If this person can get a job as a waiter or waitress at an upscale restaurant…the should be able to earn about $20,000 in that year…plus they would likely be able to work on school breaks as well.
This would put a good dent in what the oarents are loaning this student.
To the OP…you need something in writing for this loan from your oarents. I KNOW…they are your parents…but a loan is a loan. Protect yourself…get the terms of this loan in writing. This includes the no interest provision, and the repayment schedule.
The parents are LOANING the OP money, not just taking the money out and not replacing it. Depending on what rate of interest they are charging, that may not be that imprudent. The OP has not said except that “interest is included” in the amount, I think. Someone mentioned “no interest” in this thread, but I don’t think it was the OP, unless I missed that. Also, people are assuming that the money will come out of a Roth or IRA or 401K somehow. Not everyone has all their retirement savings in those types of products – there are limits to how much you can sock away depending on your situation – I have some money I have earmarked for retirement outside those accounts because some years I max out the options i have for tax protected savings, and still want to put more away.
Heck, maybe the OP’s parents will do what some other posters do out here and as a graduation present waive the debt. Of course, you can’t count on that!
One of my kids worked waiting tables at a midrange restaurant. Nothing special but nice enough…and yes, he was anew employee. He made easily $75-$100 a night in tips. He worked four days a week the summer before he started college…and could have stayed on during the year (except he was leaving for college).
I’m not saying this kid should do this…but I am saying it would be possible to earn $20,000 in a full year of full time (or two part time) jobs.
And no…I would hope that these parents would allow this kid to continue to live at home at no cost if this was the choice.
OP, you need to get detailed info from where the $ is coming from. If they have non-retirement savings, great. But you don’t want them to struggle in their golden years if you end up not being able to pay them back.
Silly me for assuming that someone talking about retirement funds would be referring to money in a tax friendly retirement account.
Obviously if OP’s parents have the money, and they’re not borrowing against a 401k or IRA, all of this is a non-issue. They can choose to loan/give/forgive-loans/whatever as they see fit (and thread probably wouldn’t exist). It just doesn’t seem like that’s the case based on what OP is describing. But I agree with Liliana, OP needs to ask about where the $ is coming from.
I still stand by what I said earlier … the parents should seek financial advice on this.
Got it. Still… the assumption that everyone has access to or chooses to keep all their retirement funds in a tax protected investment option isn’t valid. But it doesn’t mean the money is laying around for other purposes, either.
These type of posts always baffle me. Usually posters here will almost always say high debt for undergraduate is not a good idea. Especially if one is considering graduate school which will be needed for law and at some point highly likely for a Wall Street financial job. The rule seems to disappear if a name like “Yale” is the school. It seems that these schools are considered to have a special sauce that guarantees a high paying job that can pay back any amount of loans even with a undergraduate degree. I have no idea.
I agree the “Yale” name will open many doors. However, most opportunities are driven by what the student does during the four years. A student that has the talent to get accept at Yale, should be able to be successful anywhere. The concern I have is that the OP is basing a decision on a set career path as a eighteen year old. Will the same decision be valid if he decides a financial or law career is not what he wants. Many student change majors.
I also agree to get the loan terms in writing. Will support continue if the major is changed or if a fifth year is needed? Does the loans impact future support from parents for graduate work?
So the OP already had a sibling in college when he applied to Yale and STILL didn’t qualify for any FA. I suspect his parents may own a fair amount of real estate or some other investments where they lack liquidity, so they’re having to use retirement funds to make up the difference between what they set aside for him and what the cost of full pay at Yale will be.
As I said way back in post #30, it’s entirely possible his parents will forgive the $55,000 in debt if they’re able to, but there are no guarantees.
Personally, I suspect they have quite sizable assets and there isn’t a lot of financial risk involved with sending this student to Yale, but it’s their money, and if they don’t want to liquidate an asset or spend their money on the pricier, more prestigious degree for one child, that’s their prerogative. Maybe they feel it’s unfair to spend more on one child than the other two; plenty of CC folks certainly feel that way.
One can never take away education, but the cost/benefit of Yale education versus another with this debt load is making it difficult for many parents to say yes. And if wanting to work for a gap year, does the student have the skills and work ethic to work the jobs necessary?
I just talked to a friend whose only son bullied the parents into allowing him to go to Berklee Music School in Boston. Is this boy a brilliant musician - um no. Will he be passionate about music for a career, doing all the gigs necessary to earn the skill set - um no. So they are paying for 4 years of a marvelous time for this kid, who is going to have trouble scratching out a living in the music industry (if he indeed stays in it) the rest of his life. Dad allowed the lad to play too many video games in MS and HS; mom as an educator could see it but could not have H see it. So he lacked the discipline to get the great education/take advantage of educational opportunities through HS. Now he has a very good music education at a big financial price for the parents. I am sure he had no scholarship, so he could have attended local music program (or taken a gap year), but parents allowed the crying baby to have his way. They gave away their power.
But does it make sense to lose one year of work as a college graduate (even an “ordinary” job that is not a super-highly-paid Wall Street job will likely pay significantly more than $20,000, even if limited to the area within commuting range of the parents’ house) to add one year of work as a high school graduate who may earn up to $20,000, regardless of which college one attends?
Now, students from poor families may choose to do such a working gap year because they have no other possible way of paying for college, but that does not seem to be the OP’s situation.
But how many new high school graduates get upscale restaurant jobs?
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Exactly. And many restaurants who serve alcohol prefer servers who are 21+. I imagine the better restaurants probably especially prefer over 21. However, if the retirement money is in unprotected accts, then even 2 in college may mean full pay.
If there are two kids in college…and the OP got NO need based aid from Yale, then their income and/or assets are VERY high. VERY high.
Even so…this is a family decision. They have to figure out what to do.
Regardless…I still suggest that IF this student takes a loan from her parents…that the provisions of that loan be put in writing…so,that there are NO questions later on regarding repayment schedules and the like. They might want to have. Lawyer draw up these papers…or at least have them notarized.
Since there are other siblings…these loan documents should include what will,happen in the even the oarents die before the loan is completely repaid. Will the balance be forgiven…or will it be taken from this student’s share of the estate.
Lots to consider when dealing with family loans…in my opinion.
If the student worked a gap year, maybe that would give the student some perspective on how the difference in cost, and if there is a true benefit to him/her. Many times, one can get hours delivering pizzas etc - depending on the town/city they are in. Once one has even a PT job, can have something to put on other applications.
Don’t know if two other siblings are younger.
However, sometimes really smart kids (Yale type) may not have the skill set to hustle for entry level jobs.
Why is the absurd idea of taking a gap year and working a minimum wage job for a student who was admitted to Yale and plans to major in economics is still in discussion?
My son conducted this experiment - he worked at Home Depot in the Wood Dept. for $9/hr. He discovered that he would be much better off finishing his degree in economics at a regular public flagship when internship paid $15/hr and minimum job offer was $50K/y. And there was no risk to cut your hand off.