<p>Apparently my grandparents made a sizable trust fund for me upon my birth, as they did for my cousins. I didn't find this out from my parents, so I don't really know how much is in it. Can parents revoke a trust fund or use it for their own personal needs (ex. home renovation or something)? My parents are planning extensive renovations and have said they can't afford the colleges I like. I don't want to be a burden or go into debt with them or anything, but if my dad can contribute a certain amount each year, shouldn't the trust fund be able to make up the difference?</p>
<p>It depends on the terms of the trust fund. Some stipulate that you can't get the money until you're a certain age.</p>
<p>From what my cousin told me, it's portioned out after age 18 or something, but she could be wrong. I really hope I'll be able to use it to avoid taking out loans.</p>
<p>Jackson17: Think what wealthy people do with this money. Would they "avoid taking out loans" ? or would they do something than can enhance and perhaps increase the value of this money? </p>
<p>Hint: What are the parents doing with the house and how.</p>
<p>The theory is to save as much of the trust fund as possible for other purposes later (rent, etc.) in order to get maximum value. I don't know if I get what you're saying about the house, though.</p>
<p>I have a related question. </p>
<p>Assume for purposes of discussion that I have $50K in savings and my daughter's EFC is $20K per year -- so that I will need to contribute $80K over 4 years. Also, assume that I have a $50K annual income and do not have much discretionary income to support monthly loan payments. Finally, add in that I have excellent credit and easily qualify for a PLUS loan, but because of my income and present income-to-debt ratio, do not qualify for a home equity loan.</p>
<p>So here's my question:</p>
<p>Is it better to spend down my savings in the early years, thereby reducing our EFC somewhat, planning to take a PLUS loan (at 8.5% interest) later on? </p>
<p>Or is it better to finance the college with PLUS loans straight from the beginning, using some of my savings to make loan payments, and therefore extend the buying power of my money. ($100 in monthly payments roughly equates to $8000 worth of borrowing power - however, each $8000 borrowed will carry $3,900 in interest over the life of the loan)</p>
<p>Itstoomuch, I would be particularly interested in your opinion on this, as I think you have a somewhat different take on financial matters than I do. (I tend to be risk-averse and don't like the idea of taking on a huge amount of debt)</p>
<p>Once Money is spent, That money is lost forever.</p>
<p>Calmom: another way of looking at it is that you have half the money needed for DD college. Thus, you need to make up $10k per year. (this assumes no increases for our purposes). $10k can be raised through a combo of scholarships, DD working, her taking out max. student loan and finally, a PLUS loan. That should be the last option, espec. if home equity is not an option. Do NOT blow $20k up front - work the various options first - it can be done. Remember, you are doing this over time and you don't have to pay out $80k all at once. $10k is less than $1000 per month and DD should be able to work and pay about half, if she is clever, she can pick up several scholarships ($100-$5000), then the standard student loan which isn't repaid until graduation (or drop out) at very low, tax deductible rate for her - not you. If necessary, get a small PLUS loan as needed. Break it out into smaller chunks - maybe a grandparent could pay for books, for example (adds up!), etc. Don't panic - it is a long and winding road...</p>
<p>Calmom. I think we went through this a long while ago.
"(I tend to be risk-averse and don't like the idea of taking on a huge amount of debt)"</p>
<p>I would see you as risk-aggressive. Many would think that no debt is good. It is to a point. You and I are no longer young; Do you think that your health would be good in 4 years? If you spent the $ on COA and then get sick, or your daughter gets sick...Where would the Money come from for either college or medical expenses; or When you are not able to get credit? </p>
<p>Jackson1's parents are remodeling their home. Which is wiser, pay cash for that remodel or borrow that cash? The remodel is a longterm investment (education) Now suppose that during the remodel, the house unfortunately caught fire. Jackson paid cash for this remodel. How is the Jackson's going to rebuild if all their cash has been spent and which had a beneficial affect on their credit score? Who is going to lend the Jackson $200,000 plus, when their collateral is now gone, their savings gone, their FIFCO score is reduced, and the homeowner insurance only covered the original structure? </p>
<p>Another aspect is: A good accountant would see this problem as a Net Worth Statement = Assets - Liabilities. You will immediately understand what I mean. There are not many good accountants.</p>
<p>I will not get into how interest is calculated since FELP loans may soon have a different method of calculation. I will however say that the terms of the current program (soon to end) can be extremely beneficial to the borrower.</p>
<p>Calmom: I cannot give you a direct answer because there is no correct answer. As a lawyer you should no that. </p>
<p>You mentioned the cost of interest over the "life of the loan." You need to ask the questions: How long do YOU wish to be the "life of the loan?" </p>
<p>Other questions: How about inflation. Do you think our legislators will change the tax laws? So many questions and no crystal balls. Even oracles and prophets have difficulty in predicting wealth.</p>