Amount Allowed for Private Loans?

Paying for College
1

My daughter is currently a Junior. She’s busting her tail to maintain a 3.7gpa, will take the ACT this winter. Involved in activities, well rounded, community service…doing her part 100%. What are the limits for private student loans? Do all private student loans require a cosigner? Here’s our situation…

I did an online EFC calculator and I don’t know if it’s incorrect or relatively accurate, but it’s telling me our EFC is roughly $19,000/yr. (picks up jaw from the floor). My income is only $30,000; however my husband (her stepdad), has an income of $77,000,which puts our household income at $107,000. (Still so frustrated that the gov’t considers step parent income on the FAFSA, considering my husband has NO legal rights to my children - we have been married only 5 years; keep separate finances; I don’t feel it is his responsibility to contribute to my children’s education, however we know the government sees things differently and that will never change). My husband has a checking account with a $10,000 balance for emergency purposes (he does not ever allow it to go below $10,000). Non custodial dad is on disability and earns no income whatsoever, has contributed zero over the years including the mountains of medical bills for both kids (even though court ordered to pay half).

She wants to go away for 4 years. She wants that “college experience”…but it’s going to come at a price. I’m letting her know now that it’s most likely not looking like that is in the cards for her, unless she can get private loans. In state tuition with our income is roughly $18,000 for tuition/room/board according to the NPC. There is a local private college that is lower…$15,000/year for tuition/room/board, but it doesn’t have her major.

Ultimately, I feel like a failure as a parent when it comes to this. I am unable to contribute to her college education. I have never earned more than what I currently make ($30k/yr), and therefore have never been in a position to save for college due to expenses, medical bills, etc. (I have two children, my son is still in Junior High). There was just never anything extra to allow me to save for college. Now I’m married, and I am still paying their expenses 100% on my own, as well as contributing to half of the mortgage, but now my husband’s income puts us into the “scary” income bracket because it contains 6 figures.

Thanks for reading this. I’m going to discuss options with her…CC while living at home and working part time for 2 years then transferring - or State University while living at home for 2 years, then transferring to the school with her major. There is also a CC close by her grandma out of state (approx. $5k/yr) which would give her an Associate Degree in something very close to her major. But I think the schools have done such a great job in making these kids think that they CANNOT possibly ever survive in the world without a Bachelor’s degree, she is very resistant to the thought of getting an Associates.

2

She still gets a Bachelor’s if she does 2 years of CC and then transfers. Remember that she can work summers and part time; a student that really hustles can usually come up with $4K/year. She should work this next summer, too.

The limit on private loans is what you can qualify for. No one puts a cap on it except the lender. But she will need an adult co-signer for private loans.

3

The freshman Direct student loan (via the college) caps at $5500, goes up a bit after that. Our usual recommendation for loans is to aim for not more than the Direct Loan total-about 27k over the four years. Whatever you do, check what her payment plan will be, how much. And how soon she would need to start paying back private loans

4

Is your husband on social security disability?
if so, did your daughter get benefits?
https://www.ssa.gov/pubs/EN-05-10085.pdf

5

What is your daughter’s preferred field of study?

6

Get that failure idea out of your head right now. You care enough to be asking questions here and the caring is what matters. You and her can make this work.

There could still be some merit money if she tests well. If she does decide to go to a county college and she works as hard as she has in HS then she could get the grades for a transfer scholarship to help pay those final two years.

7

The college’s position is not that your husband will be paying your D’s tuition. The college’s position is that YOU benefit financially from being able to split your bills with someone who earns as much as he does. Where would you live if you were solely responsible for your mortgage? Could you afford your lifestyle on your own income?

What field of study is your D interested in? Make sure she is not slicing the bologna too thin. There are many fields where the nomenclature does not need to match 100%…

8

If your D goes to a local CC for two years and you can pay for that, and she saves her freshman and sophomore direct loans, that would be $12,000. If she works summers and saves that, plus $15,000 for her student loans in junior and senior year, that could almost add up to the $36,000 for the instate school for two years (might be less if she lives off campus).

That would be only $26,000 in student loans (right now with interest rate of 3.76%). Imagine how much better her post-graduation life will be without huge debt. Private loans have higher rates most likely.

You might also be able to qualify for the AOTC, an education tax credit of up to $2500. But I think you have to file taxes married filing jointly.

9

Wisconsin is a big state. She can ‘go away’ by just going to a different part of the state and going to one of the UW schools. I grew up in Wisconsin and can count on my hands the number of kids who went to OOS colleges from my very large high school class. About half didn’t go to school, and about half of those who did went to the UW in our town, with the rest going to Madison or the other UWs. Or she can look west to South Dakota, Wyoming, Utah for very reasonable OOS tuition rates. If her ACT is high enough, she may qualify for merit aid at some of the schools listed in the pinned list on the top of this page - Alabama, Temple, Ole Miss, LSU. The requirements change all the time so she needs to follow the qualifications through this year and next. She could consider a service academy to be paid while she goes to school.

10

Just remember, bio parents have no legal obligation to help their adult children either. But the government considers the family the first line and, by marrying you, her stepdad became family.

11

OP, I just wanted to say that I totally sympathize. You are not a failure. You’re doing your best in a tough situation, and you are on top of things when you still have time. My advice right now is just to make sure that your D prepares - really prepares well - for the ACT, because that could open some doors if she does well. Also have her take some practice SAT tests to see if that test is better suited for her, and maybe try that one as well. Hang in there. There are options.

12

The first line of loans should be federal. An undergraduate is eligible for 6 years of federal loans. Year 1: max $5,500. Year 2: max $6,500. Year 3+: max $7500.

After that, parents are eligible to take out federal Parent Plus loans, usually up to the total cost of attendance.

If parents elect not to take the Plus loans, the next avenue of loans is private loans. These will almost always require a co-signer - banks want a guarantee there is someone on the loan who can guarantee repayment of the amount. Seldom does a student have an income that allows them to qualify for loans independently.

Students who get the “whole experience” of living at college are not the majority. And you are not a failure if you cannot foot the bill for this. It’s great that your D is doing her part - now is the time to educate yourself about the possibility for merit scholarships that could make school affordable. No one is a failure if they go to CC for an Associate’s and then transfer to a 4-year school for a Bachelors, however merit aid is usually best for freshman - so explore both avenues. Focus on merit awards from the schools themselves, as they are typically renewable all 4 years as long as a minimum GPA is maintained.

There are some career paths where an Associates is sufficient - intended major wasn’t mentioned, so hard to tell if that is the case here. On the other hand, there is no significant difference between a degree earned in 4 years at a college/university versus a degree earned after 2 years in CC and then 2 years at a bachelor’s granting college/university - the terminal degree, in this case the Bachelor’s, is what matters.

It is also possible to be successful in life commuting to a nearby school. May not be quite as fun, but depending on what you put into it, can be just as rewarding.

Be sure you are looking long-term - is it worth massive amounts of debt to have that undergraduate experience? Living on campus is great, but not being able to move our of your parent’s house after college because your loans consume too high a % of your take-home pay after graduation can be something regretted for years to come…

It’s great you’re thinking about this now. Have some serious conversations about what is realistic, rather than just trying to borrow without evaluating consequences.

Best of luck to you and your D.

13

You’re not a failure.


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wants that "college experience"...but it's going to come at a price. I'm letting her know now that it's most likely not looking like that is in the cards for her, unless she can get private loans

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PLEASE DO NOT TELL HER THAT!!! WHY would you want your dear child to be burdened with huge loans? Don’t you love her? (I’m making a point; I know you love her! And because you love her that idea should not even be entertained! And, BTW…YOU would be on the hook since YOU would have to cosign those ridiculous loans)

Tell your DD to work hard, get the best grades and test scores she can AND you will help her find schools that will give her big merit scholarships for her stats.

Don’t ruin her adult life by burdening her with loans…and don’t confuse her innocent mind by thinking loans are an option.

14

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The college’s position is not that your husband will be paying your D’s tuition. The college’s position is that YOU benefit financially from being able to split your bills with someone who earns as much as he does. Where would you live if you were solely responsible for your mortgage? Could you afford your lifestyle on your own income?


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This is why step-parent’s income are included. You’re not paying all the bills of your household. If only your $30k income was considered, it would mislead the FA calculations by appearing that you alone pay the rent, the electric bill, etc.

15

Please…do NOT think of the amount of maximum private loans you can take out. Think of how much you think you can reasonably afford to spend on college. There should be options that are affordable for your kiddo.

Please…do not go into excessive debt for college. Try to work on a way to fund college with the least amount of debt possible. This will be a gift to both you, and your daughter.

16

Btw, even the Fed loans, at the max 27k, cost $300/month after grad. Will she have a job where that’s easily affordable or struggle for years?

Part of launching them well includes the education, sure. But also caution about the burdens. That’s something we parents can and should be aware of and guide them through. Not just the ideal experience.

17

If you are in Wisconsin, you also have reciprocity with Minnesota.

18

Thank you so much everyone for your replies and advice!!! It is greatly appreciated.

Her intended major is Music Business/Industry…she is a musician and that is her “dream”, HOWEVER…she is smart enough to realize that she needs a real life job to pay the bills etc., so a Music Business major has enough business management courses, with music courses as well, to give her kind of the best of both worlds. My husband and I have drilled it into her head for years now that she does NOT need a 4 year degree to become a musician. If she’s going to invest the time and $ for college, and have loans, she needs to have a degree that she actually has a chance of becoming employable. She wants to work in the music field in some form or another, but hopes this degree would allow her flexibility with other options as well. Another option she is considering is Marketing with a Music minor. We shall see. I’m told they often change their minds…

We talked last night and she liked the idea of attending a local UW school and commuting while living at home. Much lower price tag to live at home. I’m hoping to get her more warmed up to the idea of CC for one year or even two for her Associates. She currently works part time (which is rare among her friends…it’s tough for her because she’s surrounded by friends who’s parents foot the bill for everything…car, insurance, gas, and ultimately college - so I can understand her frustration).

I don’t want her to be burdened with huge amounts of debt getting out of school. I’ve been online with loan amortization calculators showing her the reality of certain schools and the monthly payment she would be expected to make. I’m hoping that by continuing to show her the reality of it all, she’ll be more inclined to make a smart, REALISTIC decision about student loan debt.

We have already removed the “dream” school of Belmont in Nashville off the list, at $25k per year (that was after any merit scholarships she would be eligible for). I don’t even want her to visit. I explained it’s just like that show “Say Yes to the Dress”…you don’t even TRY ON the $10k wedding dress when you only can afford the $1,000 dress.

Thanks again!!

19

Know what? You were worried about failing her, but this effort you’re putting in is priceless. :slight_smile:

20

Your DD hasn’t yet taken the SAT or ACT (have her take BOTH!!!). After taking those tests a couple of times (and prepping for them), she may end up with scores that will get big merit somewhere.

She doesn’t yet have to “settle” for commuting. Wait until test scores are known.