Federal loans, what??

Paying for College
1

<p>After read the info below, all I can say is "What??!!". English is my great weakness, can someone please tell me what all those means in easy English, without financial terms?</p>

<p>I especially do not understand the term, fees and deferral. Whatis in school deferment?</p>

<p>Federal Direct Sub Loan</p>

<p>Interest: Undergraduate Students: 4.50% for 2010-11, 3.40% for 2011-12, 6.80% for 2012-13.
Term: 10 years.
Fees: An origination fee of 0.50% will be deducted from each disbursement.
Deferral: Principal and interest. Payment is deferred until six months after graduation or before if the student falls below half-time status. </p>

<p>Federal Direct unsub Stanf L</p>

<p>Amount: Up to $5,500 Freshman, $6,500 Sophomore, $7,500 Junior/Senior, $20,500 Graduates, $40,500 Graduates in health professions. (All amounts minus any subsidized Stafford loan.)
Interest: 6.80%
Term: 10 years.
Fees: An origination fee of 0.50% will be deducted from each disbursement.
Deferral: Principal only. Interest may be capitalized. Payment is deferred until six months after graduation or before if the student falls below half-time status. </p>

<p>Direct Plus Loan</p>

<p>Interest: 7.90%
Term: 10 years.
Fees: An origination fee of 2.50% will be deducted from each disbursement.
Deferral: Principal only. Interest may be capitalized. To apply for an in-school deferment, Direct Parent PLUS borrowers should call Direct Lending at 1-800-848-0979.</p>

2

<p>Term = how long you have to pay it back once repayment starts</p>

<p>Fee = fee - a charge for getting the loan. For instance if you borrow $1,000 and there is a 2.5% fee then you will be charged a fee of $25 on the $1000 loan so will actually only receive $975.</p>

<p>in school Deferment - means repayment of the loan is or can be deferred (put off) until you finish school.</p>

3

<p>The Direct Plus loan will be your parents’ debt. How much is this amount?</p>

<p>Are they willing and able to borrow this amount AND pay it back? Will they take out these Plus loans every year that you’re in college? Will they continue to qualify? Some parents only qualify for a year or two, and then the parents have too much debt to qualify for more loans.</p>

4

<p>We are going to borrown about $23000 this year for Plus loan.
My parent is willing to help me paying it back. Question: So if we want, we can pay some of the Plus loans during school years?</p>

5

<p>Yes, your parents can pay the Plus loans during the college years.</p>

<p>Are you saying that YOU will be responsible for some of the Plus loans? How much will YOU be responsible for?</p>

<p>If you have $27k in Stafford loans, that will be a lot right there for a new grad to pay back.</p>

<p>If your family borrows $23k per year for Plus, that means that they will be borrowing about $92k. That is a LOT of money. Will they qualify for each year? How much will YOU have to pay back?</p>

<p>What is your likely major/career and how much do you think you’ll be earning when you graduate?</p>

<p>What school is this?</p>

6

<p>If my parent and I do not apply for in-school-deferment, how can I calculate how much we will pay each month?</p>

7

<p>I got scholarship. I am going to be a freshman this fall in NYU. I am heading math and economis majors. The Stanford sub/unsub is about $5000 each year. I am paying the rest of the tuition with scholarship, grant and work study.</p>

8

<p>I think you misunderstood my question.</p>

<p>you will be responsible for your Stafford loans (which will total to about $27k by the time you graduate since they are bigger each year).</p>

<p>You suggested that your parents are going to “help you” pay for the $23k per year Plus loans. That will add up to $92k by the time you graduate.</p>

<p>So, you will be responsible for the $27k in federal loans and some/most of the $92k? </p>

<p>How much of that $92k will YOU be responsible for?</p>

<p>I realize that your family wants to pay down some of the loans in real time, but you will likely still have a big balance when you graduate.</p>

9

<p>We are not sure… College and American Education is totally new to us. I think my parents will help me the best they can, and I will try to lower their burden by getting part-time job during school and get a good job after graduation. I think the starting salary is about 5ok to 60k.
How much will the $92k grown? Hopely less than double the amount.</p>

10

<p>I may be assuming too much, but it sounds like your parents’ income is not very high since they aren’t paying much for EFC.</p>

<p>What was their EFC? Are they paying for that?</p>

<p>I’m also concerned that they/you won’t be able to “pay down” much of that Plus loan during your college years. They may be only able to make “interest-only” payments leaving the $92k for after graduation.</p>

<p>If your parents make monthly payments on the debt, how much do they say that they could pay each month? </p>

<p>Keep in mind that you won’t ONLY owe the $92k, you’ll also owe the $27k from Stafford loans. And, school costs go up EVERY year.</p>

11

<p>By the time you pay it all off in 10 years with ~$1,500 a month, it’ll be ~$170,000…</p>

<p>I wouldn’t even go to this school if they made me take out this much. <em>barf</em> I used to be interested in NYU also. Not anymore after reading so many students with financial problems. I have labeled it the school for the rich and hell for the poor.</p>

12

<p>The “rule of thumb” is that you’re not supposed to borrow a total of more than what you’d likely be earning your first year out of college. (I think that amount is too high, but that is a popular guideline.)</p>

<p>For you that would be a TOTAL of about $50k. You are thinking of borrowing at least $92k plus $27k…so at least $109k. It will actually be more because college costs go up each year.</p>

<p>Do you have ANY IDEA of how much your monthly payments will be when you graduate?</p>

13

<p>I’ve heard something like the amount you borrow shouldn’t be more than 10-15% of your monthly income after you graduate.</p>

14

<p>^^^</p>

<p>I think you’re confusing that you’re not supposed to have student loan payments that exceed 10-15% of your monthly income when you graduate.</p>

<p>So, if you will likely earn $3k per month, then your monthly loan payments for student loans shouldn’t exceed $350 per month.</p>

<p>that is probably the most anyone should borrow. Many kids have no idea of how much of their future income will already be “spoken for” and won’t be available for student loan payments. Regular costs such as: taxes (state, federal, FICA), rent, utilities, car expenses, food, clothing, cell phone, internet, cable, etc will take up much of a new grad’s income.</p>

15

<p>The interest alone the first year of the parent’s $23K plus loan will be more than half of the student’s EFC, which the OP posted on another thread as being $3535. I don’t understand how the parent could even qualify for that loan, much less want to take it on.</p>

16

<p>Did you graduate high school here in the U.S.? If so, I would HIGHLY recommend that you schedule a few very thorough consultations with a college counselor there. Nothing I’m going to say is intended as an insult, so please don’t take it that way. I’m just being as honest as I can without trying to “sugar coat” anything. I’m not claiming to be anymore knowledgeable about this type stuation as anyone else here. But I MIGHT have a bit more life experience in these type matters as some, since I’m an older non-traditional student. But then again, I may not.</p>

<p>I am over 40 years old (but won’t say HOW much over :slight_smile: ) I’ve already been through the complete college process once for an Assoc. degree. That included the whole mess … loans, grants, paying them off, etc. And I have also been through the process AGAIN, in a very limited manner, in the military. By that, I mean I just took 1 or 2 courses here & there, a time or two each year.</p>

<p>And lastly, I have also already been through the job process … 13 years in the military, 3 years with an electric utility, a year in the medical community, and a couple of other short-term jobs. Now I will be going back to school in the Spring to finish my Bachelor & get my Master. </p>

<p>I only included the above to show that I have quite a bit of school/work experience to go by. So trying to put myself in your position, just me myself personally … I would NEVER EVER take on the amount of loans you are mentioning. At $23,000 in loans each year, which you mention, you will find that you will have a VERY tough time ever paying that off … EXTREMELY tough.</p>

<p>So back to the counselor mentioned at first. You REALLY need to figure out how to do at least 1 of the following, preferably 2 or 3 of them. That counselor MIGHT can help you figure out how. If you don’t have any type of counselor available, then you’ll need to figure it out on your own … through LOTS of research, asking around on respected forums, talking to other college attendees, etc.</p>

<ol>
<li><p>Find a cheaper college. There’s LOTS of them WAY under that $20-some-odd-thousand-per-year which you mentioned.</p></li>
<li><p>Related to the above, but a bit different … look at a PUBLIC college. At the amount of money you are talking about, that’s surely a Private college. Or at the least it’s a VERY expensive Public one. If the latter, then there are LOTS of cheaper choices than what you’ve found. But if your chosen school is a Private, which I bet it is, you can easily get by on HALF that amount by going Public. And there are some very well respected ones available too. Nothing wrong with them</p></li>
<li><p>Look into the completely free “work colleges”. There are a few of them scattered around & they usually require you to work about 3-4 hours per day, an occasional night and/or weekend, & a couple 40-hour weeks between terms.</p></li>
<li><p>If the above isn’t an option, try to find a school that offers ANY type of work-study program. You won’t make a BUNCH of money, but ALL of it will go directly to your tuition, and it will make a noticable difference.</p></li>
<li><p>Apply for LOTS of scholarships. By “lots”, I’m talking on the order of 50-75 different applications. Most of them you’ll never hear from. You will win a few of them for usually small amounts, but in the situation you have laid out, you need ALL the help you can get. You might get lucky however & win 1 or 2 worth several thousand $$'s.</p></li>
<li><p>Look into doing some type of volunteer work for a year or so, like the Peace Corp, or any of several positions which the government offers … interns & such. Quite often your “payment” for this 1 or 2 years of volunteer work is a full, or close-to-full, scholarship at almost any school in the country.</p></li>
<li><p>Join the Nat’l Guard or one of the Reserve branches. This is definitely not for everyone, & definitely not a decision to be made lightly. But for about 5 months of initial training, plus a commitment to 4 or 6 years of 1-weekend-per-month & 2-weeks-per-year, you’ll pretty much get a free ride to any school in the country.</p></li>
<li><p>A similar alternative to the above is to join the ROTC program that most every college has. I’m not 100% sure how those work since I went straight into the military. But I’m pretty sure they will pay your entire tuition, in return for you serving 4 or 6 years in an Active or Reserve branch after graduation.</p></li>
</ol>

<p>I would NEVER discourage someone from attending college. the simple fact that this Spring will be my 3rd time in college should prove that. But I have been in the post-college situation already, and several years in the job market. So I know with 90% surety that borrowing the type of money you are talking about, at this point in your life, is going to cause you ALOT of trouble about 4-6 years down the road. I’ll stress that word again … ALOT!! That’s the only thing I try to discourage. Get your education most definitely … but don’t bite off more than you can chew, too quickly, in the process of doing that.</p>

<p>But there are other ways. It just takes time & work to find them all & to get them working for you. But with your very future relying on the decisions you are going to make within a year or so, it’s imperative that you put more work & research into this than any other thing you have yet to do in your life. Even if it means post-poning school for a semester, or even a YEAR, it’s better to do that & make sure all i’s are dotted, all t’s crossed, & everything else taken care of. </p>

<p>That’s why I’m no going back this FALL. With this third time around going to be all the way to a Masters, at a private school, I’m looking at some serious cash … more than I felt comfortable with. I KNEW I could get a significant portion of my tuition taken care of … I just didn’t know exactly where or how. So I decided to wait & use the entire Fall & Winter simply getting all of that stuff put together. Waiting that extra 6 months won’t make THAT much difference for my life itself. But it will make LOTS of difference in the financial position I’ll be in after graduating.</p>

<p>Good luck out there.</p>

17

<p>*The interest alone the first year of the parent’s $23K plus loan will be more than half of the student’s EFC, which the OP posted on another thread as being $3535. I don’t understand how the parent could even qualify for that loan, much less want to take it on. *</p>

<p>that is always what I find interesting. Often the same low-income family that can’t even really pay their EFC will sign up for loans that will require monthly payments that annually would be much higher than their EFC. </p>

<p>And, these same families never seem to do the math and realize that taking out these big loans is not a one time thing. For 4 straight years they have to re-qualify and borrow more money. Do these people really think they will qualify (and can pay back) $80k+ total in loans?</p>

<p>That said, I do think that the qualifying process for Parent Plus needs to be more stringent so this merry-go-round doesn’t even do a first turn. It’s sad to see such families qualify for year one and then get denied for year two. At that point, the student has to leave the school but the burden of the debt remains.</p>

18

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<p>Maybe they were planning to pay it out of the 1 million / 10 billion / 760 squididdlion more dollars that the average college graduate makes in his/her lifetime compared to the average high school-only graduate.</p>

19

<p>It seems like a lot of the people in this position on CC only compound their initial mistake of falling in love with an unaffordable school by taking out huge loans for the freshman year while planning to transfer for the sophomore year. Then they have huge loans for college credit that could have been got for practically nothing at a community college and can’t get any financial aid as transfers at the second school. I know a gap year must sound like an eternity to an eighteen year old, but it is by far the best option in most of these cases.</p>

20

<p>It seems like a lot of the people in this position on CC only compound their initial mistake of falling in love with an unaffordable school by taking out huge loans for the freshman year while planning to transfer for the sophomore year.</p>

<p>Do you think that is what’s going on? I’ve wondered that a couple of times. In other similar cases, I have wondered if some students are just so desperate to at least go to their dream school for their freshman year, even if there’s a good chance that finances will fall apart after that. </p>

<p>If this is what’s going on, is it because they don’t want to “lose face” as seniors in high school and have to tell their classmates that they won’t be going to their dream school? Is it that they only have their eyes on the first year? Is it that they’d rather quietly leave the school later?</p>