How are you doing it? Are you turning down loans and paying for everything until you can’t anymore, or is your teen accepting whatever loans they get and you are paying the difference? We have x amount of dollars set aside in a college fund, but when it is gone, it is gone. For the first year, my dd is going to a CC and taking general courses until she figures out what she wants to do. She was awarded a loan, but since we can cover the first year, I am hesitant to have her take out the loan and have to pay back the interest. However, if she decides to go to a 4 year institution after this and board there, our money will run out very quickly, so I’m thinking maybe I will have her take all the loans she can get, pay as much of the difference as we can, and if there’s extra left when she is done, use that towards helping her pay off the loans? I’ve also heard of some parents paying off a percentage of the tuition based on the students grades as well, which appeals to me since my dd is very wishy washy about college right now. If any of you do that, how do you work it? Do you pay off a percentage of the loans or a percentage of the following quarter? Any advice would be great!
We have parsed out the saved money equally over the four years our kid was in school. Remember that if your kid takes a subsidized loan, their interest is covered until they get out of college. BUT, if you think maybe your kid won’t even complete college (not a thought parents want to entertain, but it does happen, especially for kids who start at CCs without a lot of direction), then I agree that taking out loans is risky. BUT, you could use your college savings to pay them off if necessary (if your kid drops out), too.
We do not pay for grades. We cut a deal of what expenses they would pay, what they would cover (books & spending money, any expenses related to summer programs like unpaid internships), and the younger one who is at an expensive college is taking out her subsidized federal loans. We covered the rest through savings and current income. As I said above, we divide the savings we have by the number of remaining semesters, and take that out of savings, and come up with the rest out of income. Told them that the parent bank is good for four years, so anything beyond that, they have to figure out how to pay for it.
I’d be hesitant to equally divide the savings between CC and the last couple of years at a 4 year institution, though. You have it right that the years at the 4-year college will eat a lot more money. If you can’t afford it, are there 4 year schools within commuting difference? Your post makes it sound like you don’t really have a financial plan to get her through four years, even with two years at a CC.
Unfortunately, since I have no idea where she is going to end up, I really can’t come up with a financial plan. I know how much money we have to help, but since she can end up doing an associate’s degree at the CC or do 2 years at the CC, then transfer to a 4 or even 4+ year program somewhere else, I can’t even begin to divide it equally. Plus, the costs vary so much that we might be able to cover 4 years one place, but only 2 somewhere else (not including books and extras).
Also, how long would you hold onto the money? Unfortunately, I do fear that she may not go on past the 1 year here (hoping I am wrong, but she really is not into it right now). Would you hold onto it for them indefinitely in case they decide to go back in a few years?
If you have $x, then you can try various colleges’ net price calculators to see if that will cover the cost (perhaps with some student loan and/or work added).
Be sure that she knows what your limit is, so that she can choose an application list that is likely to yield affordable choices.
If you think that the money will run out, she can borrow the student loan this year, and put it into a savings account and just leave it there until she needs it.
Happykid attended our local CC for two years and earned her AA. Then she applied to one in-state public U that guaranteed admissions and full credit for her AA coursework, offered her major, and that we know would be affordable with what we could pay, what she could borrow, and what she could earn during the summers and the school year. She also applied to one private U that she really liked, with the idea that if it proved to be no more expensive than that in-state public U, she could go there. The private U didn’t come in under budget, so she went to the in-state public U. There were no tears or sadness because we all had been completely clear about the finances from the get-go.
You could also have her put off college for a year and work and save money, maybe that would motivate her?
Sounds like she needs to do a gap year. Many kids start college, waste time and money…end up with lowish or bad grades. It sounds like she needs to take a gap year, work as much as she can, and figure out where to go from there.
But to directly answer your Q…if she’s offered any subsidized loans, take those. But again, if she’s not ready for college, she really should wait.
[bold]How did/do we do it with 3 kids?[/bold]
1.) 529 accounts from us.
2.) Their savings and their part-time jobs (a requirement)
3.) Their small loans that were repaid the following summer. Our parent plus loans.
4.) And our lack of entertainment expenses, new cars, upgraded furniture. No vacations for the past 10 years.
5.) Our being cheap on everything: shopping at thrift stores/ dollar stores/ using coupons, taking self-repair classes at Home Depot, on the weekends, to do everything ourselves.
6.) Trying to limit their choices to in-state schools that were somewhat affordable.
We gave a price per year that we would pay= the amount in savings/4 + what I could pull out of current earnings. (You could go 5 years if there’s a transfer involved because that often adds time to degree completion.) Beyond that would have been work and loans. And yeah, we probably would’ve gone loan every year rather than spend all the money on the first years of college.
And yes, what @“aunt bea” says: look at schools that are affordable.
With so many variables in your situation, I don’t know how you’d come up with a plan to cover them all. The best thing is to come up with something simple, clear cut, and easy for you all to remember/understand.
For us, it’s a combination of using savings from 529 plans, a portion paid out of our income and using the subsidized and unsubsidized student loans they’ve been offered. Like @aunt bea, we have gone without a lot over the college years and do everything on the cheap to be able to afford these payments. We made it clear to both of them during the college selection process that our ability to pay was not unlimited and that choosing a more expensive school would result in higher loans for them to ultimately repay (we used online calculators to model the costs so they would have an idea what those payments would be under each scenario). Both chose one of our flagship state universities and have done well. I’m a believer that students should have some skin in the game - I know that both of my children have had a greater appreciation of the investment in their college education as a result.
We are in the fortunate position of being able to pay for D’s college expenses from current earnings; she helped with that by earning a very large scholarship. However, if she qualified for a subsidized loan (which she doesn’t), I would definitely have her take that loan, as there would be no interest accruing until after she was out of school. There is a loan fee of slightly over 1%.
I was in a college planning workshop in my DD’s school. The presenter bragged that his kid took out the loan without the interest and re-pay immediately after graduation so as to build up her credit history…
I wouldn’t force a kid who is wishy washy about college to start.
Especially if you are concerned about finances but even if not.
Can she get a job, live at home, save some money while she figures out her next step?
The statistics on kids who start at CC’s without a solid plan are grim btw. Why put her on a path she’s not ready for???
Oh, believe me, I’ve tried to DIScourage her from going right away. I’ve tried to get her to go to a structured gap year program in Mass., but that was a no go. I’ve encouraged her to either work full time for a bit or work part time and shadow a few professionals that she might have even a tiny interest in. Nope on that too. She doesn’t want to be “one of those” people. Those are her exact words. She says that if she doesn’t go now, she probably won’t go at all.
I’ve told her that if she still doesn’t have any idea after a year of generals, if she still has no clue, it is time to take a break. Otherwise, it gets too iffy on the classes not transferring once you run out.
I took the 529 savings and divided by 4. And then add to that what you can afford monthly from earnings. So for example if you have $20,000 in a 529 and can pay $200 per month from income. Your budget would be $7400 per year.