
I'd say you are right to be skeptical. Room and board were $12k/ yr when DD1 started college in 2008; it's approaching $15k with DS4 now. That's only for the 8 months of a standard fall/spring academic year. There's no way I save $1500+/month on food and utilities while they are on campus. Maybe $100.
You are absolutely correct!

$16K R&B this year. The water & corresponding sewer bills decline a bit when the children are away at school, the food bill definitely drops, car insurance & gas decline, but the total savings are NOWHERE near the cost of R&B.
One potential solution if for your son/daughter to apply to be an RA starting with the second year at school. They will need to start inquiring and making their desires known well before the next year begins.
It's so Ironic that you mention that. When we first sat down with our daughter, this was her plan (to apply for an RA position). She will be working a portion of the summer in order to achieve this. Hopefully, she will be selected. Thanks for putting that out there for others too!

sco
Posts: 826
Joined: Thu Sep 24, 2015 2:28 pm

Re: College loan advice?

Post by sco » Fri Oct 12, 2018 10:58 pm

UncleBogle wrote:
Fri Oct 12, 2018 10:18 pm
NotWhoYouThink wrote:
Wed Oct 10, 2018 8:20 am
Agree with above observations that students can only get federal loans (5500/5500/6500/7500) without co-signers. Unless there is demonstrated family financial need and Perkins loans become an option, but OP indicates that is not the case here.

Probably having students take out a loan or not makes more difference to the parent's feelings about whether they were adequately tough on their kids than it does to kids' motivation or success. Stafford loans are affordable to pay back if you graduate and get a job. In our case, we worry about how much we should support/help/interfere in their finances post graduation, so having them take out loans when we had the money to pay and they were working hard anyway didn't make sense to us.

The baffling thing about this thread is the thought that someone sent their kid to college, paid for the first year, and then started considering changing the deal. Seems like if you are going to make your kid pay for college you should let her know that BEFORE SHE SELECTS A COLLEGE, not spring a change order on her after the choice has been made and the coursework started. So what's really going on here?
Don't be baffled - I'd be happy to explain. I make a good income(thank God) and unless something catastrophic were to occur, I can pay for her entire education. But the question is: Should a parent pay for a child's entire education?

This is a personal choice, and as you can see in the thread, there are differing opinions. Some feel that kids should not have to pay anything, others feel that it shows some financial responsibility on the part of the child. Everyone raises their children differently.

Similar to most folks that I come across, I contributed to my own education. I never saw this as "unfair" or a "change of rules", it was part of being a family and pitching in. Just like doing chores, or eating your lima beans, I looked at it as shouldering a little bit of the burden for the family and showing some respect to the folks that payed for virtually everything else in my life.

But I digress. Although our daughter is a straight A student, with many accolades, she received no scholarship from her university. She didn't play sports and didn't fit the demographics for the scholarships they were offering. As suggested by the admissions office, she put in the application for student aid/loans - it was no surprise that all that was offered was a Stafford loan.

My wife and I had sat our daughter down previously and explained that for the first year of college, we would be taking care of the full amount, however during the subsequent years, she would be taking out Stafford loans and "kicking in" a percentage of her summer job earnings to help pay for college. So there was no "rule changing", she just wasn't going to get a free ride.
So she is on the hook for $5500 (is the 2nd year 5500?) 6500 and 7500 + kicking in some of her summer earnings? 20k Appox + summer earnings (which would probably go towards spending money, so it saves you money even if it doesn't go straight to the school)...

Sounds completely reasonable to me, and it sounds like you've set the expectation.
You know your child best. A 20k stafford loan is hardly the end of the world, with a little discipline. And who knows, if she pulls her own weight and lands a good job out of college. Nothing keeps you from just paying off part of it, if you feel that you want to.

HereToLearn
Posts: 218
Joined: Sat Mar 17, 2018 5:53 pm

Re: College loan advice?

Post by HereToLearn » Fri Oct 12, 2018 11:18 pm

The loan amount increases $500 each year, so $5500, $6000, $6500 & $7000.

sco
Posts: 826
Joined: Thu Sep 24, 2015 2:28 pm

Re: College loan advice?

Post by sco » Sat Oct 13, 2018 7:28 am

Everything I’ve seen says
5500 freshman
6500 sophomore
7500 junior and senior

Assuming they aren’t independent or something

ncbill
Posts: 368
Joined: Sun Jul 06, 2008 4:03 pm

Re: College loan advice?

Post by ncbill » Thu Oct 18, 2018 5:25 pm

UncleBogle wrote:
Fri Oct 12, 2018 10:18 pm
NotWhoYouThink wrote:
Wed Oct 10, 2018 8:20 am
Agree with above observations that students can only get federal loans (5500/5500/6500/7500) without co-signers. Unless there is demonstrated family financial need and Perkins loans become an option, but OP indicates that is not the case here.

Probably having students take out a loan or not makes more difference to the parent's feelings about whether they were adequately tough on their kids than it does to kids' motivation or success. Stafford loans are affordable to pay back if you graduate and get a job. In our case, we worry about how much we should support/help/interfere in their finances post graduation, so having them take out loans when we had the money to pay and they were working hard anyway didn't make sense to us.

The baffling thing about this thread is the thought that someone sent their kid to college, paid for the first year, and then started considering changing the deal. Seems like if you are going to make your kid pay for college you should let her know that BEFORE SHE SELECTS A COLLEGE, not spring a change order on her after the choice has been made and the coursework started. So what's really going on here?
Don't be baffled - I'd be happy to explain. I make a good income(thank God) and unless something catastrophic were to occur, I can pay for her entire education. But the question is: Should a parent pay for a child's entire education?

This is a personal choice, and as you can see in the thread, there are differing opinions. Some feel that kids should not have to pay anything, others feel that it shows some financial responsibility on the part of the child. Everyone raises their children differently.

Similar to most folks that I come across, I contributed to my own education. I never saw this as "unfair" or a "change of rules", it was part of being a family and pitching in. Just like doing chores, or eating your lima beans, I looked at it as shouldering a little bit of the burden for the family and showing some respect to the folks that payed for virtually everything else in my life.

But I digress. Although our daughter is a straight A student, with many accolades, she received no scholarship from her university. She didn't play sports and didn't fit the demographics for the scholarships they were offering. As suggested by the admissions office, she put in the application for student aid/loans - it was no surprise that all that was offered was a Stafford loan.

My wife and I had sat our daughter down previously and explained that for the first year of college, we would be taking care of the full amount, however during the subsequent years, she would be taking out Stafford loans and "kicking in" a percentage of her summer job earnings to help pay for college. So there was no "rule changing", she just wasn't going to get a free ride.
We made it clear to the kids early on that we would only commit to paying for an in-state school.

But they used their Uncle Sam (ROTC scholarships) to pay for pricey ($50,000-$60,000/year) private schools.

NotWhoYouThink
Posts: 2101
Joined: Fri Dec 26, 2014 4:19 pm

Re: College loan advice?

Post by NotWhoYouThink » Thu Oct 18, 2018 6:08 pm

Ok then, if you told her before she accepted her admission to this school that she would have to take out Stafford loans after freshman year, and now you are asking her to take out Stafford loans, nothing has changed except that you are wondering whether you should. As I said above, it probably doesn't matter. If you feel like a better parent having her take out the loans you can do that. If not, don't. I haven't seen any evidence or heard any persuasive reasoning whether it matters either way.

Post Reply