I’m trying to determine if there are loans I can co-sign with my student that would later be eligible for federal loan consolidation. So which loan types if any can be electively taken (say 20,000 a year) to cover a gap between financial aid and cost of attendance that would later qualify for the federal loan consolidation? A list of the types of loans is linked but we are green to the college loan process. Post graduation my student will be able to take advantage of the Public Loan Forgiveness program (assuming it still exists down the road).
Parent loans are not part of the loan forgiveness program. She can only consolidate her own loans. Public service loans are not guaranteed to continue. The best gift that you can give your child is an affordable college option.
You are talking about your D having $100k in undergrad debt. What does she plan for n doing?
Remember she will have to do 10 years of income based repayments. If she gets married, her spuse’d incine will increase her prepayment. First of all public interest jobs are becoming more competitive Second she will not make enough $ to service 100k of debt. What ever is forgiven becomes taxable income
First of all, no new student should plan on PSLF being around, or if it is, plan on there being a cap on the amount forgiven. PSLF forgiveness is not taxable, which is great, but it’s also not guaranteed to be around or around in the same format it is today.
As @sybbie719 correctly pointed out, Parent PLUS loans are not the student’s loans. They cannot be included in any forgiveness programs (unless the parent also has his/her own student loan debt & consolidates into a new Direct Loan). No private loans are ever eligible for loan forgiveness.
Fortunately there are income based repayment programs that will keep her payments in scale with her income and that won’t be affected by her hypothetical significant other’s income as long as they file separately. And fortunately for us we can help to cover or cover completely those payments.
This website has a lot of resources for understanding the different types of student loans. The rates are very high compared to when I was in school. http://www.finaid.org/loans/ They also have a calculator to figure loan payments and salary required to be able to afford payments is listed in paragraph after repayment grid. http://www.finaid.org/calculators/loanpayments.phtml
If you D is planning on becoming a teacher, it is not a good idea for her to be taking on 100k in debt. As@ kelsmom, who is a financial aid officer stated the private loans that you sign for her(20k/year for 4 years) will not be eligible for income based repayment
I don’t think there are any loans you can co-sign for your daughter which will then be subject to debt forgiveness after public service. Those loans that can be cancelled because of public service work are government loans, and those don’t require co-signers.
Yes, I came to this conclusion during my research yesterday. We’ll end up financing the entire 30K a year (20 was used for an example). Even if she went to the cheapest state option it would be 24 K per year. We have zero home equity as the housing market in our area is in the pits. The EFC is laughable. I feel like my husband may as well retire to lower the income. It seems to me that many middle class families must be financing 100K or more for college OR perhaps they saved part or all of that in 529s etc. That doesn’t change the sticker price. One of my siblings has co-signed 80 K in loans for the first 2 years of my nephews history degree.
Why not do community college for 2 years? We are a full pay family. Luckily, we have been contributing to a 529 since birth and my son chose a state school so it was doable. If not, I would not borrow $160k for a history degree (my son’s major as well, along with education). 2 years at CC, paid in full, then only 2 years to finish up at full price would be my suggestion.
Our EFC was unaffordable. CC was the only option. We had no savings before January of Happykid’s senior year of high school. We put $500 each month away in a regular savings account so as to be able to pay community college tuition and fees that coming fall. The plan was to keep one semester ahead that way.
Good luck #1: Happykid was awarded a tuition and fees scholarship at the CC that covered 15 credits each semester for four semesters. We only paid for books and credits over 15. What we saved each month of her CC years helped pay for the last two years at the state U.
Bad luck: Happydad was laid off in a massive company smashing event half-way through Happykid’s junior year of college. Our family income dropped by about 90%. We learned then just how tight we could pull our belts. It was a very scary 17 months before Happydad had a new job.
Good luck #2: State U financial aid office whipped together more money for the senior year. Junior year was already covered.
Happykid graduated in four years with only the junior and senior year federal loans. We have no parent loans. Happykid loves her career. Life is good.
Please continue to look for options that will not overextend your family and land you all in a boatload of debt. If you couldn’t save a lot of money before college, why are you letting yourself imagine that you can pay off that amount of debt? What, exactly, are you suddendly able to cut out of your budget? How long will you truly be willing to live with that level of deprivation? That a family member is taking on too much debt for their kid, is no reason to feel obligated to do the same for yours.
You need to choose a different school, one that doesn’t cost $30k per year. I have one who is at a very expensive prive school, but she has almost everything covered by scholarships. It’s not MIT or Purdue, but she’ll be a engineer. She will have about $10k in loans (direct loans in her name only). Other child choose a very inexpensive public school (although OOS), and she will have about $20k in loans.
It can be done. It will not matter that my daughter’s history degree is not from Harvard. It will matter that her monthly loan payments are under $200.
You also need to know that the public service loan forgiveness is all or nothing. You have to make payments (a payment might be $0) for 120 months in order to get even $1 forgiven. That’s a long commitment. If after 6 years you decide not to be a teacher or a nurse in a rural community or a fireman anymore, nothing is forgiven and all that interest that was deferred under an income based repayment plan will still be accruing interest.
Thanks both for sharing. You both have demonstrated excellent approaches. I know my raised blood pressure and sense of panic are telling me to follow suit.
There are a number of things I would change if I could go back in time, one of those being having the college cost conversation with D when she was in junior high. But I didn’t. I allowed the assumption that a traditional 4 year college experience was absolutely on the table. I had that experience when I was young and made assumptions myself that it would all work out for my kids. I failed to get a realistic read on the current state of education, both the financial costs and the hyper competitiveness. That’s on me, I won’t penalize her for that. Our family relationships have been through some rough times with a near divorce thrown into the mix. I know some families endorse the “suck it up kid” attitude but I can’t in good conscience. I will find a way and ensure she has responsibility for only the federal loan portion. The applications are submitted, no more time to shop around with my new found awareness.
There’s always time to shop. It’s called a gap year.
You have more than one child, so you need a long range plan. What you don’t want is for your daughter to get part way through school and have your borrowing power run out. She’ll have debt but no degree. Or borrow to the hilt so she can have the residential college experience then not be able to do the same for the younger children. The resentment that’s created when younger siblings are left with cc or commuting to a local state school because all the money was used for the eldest can last for decades. Some families never recover. There are other, more far reaching, effects of enormous debt. If you dig yourself into a debt hole, how will you take care of yourselves in retirement? Which of your kids is going to have to bear the responsibility of caring for you when you can no longer work?
If I were you, I’d take a step back and start with finances. What can you afford without borrowing? Add the $5500/year federal student loan to that. If your kids work summers, they can earn ~$3k/year. That’s your budget. If they can get merit aid, the budget may be a little more. The best gift you can give your children is no debt. That may mean 2 years at a cc followed by 2 years at a state school. My son is commuting to our local state school. He loves it. And in 4 years he’ll have a degree and zero debt. He loves that even more.
Please strongly consider what posters are recommending. One of my co-workers was in a similar situation when she headed off to college. Parents had her take out loans and promised to help her pay back once she graduated. Recession hit. Her father lost his job. She is saddled with enormous debt and in a field (teaching) where it will be impossible to pay back. Loan forgiveness plans are very limited. She is afraid to get married for fear of destroying her boyfriend’s financial future. When my dd was heading off to college, we told her there was no way we could afford her dream school. It was heart breaking as she had worked so hard and was so deserving. My co-worker said she wished her parents had told her no. Best of luck to you and your student.
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Fortunately there are income based repayment programs that will keep her payments in scale with her income and that won’t be affected by her hypothetical significant other’s income as long as they file separately. And fortunately for us we can help to cover or cover completely those payments.
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Only her small federal loans are subject to IBR. Any private student loans that you cosign for her and any parent plus loans that you take on are not subject to IBR.
So, approx $30k total of her federal loans could be subject to IBR…the rest would not be. That’s a shock for many whose parents co-signed private loans for them or their parents took out plus loans. No IBR.
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We’ll end up financing the entire 30K a year (20 was used for an example). Even if she went to the cheapest state option it would be 24 K per year. We have zero home equity as the housing market in our area is in the pits. The EFC is laughable. I feel like my husband may as well retire to lower the income. It seems to me that many middle class families must be financing 100K or more for college OR perhaps they saved part or all of that in 529s etc. That doesn’t change the sticker price.
One of my siblings has co-signed 80 K in loans for the first 2 years of my nephews history degree.
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I hope your nephew and sibling realize that there’s no loan forgiveness or IBR for those co-signed loans.
So you are going to pay back the 30k x 4 in loans for an education degree…120k plus interest ? Do you have other kids to put thru college?