<p>When I modified my FAFSA with income numbers from 2010, my EFC is now at or above the cost of tuition, so I am assuming I will get zero financial aid (unless schools income average for people like me who are self-employed).</p>
<p>Question: what's so bad about private student loans? I just checked out Citi -- their best rate is around 3.375%. I thought my only option was to come out of savings or use my equity line, but this might be even better. Am I missing something?</p>
<p>You’re an 18-year-old high school graduate with no assets, no record of managing debt and no established career. No bank in the world is just going to hand you $30-50,000 per year.</p>
<p>You will not qualify for private student loans without a job or other steady income, a strong credit history, a co-signer and quite possibly putting up significant collateral.</p>
<p>All that you can borrow yourself is $5,550 in unsubsidized Stafford loans. Your parents can borrow more via the PLUS program.</p>
<p>Edit: Wait a minute, I’m confused by your language and your past posts. Are you applying for yourself, or is your daughter applying?</p>
<p>The worst rate is probably around 11%. It depends on credit history, etc.</p>
<p>Sorry – my post wasn’t clear. Since I modified the FAFSA, that’s what I wrote, but I can see how it could be misleading. My daughter is applying; I would cosign. I’m pretty familiar with lending guidelines, and my credit and DTI fall within the requirements of the program I quoted. So I guess there really is no downside.</p>
<p>The downside is you would have substantial loans after four years of college. How much are you anticipating taking out? Are you able to pay anything out of current earnings or savings? I would NOT suggest that anyone fund their entire college costs with loans.</p>
<p>^Right – I’m just trying to figure out the right mix and look at all the options. I was thinking of maybe $10K max for 1st year, then going forward it might be zero on student loans (depending on a couple of different things).</p>
<p>*My daughter is applying; I would cosign. *</p>
<p>How much total debt would your poor D be stuck with after graduating? It sounds like you’re planning on co-signing enough loans to put her into major, serious, life-ruining debt. Doesn’t sound like a loving thing to do. </p>
<p>But, please, correct me if I’m wrong if she’ll only have about $25k debt total by graduation. However, it sounds like she’ll have $50k+ in debt by graduation.</p>
<p>Or, if YOU will be paying back these debts, then fine…but then why the words, “co-sign”??</p>
<p>BTW…even with a high EFC, your D can do an unsub federal student loan of $5500. </p>
<p>How much will you be contributing each year?</p>
<p>What kind of job will your D have when she graduates and what do you think she’ll be earning then?</p>
<p>That’s funny: “Or, if YOU will be paying back these debts, then fine…but then why the words, “co-sign”??”</p>
<p>As the other poster pointed out, she would not qualify on her own for any debt. I would cosign to help her qualify. And no, I’m not a heartless person – not that it’s any of your business, but I would be paying her loans. </p>
<p>Thanks for caring</p>
<p>If you’re paying for the loans, then why the co-sign part? If they’re YOUR loans, then take them out yourself - she doesn’t need to be on them at all…that’s what Plus loans and other private loans are for. When you co-sign loans, then the loans are hers with you “co-signing” them so that SHE can qualify. You don’t need HER name on a loan that YOU’RE going to pay back unless SHE has the assets/income to help you qualify. </p>
<p>As for it not being my business…you made it our business by posting your business and asking for opinions…and using the word “co-sign” which means that they would be HER loans and you’re just helping her qualify for them.</p>
<p>So, if you’re going to be solely responsible for paying back these loans, then fine…I don’t see what the issue/question is.</p>
<p>Please stop pointing fingers.</p>
<p>To the OP…if you cosign, your daughter would be the primary payer of the loans. YOU would be responsible if she defaulted at any time.</p>
<p>Plus Loans are parent loans. They do not have student names on them at all. If you as a family feel comfortable taking large amounts of Plus Loans to fund your daughter’s education, that is fine. It is a personal decision. As a family you need to look at the long term impact of repaying a significant amount of college debt…regardless of who is taking the loans.</p>
<p>The other thing to remember is that college is for four years. While you may qualify now for these large loans, are you sure you will continue to do so for all four years? You don’t need to tell me…you just need to be sure of this for yourselves. </p>
<p>As I stated before, I would NEVER advocate for any family to fully fund college costs using loans. It’s one thing to supplement contributions from current income and savings…but personally, I think that if ALL the costs of attending are going to be with loans (regardless of the holder of the loans), the school is too expensive.</p>
<p>3.375 interest rate was posted by “classof2015” - i’ve seen low rates like this and they appear to be variable or adjustable - monthly. the plus loan is 7.99 fixed. please make sure you’re getting a fixed rate. oh - and please let me know if the 3.375 IS fixed, that would be very helpful! good luck to you.</p>
<p>I agree with the suggestions to fund as much of the EFC as reasonably possible out of savings and current income, and to carefully scrutinize the terms of any loans.</p>
<p>But I disagree with the characterization of a graduating student’s debt over “about $25K” as being “major, serious, life-ruining debt.” I graduated with that kind of debt back in the mid-80s (at interest rates in the teens, and at a time when $25K was worth about $50K in today’s dollars), and did just fine paying it back through disciplined budgeting and financial management. Yes, it meant that I lived in some less fancy apartments and ate pasta five nights a week for quite a while, but the price I paid makes me appreciate where I’ve gotten even more than I would have if everything had been handed to me by mummy and daddy.</p>
<p>I’m not talking about going out of your way to make your kids borrow more to “build character,” or to borrow amounts that are way out of whack with the type or quality of the education. But it may be a viable option for funding an education at a good school that’s the right fit for your D IMHO…</p>
<p>$25,000 for the full four years is not staggering debt. That is about what a student would have if they took the full Stafford loan. $25K per YEAR is staggering, in my opinion.</p>
<p>^Good point. That’s what I was hoping to get – clear eyed recommendations about pros and cons that I may not have considered. I value and appreciate comments made in that vein. </p>
<p>The 3.375% is definitely variable, but for various reasons, I may need short term funds and if I think rates will not skyrocket over the next 12-24 months, it may be cheaper than a higher rate fixed loan. But I need to find out prepayment provisions with that type of loan.</p>
<p>A potential loan of $10K would definitely not be funding the entire amount of tuition. I agree – to do so would be foolish.</p>
<p>Thanks to those who are genuinely offering advice and guidance.</p>
<p>*But I disagree with the characterization of a graduating student’s debt over “about $25K” as being “major, serious, life-ruining debt.” *</p>
<p>You’re mixing up my sentences. I said that it sounds like the debt would be $50k or more by graduation. I thought my point was clear, but perhaps not.</p>
<p>But, please, correct me if I’m wrong if she’ll only have about $25k debt total by graduation. However,* it sounds like she’ll have $50k+ in debt by graduation.***</p>
<p>Total debt around $25k is manageable for a student. (plus or minus $5k or so).</p>
<p>$50k+ debt would be major, serious, and life-ruining debt for most young grads because there are just too many other expenses to pay for…more than what you may have had to pay for as a youngish grad. While things like cell phones, internet, and cable TV can be considered “luxuries,” most current grads will have those expenses. </p>
<p>Also, healthcare costs are much higher than you were a newish grad in the 80s. When I was a new grad in the 80s, my employer paid for all of my healthcare premiums and my deductible/co-payments were so tiny that they were not a consideration ( Most doctor and Rx co-payments were $0…my annual deductible was $50…max out of pocket was $100…LOL…). Now, a person can expect co-payments like $25-50k and health insurance contributions that run into the thousands. And, max out of pocket can be in the tens of thousands…or even no limit at all! </p>
<p>And, housing costs a lot more these days. Back then, a person’s housing cost could be 25% of income…now it can be 50% or more…so much less to go towards big debt. </p>
<p>Also, I know as a female, I had many more expenses than my male co-workers. Female upkeep is just more expensive nearly any way you slice it unless the woman is really low-maintenance with hair/clothes/make-up/etc…(OMG…those were the days when we had to wear pantyhose (yuck) and just that expense alone cost me about $30 per month). </p>
<p>The $25k debt was in reference to a more workable amount. </p>
<p>Anyway…the OP has now clarified that the debt will be hers (the parent’s), so not the child’s.</p>
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Let’s not be over dramatic here…it’s not “life ruining” but $50K in debt would be substantial in that it would probably take about $500 a month for 10 years at least to pay it off.</p>
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<p>Not sure if this is of interest to you, but many schools have monthly payment plans available. My son’s school has one through SallieMae that has 0% interest, although there is an initial charge of around $70 to set it up. It makes paying our part of the bill a lot easier, since we don’t just have $25K sitting around at the beginning of the school year.</p>
<p>The OP never said anything about a $50K debt. Here’s the post:</p>
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<p>I agree that it’s worth looking into the Sallie Mae payment plan, or checking out if one’s offered directly by the college. You can pay a set monthly amount over 8-10 months. The increase in investment value of my son’s UGMA over that time easily paid for the $60 setup fee for the payment plan, plus I could avoid realizing capital gains in 2010.</p>
<p>Perhaps a combination of loans plus a payment plan would be optimal for this particular family’s situation.</p>
<p>Megmo, not to take this too far off topic, but…</p>
<p>I’ve wondered about the advantages of the 10-month payment programs that most colleges seem to be offering. Let’s say the tab is $25K. Even if you are taking a good slice out of monthly income, I would imagine that for a lot of people, most of the $25K is coming out of savings or loans–neither of which becomes available over a 10-month period, but which is generally available all at one. I see the 10-month programs and wonder what the real advantages are–other than keeping “the chunk” in savings and eking out a little bit of interest on the diminishing balance. </p>
<p>Just wondering. Keep in mind my name!</p>
<p>Thanks</p>
<p>I think it makes sense if any of the money is coming out of current income. </p>
<p>Assume 25k total due, with 15k to come from savings and 10k from current income at the rate of 1k per month for 10 months.</p>
<p>The fall payment of 12.5k could come from savings, leaving 2.5k in savings. However, when the spring payment is due, there would only be 7.5k available (2.5k of old savings plus 5 months of new savings at 1k per month). By the end of the year there would be an accumulation of 5k more, but the student’s grades would be on hold because of unpaid bills, and everything would be a mess. Setting up payments of 2.5k each month for 10 months, would mean that the year ends will all bills paid on schedule and no one in a panic.</p>
<p>If the family has a bunch of money to draw on, and the 1k from current income is only going to “re-feed” the savings account, then it would be just as easy to pay each semester in full up front, and a payment plan wouldn’t be necessary.</p>
<p>Another reason for choosing installments would be if the college fund were primarily invested in a series of laddered CDs. Arranging to take the money out at different maturity dates would be (usually) better than cashing the whole bunch in at one time and having to accept any early withdrawal penalties.</p>