Loans for College

[mommdc]

@thumper1, the OP said the son got a $1,000 scholarship, that plus the $5,500 loan is $6,500.

So $20,000 minus $6,500 would leave $13,500

[mommdc]

@shortnuke the answer to your question about the student being able to claim the refundable part of the AOTC is on page 21 of Publication 970 pdf file.

https://www.irs.gov/pub/irs-pdf/p970.pdf

Refundable Part of Credit
Forty percent of the American opportunity credit is refundable
for most taxpayers. However, if you were under age
24 at the end of 2017 and the conditions listed below apply
to you, you can’t claim any part of the American opportunity
credit as a refundable credit on your tax return.
Instead, your allowed credit (figured on Form 8863, Part II)
will be used to reduce your tax as a nonrefundable credit
only.

You don’t qualify for a refund if items 1 (a, b, or c), 2,
and 3 below apply to you.

1. You were:
   a. Under age 18 at the end of 2017, or
   b. Age 18 at the end of 2017 and your earned income
   (defined below) was less than one-half of
   your support (defined below), or
   c. Over age 18 and under age 24 at the end of 2017
   and a full-time student (defined below) and your
   earned income (defined below) was less than
   one-half of your support (defined below).
2. At least one of your parents was alive at the end of
4. You are filing a return as single, head of household,
   qualifying widow(er), or married filing separately for

[mommdc]

Is he your only son? Maybe wait to save up for a new house after he finishes college?

Is Plattville close enough to commute?

[SnowflakeDogMom]

My In-Laws (The Grandparents) co-signed my DS’s first year of Physical Therapist Grad School loan. My MIL was smart, she did it all in FIL’s name. FIL was older and not in the best health.

We had insurance on DS that would cover the loan in the event something happened to him even tho there was a death clause in the agreement, better safe than sorry.

Fast forward, DS is done with PT school, actively working and making all payments on time, he petitions to have the co-signor removed, the loan company refused, stated he “didn’t have enough credit history” Now, this was after the 12 or 18 months of timely payments etc. that the lender stated when the Grandparent co-signed. We were a bit frustrated and from what our son was telling us, this was happening to many of his friends, even tho the 12-18 months of timely payments were made, the lenders were refusing to release the co-signors stating credit unworthiness (mainly due to the high level of Grad school loans).

So, then my FIL passed away last year - there went the co-signor, it became a moot point.

Student loans are an evil we to some degree have unknowingly piled onto our youth and it is crippling their early adult years.

If I had to choose between a parent plus and a home equity loan - I would go with the home equity hands down. If need be, one can walk away from a home loan, one cannot walk away from a parent loan regardless of circumstances other than death or permanent disability and then only if its with the parent that is on the loan - Parent loans are not joint, choose wisely.

I certainly don’t think people enter into debt with an escape clause but life happens and an escape clause should be known, when it comes to student loans, if parents are taking out the Plus, then take out the Home Equity instead, its easier to get out of if needed. IMO

[ccsouth]

@nsrsfamily “I thought this would be helpful but it really wasn’t.”

This link (http://privatestudentloans.guru/) that someone provided wasnt helpful? It directly answered the questions you had in your initial post.

[lastone03]

While I understand using home equity to finance a college education seems sensible, here are the reasons why we didn’t consider it:

Drawbacks of tapping home equity to pay for college

“A home equity loan certainly can be used to pay for college education, but it probably should be pretty far down on the list of options,” says certified financial planner Donna Skeels Cygan, owner of Sage Future Financial. She suggests alternatives such as seeking scholarships and grants, having the student work part-time, or attending a less expensive school.

Disadvantage: The house is on the line

“The risk with a home equity loan is that if the parents can’t pay back the loan, then the house is collateral.” Cygan says. “That’s enormous risk and losing their house would be an incredibly high price to pay for funding a college education.”

Goodman agrees.

“With a home equity loan, you’re putting your house on the line,” he says. “Besides, you’re basically trading a hard asset, your home, in order to gain a soft asset, education.”

Disadvantage: Little flexibility during hard times

Another downside is that these loans don’t typically offer flexibility during periods of financial hardship. But those who borrow with federal student loans can readily obtain loan deferments, forbearance, and sometimes even loan forgiveness. Even private student lenders, such as Wells Fargo and Discover, now aid struggling student loan borrowers. For example, Wells Fargo is lowering interest rates on certain private student loans and Discover is offering student loan modifications to help borrowers avoid default.

Ultimately, the decision to borrow for college – via a home equity line or line of credit – may come down to your perspective on the value of higher education.

According to a recent survey from Spectrem Group’s Millionaire Corner, 66 percent of millionaires believe a college education is valuable enough for people to take on debt.

“If you ask millionaires about their success, most attribute it to hard work,” says Catherine McBreen, president of Millionaire Corner and managing director of Spectrem Group. “But in almost all cases, they will also say it was their education that allowed them to get where they are, and 90 percent of those millionaires have a college education.”

“That’s a strong case for college,” she adds, “even if you have to borrow.”