Okay, so as far as I understand, this is what you use to pay for college:
Am I getting this right?
Pretty close, except that FAFSA just helps define what you get through the school.
You can only borrow $5500 yourself for freshman year.
You should start a thread with your parents income and what they have agreed to pay v. the COA of the college you hope to attend. Look up the sample FAFSA and find out what their expected family contribution is. Many parents refuse to pay even that. I refuse to pay $60k for my son when he can attend an in state school for much less.
parents earned $75k
that’s too high for federal grants, so thru FAFSA, you won’t get free money.
Most schools do not have their own need-based aid to give.
You can only borrow $5500 as a freshman.
I don’t know if you realize most student loans will be in #2, guaranteed by the federal government, administered through the school. You don’t go to a bank for Stafford, Pell or Plus loans. Only private student loans will be in #5.
@OspreyCV22 So when I read news stories about people who owe tens of thousands on their student loans, am I reading about the people who take out loans in the name of their children?
So if I get into a great school, does that mean that I might not be able to go even if I’m willing to take on student loans?
Most of the stories you read about people with $100k in student loans are either grad student or students who have private loans, or are independent students (married or above age 24), or are the parents or had parents who co-signed. The federal loans through the school are limited (although it is possible to get them up in the $50k range).
So private loans are the ones you get from your average bank like BofA or Wells Fargo, right? I’m sorry if that seems like a dumb question. I’m super stressed out and I just want to make sure.
<<<
So if I get into a great school, does that mean that I might not be able to go even if I’m willing to take on student loans?
<<<
Right.
Because a 17/18 year old has no idea of the impact of those loans, is only thinking short-term (I want to go to this school), and doesn’t have the income and credit score to qualify.
Do you know what would happen is banks suddenly started loaning to undergrads? Suddenly all kids would be “going away to school,” and colleges would just charge whatever they wanted because young folks would just naively sign on the dotted line.
Your parents would have to QUALIFY each year and co-sign those loans. Most parents will not do this because they’re at risk to have to pay the loans back, and their credit score is hurt while those loans are outstanding.
<<<
@OspreyCV22 So when I read news stories about people who owe tens of thousands on their student loans, am I reading about the people who take out loans in the name of their children?
[/QUOTE]
You are mostly reading about students who borrowed a lot for grad school…or you’re reading about people whose parents stupidly cosigned those loans.
Since you’ve read those horror stories and how those loans have ruined their lives, why would you consider doing this yourself???
You want to be an econ major. Right? Let this all be your first lesson.
OP, it goes something like this: Your parents fill out the FAFSA and any other diagnostic test tools the school chooses (likely the CSS). This diagnostic tool is used to determine the parent’s contribution and the Student’s contribution based on income, savings, assets, number of children in school, age of parents, and other factors.
The school determines the total cost of attendance at their school. This number includes spending money for going out, rent, meal plan, books, supplies, incidentals, transportation- everything, based on a frugal student getting by for the year. This is called the cost of attendance or COA.
Some schools, including the “great schools” many aspire to, agree to meet the demonstrated need of every student they admit. That means that the budget that they propose will cover the full COA.
The budget they propose will consist first of the Parent and Student contribution. The student contribution will typically include imputed income from term-time work (work-study) and summer job income. Next will be loans TO THE STUDENT. These federally guaranteed loans are limited to $5k - $7k per year and index up each year. I forget the exact amount, but others will come to the rescue, I am sure! So total student loan debt will be limited to about $25K for a typical 4-year undergraduate degree- probably less than a new-car loan, except student loans carry a longer term to pay them off (but they also have a higher interest rate).
Some schools give financial aid that does not include loans in this COA budget, so their students graduate debt-free. Some schools do not guarantee to meet full need, there will be a gap between their proposed budget and the COA, which will need to be covered somehow- like with private loans. Most of the “great schools” you hear about do not do this- they meet full need and do not ‘gap’ you- though state flagships and schools with smaller endowments may not be able to meet full need.
After parent contribution and student contribution (as determined by a tool like FAFSA or CSS) and loans (if any), then schools add in Federal Grant aid (basically Pell grant if you qualify), State Grant aid (if any), outside scholarships, and institutional grant aid, often in that order. However, some schools will allow outside scholarships to displace loans before displacing institutional grant aid.
Moral: Outside scholarships are good to replace loans (even with full financial aid) but parent contribution is the last item to be displaced. It is not likely that you will get in over your head in loans if you are an excellent student just trying to get an education, and your parents cooperate and pay what the colleges think they should. Uncooperative parents, parents with complicated taxes, and parents with a lot of unsecured consumer debt will be in a squeeze. “Typical” parents (if that is even a “thing” anymore) should be able to get a fair shake from the schools.
See http://www.direct.ed.gov/applying.html. First year - up to $5,500, second year - up to $6,500, third year and beyond - up to $7,500
Or, the praent(s) can request Direct PLUS Loan, see https://studentloans.gov/myDirectLoan/whatYouNeed.action?page=plusApp
Not all private banks make student loans. In fact, few do. Some may make unsecured signature loans, but even those are rare. Discover is a big private student lender.
Have you tried the Net Price Calculator for the top schools you are most concerned about?
Maybe try that and then talk to your parents about the results and options. (Would they be fine with giving up Harvard for a full ride at University of Alabama, for example?)