<p>First of all, my parents offered to give me $50,000 over four years for college. They said from the beginning that it wouldn't make a difference whether I went to an ivy league school or a state school; the $50,000 is set in stone. </p>
<p>So, here is my dilemma. I got into quite a few of my favorite schools (UChicago, Pomona, Middlebury, Carleton, etc.), but only Carleton offered me substantial enough financial aid for it to be considered. I was offered about $25,000 in grants, plus work study and a $5,500 loan. Factoring in the money my parents would give me and some money I have saved, I would graduate with around $55,000 in debt, possibly up to $60,000 going there. I also got into the University of Minnesota's honors program, which, with scholarships I received and the $50,000 from my parents, would make me graduate debt free. </p>
<p>So I've come to ask for your thoughts: Is Carleton worth the debt? I love Carleton--I love the professors, small classes, atmosphere, and I know that their teaching is phenomenal. I've spent quite a bit of time on campus. But, is it worth going to over the University of MN honors factoring in cost? I plan on studying international relations/economics/politics and foreign languages. In terms of plans after graduation, I would maybe like to work for a couple years and then definitely head to grad school (not medical or law school). And I know that Carleton is excellent prep for grad school and whatnot. But is the Carleton experience/degree worth the cost?</p>
<p>I forgot to mention, the debt I would incur that goes past $27,000 would be borrowed from my parents, which they would let me pay back when I get a steady job (but there would obviously be a contract and everything). If that makes any difference.</p>
<p>$60,000 is still generally considered too much debt (and borrowing from your parents could be a source of family fights if you are unable to pay as agreed).</p>
<p>First, congratulations on your great acceptances. Carleton is a wonderful school and it sounds like it would better help you reach your goals. Your education is an investment in you, and if you want to go to Carleton, it’s worth seeing if you can make this work. </p>
<p>The ability to borrow from your parents potentially can make a huge difference in this case. You need to ask them if they would be willing to set the loan interest rate at the Federal AFR rate (the minimum rate required to avoid having a loan be treated as a taxable gift). The current AFR rate is 1.09% for loans of up to 9 years and 2.7% for longer-term loans. These rates are much lower than what you would have to pay a bank. </p>
<p>However, since the rates change monthly, and are likely to go up in the future, if your parents will do this, I’d recommend that you lock in today’s low rates by borrowing to fund your first couple of years and use their $50,000 gifts later. With these low rates, you could pay the annual interest while you’re in school easily with a part-time job.</p>
<p>Tough choice: those are some of my favorite schools. Since Pomona, at least, normally has really excellent FA, I’m assuming that $50K is way, way below your parents’ EFC, calculated by most standard methods. Presumably they have their reasons for selecting $50K as their limit, and further for selecting $27K as the figure beyond which they will loan you money. </p>
<p>$55K+ is too much debt for undergrad in the vast majority of cases, IMHO. I am not sure whether it makes any difference who the lender is. An additional disadvantage of borrowing from your parents is that they may not have the money to lend when the time comes. Things happen.</p>
<p>I’m wondering why Carleton’s aid package is better than Pomona’s. That seems unusual, since Carleton is actually need-aware. Have you considered an appeal to any of the other schools?</p>
<p>To go to Carleton with just $5500/year in actual loans? Go Carleton. Even state flagships in Midwest are having serious budget issues, including I believe UM, so unless its honors college guarantees you uniformly small classes, face-to-face professor time, and the impressive facilities of Carleton, I think this is a no-brainer.</p>
<p>I am not a tax attorney, but I think that you may not have to worry about the IRS viewing this situation as a taxable gift. Parents are free to pay tuition, room, board, and expenses for their college-age dependents without it being considered a gift. If your loan from your parents is informal – they pay for college and you agree to eventually repay them – your payments to them would be gifts. Just as long as you repay no more than $28,000 per year ($14,000 to each parent) there would be no gift tax.</p>
<p>Fifty, I’m not sure I’d agree with your analysis (and I am a tax attorney, BTW), but in any event, my point was that if the parents were willing, the OP’s interest and payment burden on a parent-provided loan could be substantially lower than with commercial alternatives, and should be considered in that context.</p>
<p>Carleton guarantees to meet 100% of need. If you check through threads on CC, their financial aid packages for many years now are commonly the most generous among offerings.</p>
<p>I think you should go to Carleton, it’ll make you happier it seems, and not all worth can be measured in cash, plus it seems like your parents ultimately have your back here, I mean they aren’t going to let you end up homeless. </p>
<p>If your parents cannot contribute more and will not take out ParentPLUS loans, you will end up with twice the debt of the Stafford maximums, which is worrisome. Obviously you are an excellent student who will make the most of wherever you attend. College graduates everywhere, even bright ones from good schools, are finding it hard to get renumerative, field-appropriate employment. I cannot recommend that you hobble your early life with debt just to go to Carleton, admittedly a wonderful school, over the U of MN.</p>
<p>I also agree that borrowing that much money from your parents through an informal arrangement is likely to end in tears. If you decline this odd arrangement, you are wiser than your elders. </p>
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<p>Yes but for some reason, the OP’s parents can’t or won’t pay their EFC but are asking their son to borrow it off of them. I think he should call them on their bluff and go to his debt-free option. Many families can’t actually pay what colleges think they should; but it’s odd when, as in this case, the parents seem to have the money to lend but not to give.</p>
<p>Thanks for all of the responses. In response to some points:</p>
<p>My EFC is actually around $20,000 per year, but my parents refuse to pay that much for it. Their logic is that whatever they give me, they must give my other two siblings. One of my siblings is attending community college and the other will most likely enter a state school in two years. They say they’re trying to be “fair”. To give some context, I live in a very small town where only very rarely students go to institutions such as Carleton. My dad basically says that “if Carleton is so good”, why should they need to contribute so much if it’ll mean a better payoff? A bit frustrating for me. I think they’re trying to teach me a lesson or something that if I want a school such as Carleton, I’ll have to make some sacrifices on my part. </p>
<p>But anyway, they told me that they would borrow the money from their home equity line of credit (I think? something like that) and because of this they wouldn’t have to pay it back right away. My parents said I wouldn’t have to pay the interest on the loan either. Honestly I feel like I’m more concerned about borrowing the money from them than they are. They said they’re not too concerned about the timing of my payback and trust that I’ll eventually be able to repay them. </p>
<p>However, I will be responsible soon after graduation for the Stafford loans that I max out at around $27k.</p>
<p>It sounds as if this “loan,” then, is some kind of face-saving device that allows your parents to spend more on you than your siblings without fostering resentment. I am only speculating, of course. As long as your parents are willing to take the public and legal responsibility for paying your Carleton tuition, then let them. Realize, however, that the federal government does not think that any undergraduate ought to have more than about 30k in student loans. Your parents should understand this also, and be willing to “forgive” your “debt” to them if necessary. In no way should your repayment of any debt to them be required for their own financial security. If they cannot forgo the money, they should not be lending it to you (or anyone else).</p>
<p>The immediate payoff on college depends in large part on the field of study. There are only a few majors that track into immediate post-graduate employment. Carleton is a liberal arts college, not a vocationally oriented or tech university. Do your parents understand this? Are they willing to accept that you may not be able to pay off their “loan” to you for quite a while, especially if you decide to go to graduate school?</p>
<p>The economics and political science departments at UMN are very well-regarded and I don’t think that this debt would be justifiable on academic grounds. The environments at these schools are different (especially with respect to location) and that is something you will have to think about.</p>
<p>So your parents are going to pay about $12,000 a year and loan you the other ~$13,000 or so you need to make up CoA?</p>
<p>If your parents are willing able to comfortably afford to pay for you to go to Carleton, then go ahead. It sounds like their repayment terms are pretty flexible and there’s no interest, so your repayment will really just be $55,000 (no interest) and that if you are going through difficult times you will be able to suspend payments.</p>
<p>I agree that the University of Minnesota is also a very excellent university - a top-notch research university, and the honors program will enhance that experience. You can get a great education there. But it sounds like your family can afford Carleton.</p>