Student loan questions......

Newbie here…is it true students are only allowed to take a certain amount per year in student loans? How do they pay for the rest? We told our son we will help him as much as we can but he will be responsible for most of his college expenses. Now I am reading he may not be able to get loans to cover it all? This is all so confusing…ha ha

Yes, his federal student loan limits as a freshman are $5500, sophomore $6500, jr and sr $7500. Parents are expected to pay their familial contribution. If you can’t afford that, options become limited. Commuting, schools with large merit scholarships, working and attending part-time, etc.

Parent loans or cosigned loans are an option (that I would not recommend and we refuse to take for our kids). But, be aware that that may require payments to start immediately and that you have to qualify every yr for the new loans.

The student aid system is built around the assumption that undergrads are dependents of their parents and that the parents will be responsible for the bulk of expenses. So the answer to “how do they pay for the rest” typically is from the Bank of Mommy and Daddy.

If that’s not an option for your son, then here is what remains:

  1. Community college and/or local in-state public as a commuter (assuming that you are at least able to provide continued housing).
  2. The military -- either via an ROTC scholarship or by deferring college to to enlist in the military first.
  3. For high stat applicants -- a full ride scholarship, typically at a less prestigious state U. --but very high stat applicants might have nice offers even from private college.

The direct loans listed above are at a very reasonable rate to students, with a 1% origination rate and usually about a 4-5% interest rate. Still, if the student takes all the loans he’s allowed to, it can be $30k at the end of 4-5 years. That’s a lot of debt for a 22 year old, so think about it carefully. The Parent loans have a 5% origination fee and a higher interest rate.

If the parent is taking on debt that the student is expected to pay, that’s too much debt.

You are so fortunate to have found College Confidential before your student has submitted application. Read all the posts this week about the students who can’t pay the $30k or more that’s not covered by financial aid, the student’s loan ($5500), and a merit scholarship. Many of those students are having to choose their Plan B - so let’s hope they have one. You see students who want to go to UCLA or Georgia Tech because it is a ‘dream.’ Often, it can’t be done. Help your child fall in love with a more affordable school, a school that is going to give big merit. Be proud of earning that scholarship.

Look way outside the box. Full rides at South Dakota School of Mining and Technology. Univ of New Mexico. Canada. The deep south. You can always say no, but consider them.

http://www.thecollegesolution.com/deciding-between-college-prestige-and-cost/

An old article but still relevant, by CC’s own Lynn O’Shaughnessy

The maximum amount your son can take out for a 4 year degree is $27k. Parents are expected to pay the rest of the tuition. If you are unable, then there is often additional Pell grant money, and some schools could offer additional financial aid, but that’s often a gamble. The best thing to do is to fill out the FAFSA and see what the financial aid package offers. If you’re credit worthy, there are Parent Plus loans offered at most major banks. If we’re in the situation where you’re unable to pay and you’re unable to help with the financing, it might be best to start at a community college. Also, there are ROTC scholarships available.

The Parent Plus loans provided by the government offer better protections that a private loan. See the end of the other thread on Parent Plus loans.

When does repayment of direct Stafford loans begin?

I believe 6 months after graduation…though you should pay all interest while in school to avoid capitalization.

Private loans DO offer consumer protections, just not the same benefits as PLUS loans. A bank loan has all the same state and federal protections as any other loan made by the institution, collection is limited by state and federal laws… Some states are very ‘consumer friendly’ and don’t allow real property to be attached for a bad debt. In fact, sometimes the private loans have greater protections than federal loans. If you don’t pay a government loan, they step in an garnish your SS checks, tax returns, etc. without much notice. A private lender has to get a judgment and order of garnishment before that can happen, and has to hit your bank account on the right day.

BUT, borrow wisely. This OP’s son has great stats. He can get a lot of merit aid if he picks the right school.

@twoinanddone yes, there are legislated consumer protections in place for private student loans. In my experience, the government loans offer easier ways to modify repayment terms to prevent default. Banks are all different.

@Skippy00
You should be very glad that the feds limit how much low-earning undergrads can borrow. Imagine the outrageous defaults that we taxpayers would be covering if 18-22 year olds were allowed to borrow $200k+ for college…when most would never be able to afford to pay those loans back.

Your child has excellent stats. Look for schools that will give huge aid/merit to get costs down to desired goal.

And why the heck would you ever want to burden your child with huge debt anyway??? Don’t you love your kid? (Kidding, not kidding)

Kids who don’t have your child’s stats to get huge merit and who don’t have parents who can pay, usually commute from home to the local CC or state school. Most college students in the US do not go away to college.

Seriously, we don’t want a gazillion undergrads borrowing a whole bunch of money only to get first jobs that pay $35k-50k per year. Your child may be headed for a higher paying engineering career, but undergrad loans aren’t based on potential earnings for a particular major. And even a future engineer should not have a bunch of undergrad debt.

@mom2collegekids I would love for him to commute or start a CC but he doesn’t want that. I told him it might be his only option. I worry he will resent us for not “saving” to pay his way through college. Ugh being a parent is the hardest job ever. Especially when he has best friends who have their college already paid for by parents.

@Skippy00 If he doesn’t want to go to a CC, he can always take a gap year and work save money for a year or two for college and then apply. That seems to change perspective.

Why does this kid need to commute? He should be able to find an affordable option.

Does he have a job now? That will help.

@Skippy00 look at the thread that lists schools that give lots of merit aid (in the Parent Forum). University of South Carolina gives excellent merit aid for high achievers and has an excellent Honors College.

@lastone03 that sounded great but I did the NPC and it came back with net price of $23,000 and with us being self employed that may not even be accurate. That is way over our budget unfortunately.

@Skippy00 - Hmmm. That’s interesting. This may be another resource (sorry if already posted).

https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-21/colleges-that-claim-to-meet-full-financial-need

University of Richmond offers a free ride for qualifying Virginians. They are on the list above and may have something else for OOS students

http://smartcollegevisit.com/2013/06/university-of-richmond-to-offer-free-ride-for-some-virginians.html

Most of those in the usnews have very low acceptance rates. It’s a reach for my son to get into those places. It would be awesome if he could get in though!

With your child’s stats, he doesn’t need to start at a CC. Or commute to a state school.

He already qualifies for a bunch of merit at various schools. When he retests, he’ll likely have even better scores. Have him take the ACT as well. How much are you, the parents, willing to contribute? $10k per year? Is that right?

He can go to UAH or Alabama. Both have very state of the art engineering complexes.

I ‘m sending you a PM