My son will be going off to college this fall. He has chosen Univ. Wis. Platteville and they offer the Tri-State tuition so the cost is super reasonable for getting an Engineering degree, which is what he hopes to achieve. That being said, we didn’t qualify for any financial aid funding and he was only offered one scholarship of $1,100 and the typical federal loan. We are looking at roughly $14,000/year. That being said, we are trying to figure out the best route for loans since we don’t have the money to pay for college up front (despite what the FAFSA thinks). We would like to keep our names off things as much as possible as we are looking to buy a new home in the near future and don’t want more loans/credit in our name, but from what I understand that may not be possible. We are hoping to pay off his college loans ourselves whether we pay something each month, each quarter, each year, or when he’s all done and we can magically pay the entire chunk off-but in case we can’t pay things off we want the loans in his name. We have been told we will likely have to co-sign for him since he has not credit. We have been told to try and find a loan where the co-signer can be removed after payments are made on time “x” number of months-but I don’t know if this even exists, and have been told that the students can consolidate or refinance their loans after school to remove co-signers names. We have been told to seek a private loan with a fixed rate as adjustable rates can be tough with unstable interest. Sallie Mae? Wells Fargo? Discover Loans? Who to go to? Is a financial advisor worth getting for all this or can we do this on our own? We have been told that he has to apply for a loan every semester, which seems like a lot of dings on your credit to have it pulled every few months for a new loan. I have no idea if we will even get approved as a co-signer as we have been doing credit repairing every since the downfall of the housing market in 2009, and have been told if we don’t get approved then he can take out another federal loan. Not sure if that is the best choice or to seek out someone else to be the co-signer, but we really don’t want to do that either. Is all this stuff we’ve been told true? Does anyone have a starting point for me to go on? Ideas?
We were also told to not claim him as a dependent for taxes next time but I don’t recall why that was important. Also if it’s between the Federal Plus loan and co-signing on a loan which would impact our credit the most?
The advice NOT to claim him on your taxes could cost you the ability to get tax credits o college costs. Who told you to do that? Your tax filing status has NOTHING to do with student financial aid…at all.
Your son can take a $5500 Direct Loan in his name. And he got $1100 in scholarships. That leaves you with about $8000 more to fund.
Can you pay anything out of current earnings?
If not…you have the option of taking a Parent Plus Loan, or a Private Loan to fund the balance.
If you are turned down for a PLUS, your kiddo can get an additional $4000 in Direct Loan money in his name…so $9500. That still leaves you a bit short.
Does your son have a job? Can a parent pick up a part time second job to help out?
- You cannot make your son independent for financial aid purposes just by leaving him off your taxes https://studentaid.ed.gov/sa/sites/default/files/fafsa-dependency.pdf
- It is usually better to have him on your taxes so you get the tuition tax credit (parents usually owe more tax than the student so it's easier to take full advantage )
- If you want to compare PLUS to private loans, a good site is http://privatestudentloans.guru
We are looking at the Parent Plus loan, as that rate seems to be the best. We are in the same boat. Great thread!
Can you claim the college tax credit if you don’t claim your college kid as a dependent? I’m not an expert on any of this but we found that tax credit quite helpful.
Do you know if the school offers a payment plan? We pay over 10 months out of salary. If they have something like that, you could either avoid loans or cut down on loan total.
I’m afraid I don’t know anyway to get private loans in a teenager’s name without co-signing. Hope you find a way to get what you need!
Many people with good credit can beat the rate on the parent PLUS loans. There is both a 4 percent fee and a 7 percent interest rate.
PLUS are absolutely the easiest loans to get, but they are also the loans that are easiest to get in over your head. The credit check is minimal, and they do not make sure you have the income to pay them back. Tragic but all too common story: parents take PLUS assuming student will help pay them back. Student doesn’t graduate or somehow can’t help pay, the parents are buried for life under the late/default fees. The federal government will dock every single check for unpaid loans, including your tax refund and your social security.
In addition, even though these loans are through the federal government, parent loans do not have income-based repayment plans or forbearance opportunities like the direct student loans have.
Sometimes parent PLUS loans are the least worst option, but if you wouldn’t borrow a certain amount of money for anything else, don’t borrow it for your child’s education, either. Add up the costs for four years and assume that even if your child wants to pay you back, it might not be possible. There is almost always the option to start at community college for less money.
What can you pay out of pocket each month? Can you start saving that much right now so that you have a bit of a cushion by the time classes start?
What options does he have for community college? Can he get the first two years at a local CC and then transfer into engineering with a formal articulation agreement?
We were in shoes rather like yours, so Happykid didn’t even apply to a 4-year U until she was ready to graduate from the local CC. What we saved those first two years made the last two possible.
No I already took out the $5,500 when I said we need to fund $14,000
He should be able to earn at least $2000 each summer, make sure most of it gets saved for school. Also should be able to work 10 hours a week or so during school year. Save it up 1st semester then it will be available for books or even tuition subsequent semesters.
You say he’s “chosen” Univ. Wis. Platteville. Maybe it’s not viable financially. What are his other acceptances?
@turtletime The bigger picture here is that there is no point in taking your child off the parents taxes unless they are truly independent and self-supporting. There is no financial aid benefit to filing taxes this way.
For financial aid purposes, the student is only independent after age 24, with certain exceptions for students such as those who are orphaned or removed from parent custody to foster care, married, or military veterans.
The posters above have given you great advice which you can also check with the FA office.
It sounds like you’ve been told what to do a LOT.
So, your FA paperwork was the starting point.
You will note that the financial aid offer is listed by semester.
It doesn’t mean you take out a loan each semester, it just means that that is what is being offered per year.
Your first priority is trying to find cash and lower your costs. Trying to get loans, with a history of weak credit, isn’t the best idea because there will be a point where you won’t qualify any loans. What will your son do when neither he nor you can’t pay his tuition?
CC sounds like a great place to begin. I’m sorry that he’ll be disappointed, but it appears you can’t afford your current costs.
So, your son has to work to contribute to his fees, regardless of where he goes to school. He should be looking now for his summer job.
Most of those questions are answered at the privatestudentloans.guru website.
The only loan where, if the parent is rejected the student can take an additional loan, is Parent PLUS. The additional loan is limited to 4,000 for freshmen and sophomores, then goes up to 5,000.
I strongly suggest you reconsider whether saving up for a house while financing your child’s college education with debt is a wise plan. I suspect, if you run the numbers correctly, that it isn’t.
He has committed and is going to Platteville. We are not looking anywhere else.
I have known lots of people who did college through loans and either paid them off themselves or had their parents help pay them off. It’s not a new concept. I don’t need analyzing of our financial situation just advice on loans or just more knowledge on what loans are right and what to avoid.
I hope it all works out for you financially.
You should avoid ALL student and parent loans except the federal direct student loan, which is the only one with income-based repayment terms, forgiveness and forbearance plans, etc.
College loans are the only type of loan not subject to the fair credit act. They are always financially risky, and most have nasty penalty fees and rates where if you fall behind you could be making payments for life with no way to get out. These loans are not discharged by bankruptcy. One of the reasons why I recommend privatestudentloans.guru site is that it actually takes the time to explain some of the risks involved.
That is why people are trying to figure out if there is a less expensive choice out there. It doesn’t matter if he’s “committed” – if he’s committed somewhere his family can’t afford, it’s better to withdraw before classes start than before you are in over your head.
You can’t keep your names off loans because nobody is going to loan ~$60k over the next 4 years to a teenager who has no collateral and will already have a not great income to debt ratio. If you’re denied the PLUS loan he can take an additional $4k loan, which would put his total debt at ~$45k by the time he graduates, but you’ll still be $10k short every year. I understand your desire to allow him to attend residential college, but he can’t go to Platteville if you can’t pay.
If he got no aid anyway, I’d let him go to a cc for 2 years and bank those 1st two years of loans ($12k total) to use for the 3rd year at Platteville. He can borrow $7500/year as a junior and senior, so if he banks those he can cover the last year at Platteville. His total debt would only be ~$27k, yours would be $0, and he’d still have a degree from the college he wants.
A Parent Plus loan would be a good option, but co-signing it over to him is a bad idea. Debt piles up fast in college and before you know it, he’s $60-$70k in debt. That kind of debt can sabotage a career, especially if he wants to start a family. The only option to set him up for success is to pay the tuition above the federal cap of $27k. Most major banks do Parent Plus loans. You could also do a Home Equity loan as well. Just talk to a banker and they’ll go over the best options for you.
@nsrsfamily You mention that you have no upfront money for college. Can you cash flow some of the tuition? Can you convert any assets to cash to help or can you reorganize your budget and cash flow so that you don’t have to take out additional loans after his freshman year (other than the Federal Direct Student Loans)? I understand concerns others have expressed about Parent Plus loans. We have used Federal Parent Plus loans in the past and they have worked out for us. But, you have to know what you can afford. Making loan payments while also cash flowing tuition payments on a payment plan is taxing on a budget so you really have to have a firm grasp on your current and future (as best you can) cash flow.
Also, I am not a huge fan of equity lines to fund college. If you default, your home is on the line with the bank in the driver’s seat.