<p>Hi all,
I am asking for some much needed advice. Our very hardworking 4th daughter has gotten into some really wonderful colleges. She is currently Valedictorian, Full IB student with a 4.84 GPA. She has worked extremely hard to receive straight A's in all four years of high school. Obviously we are very proud. :)</p>
<p>My question is this...After raising 4 children, we are seriously "tapped out" financially.
Living in California our home equity is gone! </p>
<p>How much do you all think is too much to take out in a Federal Parent Plus Loan?</p>
<p>Our EFC is $18,500 and although she has received some wonderful merit scholarships we are still going to need to come up with our EFC.</p>
<p>Do you think it is unwise to take out the full amount of the EFC in Parent Loans?</p>
<p>Thank you all for your advice, I have found that CC has been a lifesaver in the college admissions process! :)</p>
<p>Really, you need to look at YOUR family finances and decide how much money you wish to take out in loans. What may work for someone else may not work for you. The reality is that you have to eventually repay these loans…and you need to decide if you can…and how much is realistic for you.</p>
<p>We did not use Parent Plus loans. But we did use some home equity loan money (luckily, not a huge amount). We figure we’ll be able to pay the loans back ourselves once we are finished making tuition payments (we’ll feel like we’ve won the LOTTERY when we finish making tuition payments). That was our barometer…we looked at what we are paying monthly and figured we can use a good chunk of that to pay the HELOC off. (We use Tuition Pay so we are paying our share monthly for 10 months of the year…we found this easier to manage and budget than paying each term).</p>
<p>think of it this way, would you be willing to take this much (or more) out for 4 years, putting you at 74K in the hole with a loan at 8% (or more). Will you be working enough years to pay this off while still actually living and saving for retirement. Only you know your circumstances to be able to answer that question</p>
<p>This is a personal decision each family has to make as they would taking out any loan. Get the monthly payment schedule and see how it fits with your future plans. You are the only one who can determine what is “too much”. We took a bit more out this year than what we needed on paper, because we knew there would be outside costs (visiting S) and things were going to be tight this year for us. I’m glad we did that.</p>
<p>Congratulation on having such a hard working successful daughter. What her success should tell you is this is a kid who will probably do well no matter where she goes to college. I don’t think that any child’s reward for hard work should include their family taking on uncomfortable debt.</p>
<p>The first thing I would do is assess her goals and where she has the best chance of accomplishing them. If she wants to be a doctor or lawyer, any solid college will get her into a good grad school. If she wants to go into business, than if the school we’re talking about are HYPS, they might be worth it if you can swing it.</p>
<p>But since H and P have not sent out acceptance letters yet and you talk about merit aid, I’m wondering if these schools are of very different quality than what she might get with less expensive options. </p>
<p>Bottom line, in this economy and with the knowledge that this will be a prolonged recession, there has never been a better time to keep debt low.</p>
<p>It is a personal decision. With that said, the parent plus loan is a very good option if you need money for school. You can opt not to start repayment til your child is finished or drops below halftime. Perhaps you can do a combination of things to keep it at a minimum such as the using the monthly tuition pay using current income as well.</p>
<p>My sister was bemoaning that she tapped out any home equity fixing much needed home repairs and took out quite a bit on a parent loan…stretched out it is manageable and she seemed a bit of the grim reaper the other night saying, “At least this debt wont carry over after I die as some do”. I think she was sad because her friend died of cancer and it was something her children didn’t have to deal with, it was just forgiven. (only in her name)
These decisons are always hard and sometimes you question them later, but you do what you feel is right at the time.
I remember when I was faced with 10.000 more than I thought we would have to pay, mentioning to the FA counselor, that I would maybe take a second job to help pay it (many of my co-workers did that) She countered over her bi-focals, that would be my decision, but please realize that would increase my EFC and I’d have to pay even more.
That’s the bottom line in FA, the more you make, the more you pay, unless you get a great scholarship.</p>
<p>Yes, the more you make, the more you pay, but there is still some left over. They are not going to take every bit of the excess. I found this very discouraging too when I worked. Since H makes a good income, when I earned some money, it was all taxed at his marginal rate which really did not translate into much net for me. Considering that little bit is not going to do a thing for my social security, it was particularly galling to have to pay that in addition. Had we been on financial aid, another 25-30% would have gone into the EFC. So you pocket twenty cents on the dollar, but that’s twenty cents you did not have before. The way to make if feel like you are getting anything at all is to bank the money so that you can see it. If you spend it and did not deduct enough taxes or forget that it will effect financial aid, you are going to have to scrape the additional out of pocket an feel gypped.</p>
<p>Yes you are right, I had to adjust my deductions. I will say, we did have our grant be almost “dollar for dollar” last year. I got a new job, made 5,000 more and had my sons 7,000 grant go to 2,000.</p>
<p>The best advice I could give you is to shop around for loans. My D started college last year and like you, I had to come up with almost the same amount of EFC for her. Instead of using the Parents loan, I opted for a private loan which gave me a much lower interest rate. What I’ve done since is make monthly contributions towards the loan and pay off the quarterly interest. As a single parent, this is hard, but hopefully things will get better.</p>
<p>I have a question about the PLUS loan (or any loan). When they ask for the amount you wish to borrow, would it be for 1 year of college or all 4 years?</p>
<p>D starts in June. We are willing to pay for Summer but will need a loan for Fall/Spring.</p>
<p>Where did you find a private loan that was cheaper?
I wouldn’t pay more than 1 year at a time because you never know if the student will be at the college all 4 years.
I also pay the quarterly interest on my loan and my son’s stafford…it’s not much, but will help him later. It does add up</p>