Th biggest hurdle with elite private colleges…is admissions. With acceptance rates in the single digits…they are not a slam dunk for anyone.
Their excellent and generous need based aid does you NO GOOD without an acceptance…and financial need.
Actually, i’m still confused about student loans (and apologies, OP, for highjacking) but I’m constantly seeing here at CC that a student can only take out $5000 a year in loans…so how is it that students are graduating with $100,000 loans (okay, newspaper articles that I’ve seen) if they’re not counting the loans taken out by parents as well?
^^^ parents are co-signing private loans for their kids
Undergraduate student loans without a cosigner (federal direct loans, formerly Stafford loans) are limited to $5,500, $6,500, $7,500, $7,500 (years one to four).
Additional undergraduate student loans generally require a cosigner (usually parent).
It’s because of parents co-signing for loans. There are also private loans available for credit worthy students with similar terms as the Federal loans as well. There’s always a loan for it if it costs something. Its a big exploitative business.
@MomOf3DDs Because I would think the colleges know darn well the details of the financial aid package. Are college loans paid direct to the schools? If so, then they certainly know who paid them. Quoting $7000/yr in student loan paints a distorted picture, if the actual situation is $7k for the kid and 30k for the parents per year. I guess stating “student” debt is technically accurate, but it implies “only” when that may not be the case. There should be a disclaimer or something that says, families may incur additional loan debt not accounted for here.
Thanks for all the responses so far. I still have a few questions for my excel file. I’ll also adress some of the questions posed below.
I should clarify, the goal is for our son to be debt free…we will definitely be in debt.
I have but we’re still waiting on acceptances, merit aid, outside scholarships, etc.
This was exceedingly helpful. My hope is to make payments as we go. I didn’t know if I could defer Plus loans. Can I pay when it’s possible throughout the life of a loan that is technically deferred? I’d rather pay all along rather than interest only payments or straight deferral.
You make a very good point. I like the idea of him having skin in the game. Just as I’d prefer to estimate more than we might owe, it would be nice to have him expect to pay “some” of his educational costs only to find out that we can afford to cover them for him. I think I’ll use your strategy.
We did and they essentially were within our price point, but our pain threshold on borrowing is pretty high. As I stated before, we’re still waiting on acceptances and actual aid offers. If none come for any school then we are looking at a substantial amount of loans on our part. Our other child is already receiving athletic interest from schools which would, best case scenario, make a difference in our overall debt down the road. I’m coming to grips with the fact that I’ll have substantial student loan payments for the next 10-15 years.
You hit the nail on the head. This is one of the primary reasons for this exercise. I’d like to paint a picture of the long term implications of college debt on our family. To your point,10 years after my youngest graduates, I still will not have reached retirement age, though I’ll be close.
I’ll put it out there. It sounds to me like you will be financiallly stretching yourself in terms of taking out all these loans.
Did your kid apply to any colleges where YOUR debt would not be so significant?
I’d like to also add…isn’t it a little late to be going through this financial analysis and exercise? Shouldn’t this have been done BEFORE your kid’s applications were sent?
- Do not just consider the best case scenario with respect to the younger kid being a recruited athlete. Consider also a typical or worst case scenario (e.g. not recruited at colleges that s/he is actually interested in attending, injury ends athletic career, etc.).
- Even a parent willing to take on debt may want to consider having the student take on the federal loans (no cosigner needed); the parent then has the option of helping the student pay them off, but is not required to in case the parent's financial situation becomes too dire.
- Are there really no options that avoid the need for loans other than federal direct loans for the student? From what you write, it looks like your financial situation is overstretched already, so additional debt would overstretch it even more. It looks like you may have trouble funding your retirement if it will take until almost retirement age to pay off all of the parent loans for your kids' college costs.
@thumper1 Yes, he did. He is not applying to any school with a COA over $57k, and one is sub-$25k. Most are roughly $40k but another is a very good state school that will come in around $30k. While we may stretch ourselves, I feel like it’s part of being a parent. My parents did it for me. My wife’s parents did it for her. Granted, the price of education currently is vastly different from 1990. Will it mean driving cars until they actually die? Yes. Will we need to live on a tighter budget? Of course. Do we have other debt? Sure. That being said, our house will be paid off as our first son graduates, and we already have a significant amount of money accumulated in a retirement account that I started 20+ years ago, and I will continue to contribute into it. All in all I expect it to be painful but rewarding.
I agree totally which is why I called it best case scenario. Son number 2 is also a VERY strong student which may mean more merit, etc. That all remains to be seen.
Here is my suggestion. If you plan to pay anything out of current earnings…start putting that amount aside NOW…so you can see if this is actually doable.
In other words…if you plan to pay $1000 a month out of current earnings for any reason (some private loans and HELOC loans have repayment begin immediately upon disbursement), you want to be sure you can actually put that amount aside for college costs.
Your son has applied to mostly expensive schools…with the two options at about the $30,000 mark, right?
No student HAS to attend a $57,000 a year college.
I think skin in the game begins now, with a job for the kid. Only after scooping McDonalds fries for $8 an hour do you really understand the value of a dollar. Otherwise it is all theoretical and easy to dismiss.
Finaid.org has all kinds of handy calculators. Scroll down to the bottom of the main page to find the links.
Re preparing for the worst:
Our family breadwinner was laid off in a massive company-wide event half-way through our kid’s junior year of college. The kid didn’t have to drop out, and didn’t end up with a cent more debt than we had planned on because of swift and generous action on the part of her home-state public U financial aid office, and because we had been really tight-fisted with the college budget to begin with. We were incredibly lucky.
All very valid points. Currently we spend a lot of money on unnecessary things. We’ve begun to tighten the belt and are currently identifying the items that are much more luxury than necessity. We should be able to handle $1k per month if we had to, but I wouldn’t anticipate payments getting to that level until the tail end of his college career. We should be able to cover most of the first year with the 529 plan we have as long as he takes out the standard $5,500 federal loan.
As for the schools, the 3 between $50k - $57k are small local privates, and I would anticipate some merit aid. Hopefully they’ll be more affordable than sticker price after we get their acceptances. None of them are his top choices. Of the 4 from $40k - $49k, I don’t expect much in the way of aid because they’re publics and he’s applying OOS. The issue is that his top schools are within this group. The final 3 are in-state schools that range from $24k - $30k. The lower 2 are total safeties and he may get money as well. The $30k option is most likely the best in-state choice, and one he’d be okay with.
He’s applied for some local scholarships as well, which could help with some of the costs if they come through.
I agree. He’s an amazing worker. He’ll dig fence post holes all day in the hot sun if you ask him to. This isn’t a worry for me. He actually has a job that pays up to $50/hr at 17 years old, if you can believe that. The issue is that he’s been busy with sports up until now, and he’s only been able to work 3 hours at a time.
Currently we spend a lot of money on unnecessary things<<<<<<<
This is a confusing thread for me, and seems to have a potential for magical thinking. Grown ups who are looking at taking on large debt in their later years don’t say things like this.
If your breadwinner was made redundant tomorrow, how would you look, financially? You both have solid retirement funds? Does one partner only carry the health insurance plan?
How much will the 529 cover? And are PP loans your actual options or HELOC at a low rate?
You can control that. If you want to keep the payment at $117 per month, you’d start repaying immediately upon taking the loan. The second year, you’d take the next $10,000 and payments would be the $234.
Most people don’t do that. They defer the payment start until the end of undergrad, but then the payments are going to be more than $117/per $10k because interest will have accrued. Also, Plus loans have a 5% origination fee, which is pretty high. It doesn’t make sense to repay $117 per month and then pay an origination fee to borrow more money. You may have better options (HELOC, private loan). There are benefits to Plus loans, but the origination fee isn’t one of them.
Your child taking the Direct student loans ($5500, $6500, etc) is always going to be a better option than Plus.
I didn’t want my kids to have student loans either, but after the first year they became necessary. We’ve kept the amount down by working, living cheaply (at home and at school). They do not have cars at school, they don’t go to spring break in Mexico, they don’t shop for text books at the bookstore but beg, borrow, and trade for them (most often rent them). Their dorm rooms didn’t look like Room and Board Teen showplaces (they took their stuff from their rooms at home and towels from my linen closet). They both have a few expensive pieces of clothing but live in sweats and jeans.
But really, the biggest thing was picking the schools we could afford.
I agree this thread is confusing. It seems the cows have left the barn and you’re hoping they’ll find their way back.
You asked how to show him the implications. Thats not about maxing your own loans. Maybe I’m wrong, but that sends the message big loan debt is ok, a reality (after all, your parents paid for your educations.)
We told our kids college costs were like buying a new Mercedes every year. They understood we were not in that market, were driving old cars, balancing other family priorities.
You asked how it works. After the PP loan amount is disbursed, the billing starts a few months later. After that, it’s on a similar cycle: more money is released, your payment increases.
We opted to start paying, not delay. First payments are easy and the ten year clock starts on that part of the overall loan. Problem is, with each new disbursement, the monthly payment goes up. By the end of senior year, you could be in one heck of a crunch. So by then, it’s, eg, $468 (10k loan/year) on the first kid’s four years, but now you’ve got a second kid in the cycle, his PP loan costs.
Yes, as you hit the ten year mark on each loan segment, in theory, your overall amount due monthly goes down (ie, after ten years, you’ve paid off xxx dollars, now it’s a lower balance.) But you’re still locked into years of payments.
No one should take the loans just because they’re available, but only when you know how you will afford to pay them back. I am not in favor of a HELOC, you’re counting on a stable housing market. And, what about your own need to save for retirement?
I’m surprised you don’t have a better idea of what merit he may get. Some NPCs tell, upfront, what he qualifies for. If this is more random, I’d be explaining to mine that his acceptance of an admit depends entirely on what aid comes through.
In fact, my expression to mine was: No school is a dream college, unless we can afford it.
Good luck.
Agree. Why do you need to show your kid the implications of loans that YOU plan to take…and will be responsible for repaying? Are you expecting him to help you repay these loans?
If not…the only one who needs to understand the implications…is YOU because these loans will be taken out by YOU and you will be responsible for repayment…not your kid.