Private Student Loan Financing

Paying for College
1

<p>Are the student loan rates pretty much the same from national bank chains, or do they differ widely?</p>

<p>My daughter was accepted to Virginia Tech to start in the fall. She wants to major in Bio Science Engineering. She was offered a 5k scholarship for the first year. They also offered her 4k in subsidized and unsubsidized loans. The yearly tuition there with room and board is about 18k. For this first year, she'll be short about 10 to 15k. I make about 70k a year. I have good credit, and will co-sign for her. I will also make loan payments for her depending on her grades. </p>

<p>I was looking for student loans from Wells-Fargo. As I understand it, She wouldnt have to make any payments till she graduates or quits going to school. I think they even told me she doesn't accumulate and interest charges until she graduates. </p>

<p>Are their any better programs I should look at? I have never made it to college and am not sure how the student loans work. Any recomendations or advice will really be helpful.</p>

2

<p>* I think they even told me she doesn’t accumulate and interest charges until she graduates. *</p>

<p>I don’t think that sounds right. Recheck that.</p>

3

<p>Definitely not true for any loan that’s not a Subsidized Stafford. She won’t have to pay interest until she graduates, but the interest will accumulate and be recapitalized into the loan.</p>

<p>By the way, you need to remember that being short $15k the first year… will be short $15k the next year, and the next, and the next. She’s not going to magically become less short each year. So you’re not talking about private loans of $15k, you’re talking about private loans of $60,000. Plus her Stafford loans of $5,500-7,500 per year. That’s debt of ~$85,000 for a four-year degree…</p>

4

<p>What is your daughter’s real cost of attendance likely to be at Virginia Tech? She needs to have money for her books, materials and supplies, transportation, and personal expenses as well as for tuition, fees, room and board. That could easily be $3,000 more.</p>

<p>Do talk with your own bank or credit union about this loan business. You should find out now if you will be able to qualify for that much in loans each year for all four years.</p>

<p>Generally speaking, private loans accumulate interest from day one. Yes, you can defer repayment until after graduation, but the interest that hasn’t been paid will be added into the original loan, and the over-all debt will be bigger than originally expected. Think carefully about how much you can pay each year out of your current income, so that the two of you don’t need to be taking on this much debt. Virginia Tech probably has an installment plan for tuition, etc. so you wouldn’t have to come up with all of it at the beginning of the semester.</p>

<p>If the money doesn’t look like it will work out for your daughter just yet, she should consider attending the closest community college. Virginia Tech has formal articulation agreements with the Virginia Community College System which would guarantee her admission after completing one of the specific transfer-oriented degree programs. [Articulation</a> Agreements | Applying as a Transfer Student](<a href=“http://www.admiss.vt.edu/apply/transfer/articulation]Articulation”>http://www.admiss.vt.edu/apply/transfer/articulation) I know this isn’t what she wants to do, or what you had hoped to be able to make possible for her, but it would cut your family’s costs significantly.</p>

<p>Wishing you all the best.</p>

<p>P.S. Happykid followed the CC to State U route, and we have saved a bundle.</p>

5

<p>You mention in another thread that your D is borrowing $80k for VT. That is wayyyyyy toooo much.</p>

<p>Yes, she could have a nice salary as a new engineer, but they don’t earn enough to make those kinds of payments. </p>

<p>How much are you contributing each year?</p>

6

<p>I will probably be paying 75% I told her I will pay back any and all classes she gets an “A” in. She is a really good kid, but I don’t want her slacking off and I am stuck with the bill. As a result of our conversation she agreed to take out all loans in her name(I will co-sign) and I will pay back all classes she gets an “A” in and she pays back all "B"s and below.</p>

<p>My wife and I don’t have much debt and we can help her out for living expenses, books and such</p>

7

<p>Here’s the thing. When you co sign for a loan for her, both you and she, and both of your credit records are on the line. If for any reason one of you can’t pay the loan, they go after the other. If you die, she has to repay the loan. If she dies, you have to repay the loans. The lender has both of you on the hook.
And its’ for a period of about 14 years for each year’s loan, and each year it is likely you will need to borrow more. Also, the interest will accumulate as well. Until you apply and get accepted, you don’t know what the interest rate is going to be, either. </p>

<p>If you want to borrow, check out the PLUS. THe repayment terms are flexible and if something happens to you, it’s like an insurance policy, the debt is cancelled. You can have a separate agreement with her regarding repayment. </p>

<p>My recommendation is for her to take out the maximum Staffords each year. THat is what is considered manageable debt for a student. Any thing else, you and she will have to earn in jobs, and you might want to consider borrowing the shortfall yourself.</p>

8

<p>what is Plus? One of the things I was considering is that by going with a private lender she will build her credit rating at the same time.</p>

9

<p>I will probably be paying 75% I told her I will pay back any and all classes she gets an “A” in. She is a really good kid, but I don’t want her slacking off and I am stuck with the bill</p>

<p>Oh brother. So to you, getting a B is “slacking off”? Your D will be an eng’g major. Do you have any idea how hard it is to get As in engineering? Getting a B does not mean anyone has been “slacking off”. </p>

<p>I can’t imagine putting forth a situation where my child has to fret throughout a semester that a B will mean that she pays for the class. </p>

<p>Seriously, you need to figure out how much you’ll pay period. If you want to include a REASONABLE GPA req’t, that’s fine. If your D graduates in eng’g at VT with a GPA in the 3.5 range, she’ll have worked her fanny off.</p>

10

<p>[Student</a> Aid on the Web](<a href=“http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp]Student”>http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp)</p>

<p>Do your best to maximize the federal loans amounts. </p>

<p>PLUS Loan information: [Student</a> Aid on the Web](<a href=“http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp]Student”>http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp)</p>

<p>Perkins Loan:
[Student</a> Aid on the Web](<a href=“http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp]Student”>http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp)</p>

<p>Do not dip into private loans unless you need to. I tell my parents to not touch private loans. The rates are sickening and the financial debt you accrue is overwhelming. If you want to build credit report have you daughter get approved for a college student credit card. Put small amounts on it and pay it off in full.</p>

11

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<p>So you’re strapping your daughter with debt if, God forbids, she gets a B when you have the resources to help her pay? ESPECIALLY as an engineer? You are living in a dream world if you think a B in engineering is slacking off. </p>

<p>What if she has a bad prof? What if she gets ill? That’s a crappy deal IMO.</p>

12

<p>I may adjust, but the whole idea is to give her something to work for. There is nothing wrong with her paying her whole ride through school. I joined the Army, and then got married and never made it to college.people feel much better about their accomplishments when they are involved and responsible. The way I see it, she has everything to gain and nothing to loose. I am sure that some classes will be difficult, but with a 3.5 gpa, I am on the hook for half!</p>

13

<p>Reading about the plus loans, it says the interest rate is fixed at 7.9% Why should I take this over a home equity loan which can be had at less than 5%? Is there any types of loans that have better tax advantages over getting a lower interest rate?</p>

14

<p>If you want her to “pay the whole ride” then tell her to go to a more affordable option. Maybe a CC then transfer.</p>

15

<p>I am not going to pretend I know about the tax advantages of the two but here is an article.</p>

<p><a href=“https://studentaid2.ed.gov/getmoney/pay_for_college/loans_plus_vs_equity.html[/url]”>https://studentaid2.ed.gov/getmoney/pay_for_college/loans_plus_vs_equity.html&lt;/a&gt;&lt;/p&gt;

<p>Using a home equity loan to help pay college costs has been a popular option, since the interest is tax deductible. However, many families would rather have the peace of mind of not putting their house on the line to pay for college.</p>

<p>If you are considering using your home equity to pay for college instead of a PLUS Loan, be sure to consider these points:</p>

<p>Interest Cap
Many home equity loans have very high interest rate caps, which means that if interest rates were to rise, a home equity loan could become a very expensive option — even with the tax advantage.</p>

<p>Liquidity
Parents who hold on to their equity have the peace of mind of preserving their liquidity; they have the funds available for emergencies as well as opportunities.</p>

<p>Insurance
Unlike most home equity loans, the PLUS Loan is fully insured against death and disability and payments can be deferred during times of financial difficulty.</p>

<p>These questions can further help you evaluate the PLUS Loan vs. a home equity loan:</p>

<p>What is the interest cap on my equity line?
Many home equity loans have very high interest rate caps.</p>

<p>Do I have enough equity available to cover all four years and all of my children?
Many parents don’t, and that’s why they are taking advantage of the PLUS Loan now while the terms are so favorable.</p>

<p>Would my equity loan be fully insured?
Is it forgiven in the event of death of the parent and/or student or the total disability of the parent? Does it contain a payment deferment or forbearance clause for times of economic difficulty, like the PLUS does?</p>

<p>Am I carrying any debt above 9%?
Most parents in this situation use the PLUS to pay for school, which frees up other monies (equity, for example) to pay off more expensive debts. Nobody wants to be in debt, but taking out a 9% loan is far better than carrying a credit card balance at 17 or 18%.</p>

16

<p>*There is nothing wrong with her paying her whole ride through school. *</p>

<p>Yes there is when the cost is what it is. </p>

<p>Frankly, you’re being unreasonable. If you can’t afford this school, then fine…own it…and suggest another route which wil leave your D with less debt. </p>

<p>You’re acting as if this amount of debt is “no big deal”. Well it is. Even half of that much debt is a big deal. </p>

<p>I think your D should either start at a CC and then transfer, or you should come up with a plan that leaves her with a reasonable debt load.</p>

<p>Nobody is suggesting that your D shouldn’t have some skin in the game, but you have her up to her neck in debt.</p>

17

<p>Komobu, I just went to a funeral of a friend. He had his kids late in life and recently borrowed quite a bit to send his two girls both to private school and then to some graduate program. All loans were released at death. Had they cosigned or if the loans were against the equity of the condos he owned, they would have had nothing, and they are not quite there in self sufficiency and finding jobs in their field. But they are free to get there. My own kids are struggling in making a go of it and they have no loans and we are near enough to help. Bear all of this in mind before hanging that debt around her neck. I know kids who dropped out due to all kinds of emotional, psychological issues and in addition to having to deal with them still and getting on their own two feet, they owe a ton of money that their parents looked at as an “investment” on their kids’ part. When they are self sufficient and truly understand what it means to make ends meet and what a $X loan means, then they can take one out. THey don’t need parental coaching for getting into debt.</p>

18

<p>Does anyone know if and how student loan impacts parents’ mortgage application, if a loan is co-signed?</p>

<p>There is a loan amount and sometimes also a student loan credit line. Which one will be added to parents’ total debt, during a mortgage application?</p>