OP - I definitely feel for you. Figuring out paying for college is probably one of the toughest things to do in life. I hate the 4% orig fee, but it sounds like you might have to do it.
Can you do a loan against a 401K. If you think you can replace the money I might also go for the IRA. If you do a combination of all of them then it is somewhat like a hedge.
I harp on my kids to work. You either play sports in the Summer or work when you are 16. My D19 has been working like crazy. She did 26 hours last week which is a little high for her, but putting in the hours means $$$.
@blossom I know what you mean about a job. During my Senior year in HS I worked at a country club. I worked every holiday except for Xmas day. It is just what you had to do.
I don’t recall my parents sitting around worrying that I wouldn’t have time for socializing, EC’s, etc, either in HS or college. They thought that spring break was when you came home to look for a summer job; they thought that Christmas vacation was when you went back to LAST summer’s job to fill in shifts for fulltime employees who were getting days off at Christmas and New Year’s.
That first tax filing when I got money back- WOW! My dad kept explaining that it was MY money that had been withheld… but it sure felt like a gift from the government!
Those country club jobs were highly prized back then, GPO, you must have been terrific. I worked in all kinds of restaurants, but everyone knew that the clubs were where the REAL tips were, plus offers to house-sit when the members went on vacation.
@thumper1 brings up an excellent point. The whole family needs to be on board with the belt-tightening, and the sooner you all start doing that the better. It is likely to be shockingly disruptive all around. Keeping eyes on the prize will make the experience more tolerable.
Yes, @thumper1 brings up a very important point. Here’s the thing: you were not able to save what would make you comfortable for your DD to go to this school. If you all now can’t go through austerity regiment and put in the work to make this school work comfortably in terms of finances, you think that pushing this all off on loan repayment is going to make you comfortable financial?
I went through the loan route because of cash flow reasons, and I wanted us to be more comfortable. Well, I used the loan option to spread out each year’s payment for college to be spread out over 10. So paying that much reduced amount should have been far more comfortable , right?
Well, it was not. It was danged uncomfortable, inconvenient and really cut down on a lot of other options in life. Instead of 4 years of uncomfortable , it was over 14 , as we borrowed each year. Just paid it off a few years ago. And I’m lucky to have been able to do so because those loans grow incredibly large when you don’t stay on top of them. You let them grow and that capitalized interest becomes colossal
So, yes, borrowing is a viable option, and you are aware of the pitfalls of borrowing and are going to manage this. A big part of managing it means everyone has to be on board in making this work.
Now that the decision has been made, it’s a happy , celebratory time. Just let everyone know that it’s also a time to work on making this affordable.
Student loan interest is simple interest. It only capitalizes once, when you put the loans into repayment (when student leaves school or graduates). You can avoid this by paying the interest as it accrues. The origination fee is deducted when the loan is disbursed, so that is simple interest only.
The low credit card interest rate, mentioned above, is compounded interest, usually compounded on a 60 day average balance.
How well prepared are you in terms of other things? For example…before our kids went off to college, we made sure we had cars that were fully paid for, our mortgage payment was low (and we actually paid it off). We had no other consumer debt…no credit card debt, no loans of any kind with payments. We planned ahead.
And we had to keep it this way while both kids went to college…seven years. And in our case, both parents were working full time professional jobs.
We did not take any loans out for college costs that required our co-sign. Our kids knew that was off the table.
But this all happened before our kids applied to college…so we would know what costs we could support (we were able to fully fund expensive private colleges…and we had NO college savings).
I’ll try to go into what I think the “some reasons” are, briefly.
It's Buffalo. The city itself does not have a great reputation, it's known as one of those booming cities from the industrial and canal shipping days, that has been dying a slow death for decades since that all went away. I've never been there, but people I talk to that have say "Buffalo is a dreary, sad place". I've watched some videos recently that make me think that the city is on the rebound, and better than many fear.
The distance. It's far from everything, and unlike driving down to Delaware or Maryland or even North Carolina, there is large gaps of nothing on most of the trip up there. For us, we go through Newburgh, then Binghamton, then to Buffalo with hours of empty in between. Alternately, a slightly slower route is Albany, Syracuse, Rochester, but again, hours of nothingness in between. The drive for us would be 6.5 hours, but, given how long that is you are likely to stop for gas, a meal, bathroom breaks, and it can easily become 7-8 hours. That's essentially a day, each way, which is the reason we never got a chance to visit. We had looked at Clark, Umass, Binghamton, Delaware, and all of these were close enough where we could visit in a day or two, but Buffalo would have meant leaving on a day and spending that entire day driving, then visiting rather quickly, to be able to spend that next entire day driving back. Either that, or you need 3 days to be able to spend a day.
The weather: Whether (no pun intended) it's accurate or not, Buffalo is portrayed as a freezing cold, always snowing place. Being from CT, we aren't that worried about that, but it did play in. This is something the country as a whole is dealing with right now. 50 years ago, weather was not as much of a prime mover as it is now. People are leaving the colder areas in large amounts to head toward warmer states (and colleges).
I still thought Buffalo looked like an excellent school, and because of the above, I actually thought there’s a chance it may have a better group of kids there (people who aren’t going just for the weather, or the super cool nightlife, or the proximity to big hubs). I still think most of the kids who go there are kids who are from upstate NY … but for those who aren’t, they would have to be going for the better reasons.
Will certainly look at it for the next two kids. They were also extremely competitive on the merit award, which was very nice.
Is your daughter going to college in a warm weather climate? That wasn’t my impression from the other posts you have made.
You have made your college choice. The issue is…you are short about $12000 in funding…or $1000 a month. Your daughter can take a $5500 Loan (assuming that isn’t already in her financial aid package) unsubsidized, and the remaining about $6500 needs to come from somewhere. She can’t take that loan herself. You will need to co-sign.
OR someone in the family will need to earn about $10,000 in income to guarantee there will be $6500 left after taxes, and such. Can your wife do that? Can you?
@thumper1 First off, congrats on all of this. You are among the 1% of the people (or less?) in the country who were in the position of having no debt and being able to pay for college up front with ease. This is typically for those who grew up with some money in the family, or have two working professional incomes, or were extremely, extremely diligent budgeters and savers. I have to assume you are in at least one of those buckets! And it’s awesome to be able to have accomplished that.
As for us, we’re doing ok. Many would say we’re in an excellent positions, I tend to be more of a worry wort financially. We have only one professional income (mine). My spouse has only recently returned to work and has been working 20 hours per week. The pay is low.
I’ve managed to save for 20 years maxing our pre-tax retirement (and a little post-tax).
We have no credit card debt, just a monthly for fixed costs we pay off as part of the budget, getting our 2-4% cash back.
We have one car loan. Typically we have always had one, and when one is paid off, we re-up on the other car. So far, we’ve always borrowed for cars at 0.9 to 2.25 rates, which is part of the reason we financed (those rates are appreciating slower or at the rate of inflation).
I’ve set aside the first year’s tuition cost, and that is before the 2K per month we can put toward college money. I’d like to spread that current amount over a few years if all goes well.
I work in an industry where a large chunk of the pay is via end of year bonus. At the end of 2018, the company I worked for did something they had never done before, and slashed bonuses tremendously. This was unexpected to all. It caught us off guard, let’s just say that it was a few years of tuition missed. The company had an unprecedented bad year in 2018, and fortunately is doing very well in 2019. It’s a bonus, and never should be counted on, but in my industry, the bonus could be counted on in almost every year. In my experience, from 2003 to 2019, the only years where bonuses were terrible was 2008 and this past year, 2018. I plan to take all of the bonus money at this year’s end, and put it toward college funds for the kids.
And in truth, if our life situation drastically changes between now and 2020-2024, it will indeed affect kids #2 and #3. It may not be fair, but that’s life I guess. The good news is while #1 was a good student (3.5 gpa, 1300 sat) and got some decent merit, kids #2 and #3 are several levels better academically, and I can hope that they keep it up, and that it will help offset some of the risk. #3 has had an unweighted GPA over 4.0 all year - I am wondering who her real father is
@cptofthehouse Yes, my wife is already annoyed that I am cracking the whip left and right. It is what it is, has to be done. The good thing is, there’s no reason it can’t be done.
I think you are way overestimating me. We simply planned ahead. We knew we had two kids to put through college, and we wanted their options to be as open as possible financially. Thus the reduced debt by the time they went to college. No inheritance, no tuition fairy, and we are not in the top 1% of income earners. But we are good planners.
I don’t know your car payment, but if it’s $300 a month, that’s 1/2 of what you need. Maybe this is the time not to get a new car (that’s something we didn’t do the entire time our kids were in college)…and that payment can be diverted to college costs. Just a thought.
You could decrease the amount you contribute to your retirement accounts. You have a nice nest egg that will continue to earn interest. Like you, we maximized our retirement contributions and if needed, we could have decreased these. That wasn’t needed for us…and it’s not my top recommendation…but it is an option.
Oh…your daughter can earn some money too…that has already been discussed upstream.
This college financing needs to be a family decision, unless you and your wife want to just pick up the whole gap amount.
I’d start with a nice conversation with your spouse. Start by saying…”we are $12,000 short on paying for college. We need to figure out how to cover this cost.” And go from there.
New Haven is a dreary, sad city but kids at Yale still manage. The South Side of Chicago has really cold weather (and some parts of it are dreary and sad) but U Chicago isn’t lacking for students. Walk two blocks in a certain direction off the U Penn campus and you are in a neighborhood which defines urban blight- and yet the line for Penn wraps around the city.
I’ll give you free advice for kids 2 and 3 (it’s worth what you paid for it, so feel free to ignore)
Find one thing to love about every single school on the list, even if you and your kids have to work a little harder at doing so. This is going to save you from a lot of agony down the road. Even the most mature 18 year old is still mostly a kid, and sometimes can’t see the forest for the trees. It is so easy to fall into the Groucho Marx trap, where only the colleges you can’t afford or won’t admit you are acceptable choices. But a little effort to make even humble U Buffalo attractive can pay off in the long run.
One of my kids had a school on the list (the parent pick- affordable and admittable) which was hard to get excited about- it was a pain to get to, wasn’t in a terribly exciting location, didn’t have the amenities or the sex appeal that some of the other colleges had.
My mantra was “College X- nobody is dropping in unannounced on a Sunday morning!” which the kid LOVED and took up as a rallying cry. I was not interested in adding more colleges of similar ilk, which were more expensive, just to get nicer weather or cooler bars for my underage kid to frequent.
Yeah if this was my situation, I’d not be buying new cars constantly. You always have a car payment? Okay, that’s a choice. Stop buying new cars every 5 years. Hopefully you’re almost finished paying off the current car loan. You’ll probably have closer to $500/month (based on the average American car payment).
Any other budget tightening may get you all the way to $1k/month you need. Are you paying for cable? Got a gym membership? Paying for yard service? Going out to dinners or movies often? Maybe you aren’t, but when I see someone say they always have a car payment I do assume that folks have more to trim.
Sorry if that comes across as judgmental- it’s not meant to be. Take it as a helpful suggestion. Look at your monthly budget with fresh eyes. You may find more wants than needs sitting there ripe for the pruning. Consider it post-planning instead of pre-planning.
Hank, I think you are in good shape if you have year one covered. You can do all the things suggested like tightening your belt, having your child take the $5500 loan (and stash it if you don’t need it), having child and spouse work and anything above the budget gets saved, etc. If you do all that, it is likely you’ll have enough money for year two. If the bonus comes in, that helps even more.
You’ve made a decision now make it work. Your original question was are there any loans out there with better terms than the PLUS loan. Not really. There may be a HELOC, there may be a credit union loan, but student loans like the PLUS loans have better protections and repayment terms than most private loans. You can check Sallie Mae and SoFi, but you’re going to ‘get’ something here and ‘give’ something there in terms or benefits.
You’ve got a handle on the numbers, now you need to do as suggested above and get a number for daughter to reach through her work this summer.
I also have a spendthrift kid and a saver kid. Both had the same budget for college and the spendthrift has more in loans. And a much lower paying job coming out of college. She’s going to have to work a couple of jobs to pay those student loans.
@ucbalumnus I don’t want to get too personal on this issue, but let’s just say, it’s been a hot area of contention for years now. We have fought about this frequently for years, and really, the only weapons I have on the table left at this point are either claiming all of my income is mine only and she can’t have a say, or, divorce. I can only ridicule, or plead, or yell so much, at some point, she has to be willing to do it. I have told her a few times, not really joking, that she will get her act together - but only after I die. Right now she is very comfortable letting me pull the plow alone, and has zero confidence in herself (liberal arts degree and no work experience), and is afraid of trying. To someone like me, I can’t understand it - and I am presuming most people who take the initiative to be on this forum also wont understand someone who can’t seem to take any initiative. What irks me is that she works hard, where she works, for peanuts, not realizing with a little ambition, she can make much more for the same level of effort (or less).
And to be fair, she vetoed the college because she is convinced that #1, who has diagnosed SAD, is going to have a breakdown/panic attack (or 5) and she didn’t want her to be a full day of travel away. My wife actually doesn’t mind road trips, and has claimed that #2 and #3 she would be fine with them being further away, but not #1.
Hank- I get it. I know a lot of people where one partner drives the truck in terms of finances (making more money, making budgets, prioritizing saving over spending) but there is the other partner to consider as well, and most of the time it works fine except during inflection points like a kid’s senior year in HS or major decisions like buying a house. Hugs to you.
It’s probably worth an hour ($125?) of a career coach’s time if your wife is amenable to have someone who is NOT her husband explain that she can make more money with similar effort. Your wife doesn’t want to hear it from you, but that doesn’t mean that she won’t hear it from someone else. I have a friend who just moved from an all-consuming job in the non-profit sector (one of these “work all day and go to events or development dinners at nights and weekends” types of jobs) to yet another all consuming job in the non-profit sector. The difference? She’s now executive director, has tripled her salary and eliminated her commute (her office is 8 minutes from home).
Do you know how many times her husband told her that for as hard as she was working she might as well be CEO of the organization? (a lot). Do you know how many times she complained to her friends about how she was being taken advantage of? (a lot). Did she listen to any of us? Heck no.
But she spent two hours with a career coach, ostensibly to revamp her resume and talk about her future, the result of which was that she realized she was not working to her full capacity, and a month later she had tripled her salary.
And she’s stopped complaining- at least to her friends. She works hard, but she’s well compensated, gets a month’s paid vacation which she has to use (the board forces her to take two weeks at a time), and I think as a family, they are a lot happier.
Your D’s health- that’s the most important thing. Big hug.
@blossom Great tip on this. I actually looked into that once, but never followed up. She was afraid to meet with the career coach, she said the woman would think she was an idiot for being afraid, so she never went. But I agree, and I think there is something to this. Kids will listen to a peer over a parent often, and probably the same with spouses.
One thing that bothers me is that if you put all this money in kid one but the next 2 kids are smarter and harder workers, but you might be burned from kid 1 financially. I would have not called a 3.5 HS GPA acceptable in my kids presence and that scenario would have been local commutable 4 yr option only. If you were wealthy, it would be different, but this is about borrowing money. You have set a standard with kid one that is going to suck if your next kid hits the nice stats that would get into a competitive school had there been the same budget, but won’t be available?
