It sounds like the Yale finaid office is right. Your parents are loaning you money…which means they have it…and can pay it. They just don’t want to give it to you outright for college costs.
Thank you everyone for the thoughtful contributions. The money my parents are loaning me is being drawn from their retirement savings, so they do in fact need that back. That’s my full situation I am willing to describe. I will have a lot of decisions to make in the coming month, and am thankful for the insight you have provided.
If they are already having to withdraw retirement savings just to send you the FIRST year for just an undergraduate degree, AND they they have 2 more kids to send to college, aren’t they setting a bad precedent for the next 2 kids’ college choices? Or are your parents just going to stiff the 2 younger kids when it’s their turn?
Just for perspective… we also would not qualify for FA, so we simply would NOT let our kids even apply to schools like Yale. There are lots of ATTRACTIVE school choices out there that don’t involve parents having to beggar themselves. If you have plans to pursue law school, then wouldn’t prudence dictate that cash be conserved for that?
This information changes my answer - I was assuming that your parents had the money readily available but wanted you to have skin in the game. @GMTplus7 says it much better than I could.
It sounds as if you need to really consider whether law school is in the cards so you can decide whether the $85K would be all you’d realistically be taking on.
Edit -
Have you asked the Yale FA office to reconsider the denial of FA?
FYI, another thread where someone suggests that the OP (fullpay parent) lend money to child for Princeton:
http://talk.collegeconfidential.com/discussion/comment/19353635#Comment_19353635
The parents probably have a set amount aside for each kid. OP is probably going over with Yale tuition, and they are finding the money for him.
Again, the key for OP is to decide if he/she wants to go into a paying job after undergrad or wants to go on to more academia.
I agree. Taking money out of retirement is not a good idea. They would be better off taking out loans…or consigning with you.
But you do have options to consider.
If these are qualified retirement accounts and depending on the account owner’s age, there could be income tax due plus an additional 10% penalty on any distributions. (This will not apply to withdrawals of contributions from a Roth IRA that has been open at least 5 years.) Also, the plan administrator may disallow any further contributions to the plan for six months after a withdrawal from a qualified plan for the purpose of paying higher education expenses, which might jeopardize employer matching contributions. And, distributions from a qualified retirement plan will count as income for financial aid purposes, which might put at risk any future need-based financial aid, should you qualify. Generally speaking, taking an early distribution from a qualified retirement plan is a bad idea.
If these are non-qualified retirement accounts, this may explain, at least in part, why you do not qualify for any need-based aid from Yale.
I am not trying to endorse the idea of raiding retirement savings to pay for Yale but active 401Ks usually allow loans and Roth IRAs allow withdrawals without penalty to pay for educational expenses.
To soften the blow of being a full-pay the OP may want to research available internal scholarships and fellowships available at Yale.
The retirement saving is personal don’t worry. Each of us has a set amount for college, and yes I went over. The other two (one in college, another soon) will not go over that (not applying to top schools). Thus, they are comfortable and well within their right to draw from retirement savings. Academia is probably not a future for me. I want to get to work. Thank you for the continued advice.
You may want to ask about management consulting and investment banking on forums dedicated to such work (note that there a forum on investment banking in these forums at http://talk.collegeconfidential.com/investment-banking/ ).
Basically, if you go to Yale with that large amount of debt, the door will open wider for those types of high pay jobs, but you will be committed to chasing those kinds of jobs in order to pay off the debt to your parents after graduation. What you want to do now is learn more about those kinds of jobs to see if you really want to commit to chasing those jobs. If you find those jobs to be unappealing, then that argues against taking big debt to go to Yale. Even if you do find those jobs appealing, it is not a guarantee that you will be hired into such a job, even though the chance is much higher at Yale than at most other schools.
THREAD’s TITLE:
You say you want college financial advice, but whenever anyone her (actually, pretty much EVERYONE here) points out the financial imprudence of raiding a retirement account, you cry foul.
“Of course”? Not.
Neither have consistently generously paying jobs. In fact, you seemed to have missed the memo that a law degree isn’t isn’t even reliable for netting a job at all-- many of the legal work has been offshore to a cheap English-speaking legal army in India, needing only one US lawyer to “sign off” on the work.
FYI
U.S. firms outsource legal services to India
http://www.nytimes.com/2007/08/21/business/worldbusiness/21iht-law.4.7199252.html
Burdened With Debt, Law School Graduates Struggle in Job Market
http://www.nytimes.com/2015/04/27/business/dealbook/burdened-with-debt-law-school-graduates-struggle-in-job-market.html?_r=0
Mamas, Don’t Let Your Babies Grow Up to Be Lawyers
http://www.huffingtonpost.com/natalie-gregg/mamas-dont-let-your-babie_2_b_6457898.html
You appear to be be just another poster who is just fishing for validation.
UIUC and retire comfortably at 50 or 55 (or do that Peace Corps or non profit thing you always wanted to do) vs Yale and either work a job you hate because you need the money or work the same job UIUC got you until you’re 65 or 70.
Wanting to work into your late sixties is one thing. Having to is another.
Is financial imprudence a prerequisite to working in finance? It would explain a lot.
Enjoy your monthly loan payments. It’s only money that can go toward housing, food, decent transportation, clothes, etc.
Only you and your parents know how much they will depend on this “retirement” savings for their retirement. There are CC parents who say they would take on a second mortgage, take on a second job, postpone retirement and so on, to send their child to a school like Yale. (I’m not one of them). You need to talk to your parents about finances. There are several factors - their ages (are they in their late 40s or late 50s or early 60s?), how long can they wait for the money, what is the payment schedule. And that’s just their side. You need to examine the loan from your side - others have presented the issues quite well.
I usually choose the least expensive option with the best value. This is rarely just the least expensive option. In your case, if your parents really do have close to $400,000 set aside for two college kids, earn over $200,000 and were not looking to retire until a few years after the last child graduates from college, I’d choose Yale. (I’m assuming Yale will cost close to $300,000 over four years and your parents will not retire in the next ten years). If, however, your parents would not be able to contribute to their retirement, need to draw from protected retirement accounts (401k), or planned to retire while having a child in college, I’d need to rethink Yale.
For you, you need to decide if the high paying job is your true goal, whether it’s in Silicon Valley or on Wall Street. Plenty of people love the careers, the hours, the lifestyle. Others discover within a year or two, the money isn’t enough. With your amount of debt, you won’t have that luxury to just quit and move on to another job.
@AbbyAndy wrote
Written by somebody who’s probably never earned $85,000…
If he Gap years and works Summers he can put a serious dent in the advance from his parents.
Then he would not be stuck with huge monthly payments that would influence his choices for majors, employment and future education.
OP, this thread is painful to read. My advice is to not force your parents into making a stupid decision because they want the best for you. Hopefully they are asking for advice on this too, and not just leaving it up to you.
A (gap) year of work as a high school graduate may not earn all that much. Summer work is generally expected by colleges to allow students to contribute an extra few thousand dollars. So, even in that case, the extra debt beyond the federal direct loans will be substantial, requiring the OP to chase the money after graduation.