I am totally new to this. My C may have to take roughly $20K loan in addition to Federal Subsidized loan. What are the best options? We did some initial research and found that there are Interest-Only vs Full payment loans. Which is a better option? Which borrower you and the direction you recommend?
Taking loans larger than the federal direct loans is usually not a good idea, and typically needs to be parent loans or parent cosigned loans.
If the student needs $25.5k debt per year, that means graduating with $102k in debt if four years (more debt if more than eight semesters are needed). That can be a large burden to pay off. And if the loans are yours or cosigned by you, that can be a burden for you.
The best option is usually to choose a more affordable college.
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Thanks @ucbalumnus! I am sorry for not making it clear. I totally understand that taking loans for undergrad is not advised but we end up taking another $20K for the final year of undergraduate. She is already a sophomore and we paid from our pocket. She will be completing her undergrad in 3 years.
Yes, I understand that parent has to co-sign and we’re willing to do that as we don’t want the student to take the responsibility for the undergraduate part. Student takes loan if required for masters program later.
We had to co-sign private loans for our kids, our in state flagship is over $120,000 with housing (very little merit given). My kids in OOS publics get enough merit to bring costs down to in state. My two oldest have pretty much paid them off, the third will have more due to grad school. The next two don’t plan on graduate school, one is commuting. My kids were eligible for co-sign release after a year of payment, we signed up for automatic monthly interest payments starting dat one. My graduates have good jobs, the others should as well with their majors.
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@Mjkacmom , Thanks! Where did you take the loan from and your experience?
I co-signed a loan for a (non-related) college student, which may also have qualified them for good rates based on my credit rating.
The decision criteria was APR, then APR and finally APR (fixed rate!) - we didn’t care who we’d owe to, and of course allowing penalty-free extra payments and early pay-off.
The other criteria was availability of an “interest only” option. I counseled that student that it’s better to only HAVE to come up with interest payments each month, and being able to voluntarily pay extra principal if funds are indeed available - rather than risk falling behind on a too ambitious schedule due to illness or other unforeseen events (and ruining MY credit rating).
The student has since graduated and has been keeping up with their end of the bargain. Phew…
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We use Sallie Mae and haven’t had any issues. We were only able to fund around $40,000 for each of them (and we are in a donut hole in a high COL area so receive no FA).
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