<p>We have relatives still making payments on their childrens’ college educations 20 years post graduation (and counting!). And yet, when we talked about how we are looking into public universities with merit aid, they scowled at us because our children “deserve a top notch education at an elite university”. To be fair, their kids did have very successful outcomes. This makes it all the more difficult to defend our position of not wanting to incur tons of debt. </p>
<p>@randysch - my sons have both taken Salle Mae private loans to pay the balance due on their university tuitions. My husband and I would take a Parent Plus loan as a last resort. We wouldn’t open a HELOC.</p>
<p>Of the loans we studied, what we like about Sallie Mae is:
Cosigner release after 12 months of on-time payments
No fee, and no penalty for early payment
Your choice of variable or fixed rates
Loans are discharged upon death or permanent & total disability of the borrower (student)</p>
<p>Re: “parents in USA who make their children take out loans (some even as high as $150,000+) for undergraduate studies. I feel sorry for these children.”</p>
<p>We make our child take out loans (as high as $100,000 and could slightly go beyond that) for professional school. The school’s “unit loans” in 4 years which are required for every student before any true FA kicks in is already almost $100,000. We did pay for his UG studies so neither he nor we have any loans for his UG studies.</p>
<p>When he started the professional school, he knew that he would be responsible for the student loans. He did ask whether we will still “chip in” some ( along the line: “you would not ask me to pay for everything, right?”) It was then when the agreement on $100’000 total amount of HIS loans was made between us, even though we had not know the total amount of the unit loans would be about $100’000 when he graduates at that time.</p>
<p>I somehow feel sorry for him for such a large amount of loans. But we have our retirement “problem” to take care of because we are about to retire. We originally planned to give him a new car but in the end, we will give him our 6 years old car because we really can not afford it.</p>
<p>I think this is the best we can do for our child. (No loans for his UG but about 1/3 of COA would be his loans and the rest roughly evenly shared by the school and us for his grad studies. Come to think of this: We may pay almost as much for his grad studies as his UG studies because the FA for his UG is much more generous.)</p>
<p>I wonder whether some CC parents would “feel sorry for our child.”</p>
<p>I think that even for grad school, $100K is a lot to take on. I am a lawyer, I am the daughter of a lawyer, my kids’ father is a lawyer – and I think that a law degree would be much more valuable to my kids than the MPA’s they are getting instead – but its out of range financially. </p>
<p>My kids did take on debt for undergrad and grad school, but probably maxing out in the $45K range. They are already faced with the impact of rapidly increasing housing costs. Those won’t go away.</p>
<p>I know that it is common for medical students to borrow 6 figures and I really am sorry that we have a system that requires that sort of cash outlay. Stuff happens. People are not always able to follow through on their career plans in the way they had anticipated. But the debt doesn’t go away. </p>
<p>I realize that the system for some degrees leaves most students with no other choice. I don’t think that’s right that a student in our country who is studying for a Ph.D. in neuroscience will be offered a tuition-free education along with a stipend, while if that same student opts to study medicine with the hope of someday becoming a neurosurgeon, she will have to foot the bill for medical school. But if that’s the way it is – then as a parent, I would advise my kids to take another path. </p>
<p>On the Parent Plus loan - now that I have my online account set up and can see the interest growing - it’s a little more real! I am committing to voluntarily pay a small amount monthly to at least cover the interest, rather than just ignore this loan until December 2016.</p>
<p>"“I’ll never retire. I’ll work forever, that’s OK."</p>
<p>That is so disturbing… I’m sure Germany with its free college system is laughing at us right now.</p>
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<p>Many people don’t have many options for work that pays much as they age and employment opportunities shrink. There is age discrimination in the workplace, no matter even if this isn’t openly admitted. Many jobs that with physical job requirements may be too arduous as bodies age. Also, jobs that require technical expertise require employees to keep up, which can be challenging over time. H was encountering this toward the end of his career–things that he used to learn after just hearing and reading once or twice, would take many, many repetitions to learn. It was very challenging for him and he was happy we could afford to retire.</p>
<p>Admission offers are rolling in here for DD, but no PLUS loans for us. You can either pay for it, or you can’t. </p>
Hell would freeze over before we would take out PLUS loans.
I’m new to the boards, but this is scary stuff, my kids in high school but I’m trying to plan ahead, I’ve been saving for him for college since he was born in a 529 plan,not that it did me any good, so far I have about enough to cover one semester at an Ivy League school, we won’t qualify for financial aid of any kind, not until I pay $76K out of my pocket first,I’ve run the calculations, I have too much money -on paper- mostly it’s the equity in real estate, I did everything right, I saved, put money in a pension plan and saved for college, but despite that my reality is that I will need to borrow money to put my kids through college, I’m thinking maybe 2 years at a CUNY college and a transfer to save money, my kid is an average student, but if I take out these loans, he’ll need to do something that will increase his chances in the job market after school,
Be sure to take out term life insurance if you have co-signed for loans. If loan is only in students’ name, it gets written off if the student dies. You also have to have a contingency plan - what if student doesn’t finish professional school and you have co-signed on loans?
Just heard on Dave Ramsey radio (I believe it is a repeat program) where a student got an undergraduate degree in philosophy, looking for a job, has $100,000 in debt. Currently waiting tables. Parents do not have degrees and dad co-signed. They thought they were helping their son ‘do better’ than they had done. Mom works as a teacher’s aid, and her whole paycheck is going to the payments currently due each month on the student loans.
Some parents do have a hard time saying ‘no’ to their child, and some do not understand how the debt will affect them or their S/D.
An average student does not need an Ivy education. Even a very bright student (high stat student) can do well other places if they search for and receive their merit awards in a timely manner. One has to evaluate if there is enough merit at a four year school, or if student needs to go to a lesser priced CC or nearby commuter school first.
Ade - The financial aid formulas are skewed heavily toward income. So even w/o your savings, it’s possible you’d be in a quandary of having no “need”. College is pricey - that’s the main problem. You are wise to want to minimize loans.
My S is not eligible for any financial aid - at any of the schools he has applied to. Upwards of 50k per year is supposed to be paid by us. That would be 1/3 of our income (before taxes). We can’t pay that kind of money for college & this is just child #1. S has received scholarships to 2 public universities (one in state). Both come out to the same amount of money after the scholarships. So…$25k per year. No financial aid. We told him we would help with food & books (about 6k per year). He has been working for the past 2 years & plans to continue to do so, I figure he can swing 5k or so. This leaves 14k per year unpaid. Our only option is loans. For a total of roughly 60k at the end of 4 years. This is for our flagship school & one next door that will be about the same price. I am still trying to figure out how college is affordable for everyone.
As a parent whose first child is headed to college this fall, I am appreciative of all the comments and information that people post on this thread and on the site in general. My son was hoping to attend his dream school, the University of Oregon this fall, and until recently we encouraged this endeavor. However, when the financial aid letter came to us a few weeks ago, he received no scholarships or grants, only $5,500 in subsidized and unsubsidized loans from the federal government. While we saved enough money to cover most of four years at Oregon, it would limit our ability to help him in the future with graduate school or any emergency situations that might arise. In addition, with Oregon’s four-year graduation rate at only 43%, there is a good chance he would need to go for five years which would him/us to take out significant loans (50k =/-). Gonzaga University game into the picture in the last two weeks and offered him significant scholarships/grants that would make the cost about 50k less than Oregon over four years and their students graduate in four years at a 73% rate. So the dream school is out of the picture and the better academic school is taking its place. My son will be taking out the maximum subsidized and unsubsidized loans from the federal government (27k) over the course of four years so that he can learn the value or borrowing and paying back debt. We will not be taking out a Parent PLUS loan and would not take out a Parent PLUS loan under any circumstances.
I have a question on PLUS loans vs Sallie Mae. We need to borrow about $45,000 per year. My son got $10,000 in a dean’s scholarship + $5,000 in subsidized federal loans. Total cost at American University (where my son got in) is about $60,000.
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My S is not eligible for any financial aid - at any of the schools he has applied to. Upwards of 50k per year is supposed to be paid by us. That would be 1/3 of our income (before taxes). We can’t pay that kind of money for college & this is just child #1. S has received scholarships to 2 public universities (one in state). Both come out to the same amount of money after the scholarships. So…$25k per year. No financial aid. We told him we would help with food & books (about 6k per year). He has been working for the past 2 years & plans to continue to do so, I figure he can swing 5k or so. This leaves 14k per year unpaid. Our only option is loans. For a total of roughly 60k at the end of 4 years. This is for our flagship school & one next door that will be about the same price. I am still trying to figure out how college is affordable for everyone.
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I see that your son is a mechanical engineering major… With his stats, he would’ve got a free tuition plus $2500 a year from the University of Alabama.
That would have left your family with a remaining cost of about $12k per year. If you paid $6k, and he paid $5,500 from a student loan, then no Plus loans would be needed.
You ask how college is affordable to anyone…well, you have to apply to schools that are affordable.
As for those who don’t have high enough stats to get the merit, then they do what most American kids do…commute. going away to school is a luxury.
@Rebecca1212
since you have other kids to put thru college, you may need a different strategy with them…otherwise you’re going to end up with over $100k in plus loans
That is way too much to borrow for undergrad.
Look at it this way: on your current income, how much can you comfortably afford for a monthly loan payment. Use an online calculator to figure out how the payments would be on various loan amounts, with a standard 10-year payoff.
For example,here’s a calculator: https://www.calcxml.com/calculators/parent-plus-loan?skn=133
At current interest rates (7.21%) - see https://studentaid.ed.gov/about/announcements/interest-rate – every $10,000 you borrow would require $117/month in payments. So a $45,000 loan would have a $527 monthly payment. If you borrowed the same amount over 4 years, then by the time you son graduates you would have a monthly loan payment of $2109. (and that’s assuming you are making current payments
Can you afford a $2100 monthly loan payment? If so, then pay $24,000 directly out of pocket for the first year of college,and borrow only $21K, for year one. Your monthly payment would be $234, but the first payment isn’t going to be due until March – so if we calculate the “fiscal” college year as including the out-of-pocket for that year plus half a year of loan payments-- that’s $24,000 plus 6 months of loan payments @$246 (1476) - which comes to about $2123 a month … close to what you think you can afford. Each year you will be reducing the amount you contribute, but you will have borrowed less overall and when your son graduates, whatever debt you are facing will be no more than that $2100 monthly loan payment you know you can afford. Obviously you’l need to keep working and earning – so if you are nearing retirement age this won’t work as a plan.
If you can’t afford $2100 a month as a loan payment – then you can’t afford to borrow $45K a year for your son’s college – unless you are borrowing against an asset you don’t need to keep long term. For example, if you own a 2nd rental home that has sufficient equity to cover the college debt – you could borrow the college money, continuing to collect rent from your tenants, then when your son graduates from college sell the home and use the proceeds to pay off the college debt.
But if you can’t afford the loan payment – and you don’t have other assets that you are factoring in: welcome to the real world. You need to tell your son that you cannot afford to send him to American U.
Calmom,
Thank you. This is extremely helpful. The link to the calculator helped understand in a visual manner the basic monthly payments around borrowing. Some background and then some questions.
Background:I run a strong software business in healthcare that is going to generate in about 3 or 4 years from now a payout (equity buyout) that will easily allow me to repay the entire 10 year loan ($260K = $80Kinterest + $180Kprincipal). While there are no guarantees in business, I have more than 90% confidence in this outcome. Alternatively, I feel comfortable that even in the absence of a payout in 4 years, I can at least expect to be earning at a level that makes $2200 per month affordable for me. The basic issue is that I face a near term liquidity crunch that puts cash out of my reach for a few years.
Question 1: From your note, I understand that PLUS payments start right away. Which means that I should be ready to start paying $527 per month right away for the 1st year. Correct? In the 2nd year (if we borrow the same), we will start paying $527x2 per month. Similar math for years 3 and 4. Essentially, I will make monthly payments over 14 years, that climb from $527 per month to $2200 after 4 years (for the next 6 more years). Then the payments ramp down over the next 4 years until in year 14 we are paying $527 per month. Is my overall understanding correct?
Question: Do I have to option of waiting 4 years (post graduation) before starting to pay the loans? The implications being higher overall payment due to interest.
Question 2: Are there loans from the likes of Sallie Mae and others that are worth exploring? I don’t own a home, so no home equity line possible here. I am going to start talking to the Finanical Aid administrator at AU. I have some time to explore options. About a month to figure it all out. I am sure they have a list of recommendations. But, it does not hurt to check out other sources.
Thank you for any help.
Mom2collegekids thanks for the info. I had no idea about any of this stuff until I found this forum. My son won’t go out of New England for school. He wants to go away to school, but not far away. I get that. I wish I had had more info for him when we started this college sesrch thing. He is not willing to take a year off so we can try for better scholarships elsewhere. He will be the one paying back the extra loans, not us (unless he really is unable to afford it). I know they will be in our names though.
Our 15 year old will be better off thanks to his older brother paving the way. He is willing to go anywhere for school. He wants to be a Dr & has the grades for it. Currently #1 in his grade out of roughly 500 students & he goes to a very good school. He is on target to get full tuition somewhere. Grateful to at least have found this forum when I did. It might not help our oldest at this point, but it might help the younger 2.
You can request a deferment, but that’s not a good idea because interest starts to run from the outset. If you don’t pay the interest, then it’s added to the loan balance when the loan comes due. If you opt to make interest-only payments, because of the way loans are amortized (mostly interest in the early years), there’s not much of a savings – so you might as well be paying a little bit more to make a dent into principal.
Pretty much true, assuming that you continue to make loan payments according to the schedule.
There are other options you can explore --but consider what-ifs scenarios and look at the provisions for possible loan forgiveness or alternate payment plans down the years.