Loans, loans and more loans

Paying for College
1

For starters, let me say how much I enjoy reading this forum. You regulars seem to know your stuff, are willing to share and pull no punches with people living in la la land about college costs. Thanks!

We’ve been planning and our child will be attending a low cost/high merit aid school which we can afford to send her to. This question is not for her :slight_smile: but for myself to learn, and help my friends who have not done as good of a job planning and just now raised their heads up from the dark recesses of their asses and realized that their little Darla just HAS TO go to XYZ college and they have no idea how to afford it.

Please clarify - just how much can a student take out on their own name, in loans per year?

At first I thought it was limited to Perkins with gradually increasing amounts each year (then I did some more reading and found this)
“Up to $5,500 per year in Perkins Loans depending on your financial need, the amount of other aid you receive, and the availability of funds at your college or career school.
$5,500 to $12,500 per year in Direct Subsidized Loans and Direct Unsubsidized Loans depending on certain factors, including your year in college.”

So does this mean 5500 plus 12,500 (“best” case) or 18,000 in loans for the kid to sign for?

Also, does the interest start accruing on the loan amount right away? I assume it does, based on this statement “If you demonstrate financial need, you can qualify to have the government pay your interest while you are in school.”

"How much money can I borrow in federal student loans?
If you are a parent of a dependent undergraduate student:
The remainder of your child’s college costs that are not covered by other financial aid. Note: A credit check is required for a parent loan (called a PLUS loan).

Finally, is this true^, the parent can borrow the remaining amount of money? Wow. So that is how people get themselves 100,000 or more in debt huh?

Fill me in if I’ve put down any wrong details or left anything out.

2

Your information is a bit inaccurate.

By filing a FAFSA, your student can take out this amount in loans per year…guaranteed. These are Direct Loans.

Freshman $5500
Sophomore $6500
Junior $7500
Senior $7500

These are the totals. If you parents are denied the Plus Loan, your student can take an additional $4000 in Direct Loans each year you are denied. You have to apply annually.

You will need to file the FAFSA annually for these.

The Perkins loans are for lower income students on each college campus. They are NOT guaranteed for all who apply. Each college has a limited amount of Perkins Loan money, and the college determines who will receive Perkins Loans…or not.there is no guaranteed amount annually.

Parents can take out Plus Loans up,to the cost of attendance. Not my recommendation!!

3

Got it - thanks.
Glad we planned and can avoid this loan stuff altogether. It looks like quite a racket.

4

Why do you say it is a racket? Students can take student loans up to about $27,000 total for the four years of undergrad. Nothing wrong with that.

Parents can take loans. It’s not a racket…it’s available if they choose to do so.

5

Re the interest accruing, based on income some students qualify for part of their loans being subsidized, so interest is paid by the government as long as the loan payments are deferred, such as while the student is in school. Unsubsidized loans (or portions of loans) start accruing interest right away.

This site has detailed information about the federal student loan program: https://studentaid.ed.gov/sa/types/loans/

6

Thanks for the feedback. Learned a lot here as always.
My basic takeway is that kids can graduate with $27,000 debt in their name, owing about $300 a month for 10 years, give or take some interest.

7

@NJRoadie

Yes, the max Direct Loans…which all students can take in their names, is about $27,000.

Some (emphasis on some) lower income stidents can also get the Perkins loan. But that is not guaranteed.

8

And some can also get the Plus loan of $4000/year if parent is denied. A student can also go to undergrad more than 4 years so that standard $27000 can increase. A student can end up with $40k+in loans and it is not that hard to do.

9

Some can get an additional $4000 in Direct Loans if parents are denied the Plus loan or if the student is an independent for financial aid student. The aggregate amount for the undergrad loans is $57,000 or so. And yes, that could happen, especially for those getting an additional $4000 a year and/ or taking longer than 4 years to graduate.