Zero financial aid...what are your plans?

Parents Forum
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I saw thread about "read this before taking out a Parent Plus Loan’’ and the date was 2014…seriously…anyway…hopefully there must be others in my situation.

Firstly my child was accepted as a transfer and will be attending Berkeley. Because of our FAFSA our financial package offer is ZERO. I would say we are middle class but who knows anymore…anyway…the financial package was also ZERO at UCSD and UCSB…all of them…

Anyway…my question is…first time doing this. The Fin Aid package offers a button for a 7500 loan for the kid, and a Direct Plus for the rest.

We have savings, and a 529…

Our plan is to take some loan and pay off as soon as possible…the Direct plus loan is 7.54%. There is an origination fee. Some of these other websites like you check and apply to several…the rate seems to be around 5.99% and no origination fee.

We thought about using our Heloc but the rate is 10% now due to interest rates rising, and you cannot deduct the interest I do not believe unless the amount is for home improvement.

So if you were me…would you just take the Direct Plus and the higher rate/origination fee, or try one of the others. I am just wondering if anyone has used some of the others like collegeave, sofi, sallie mae…was the experience positive?

The main thing we are looking for is being able to pay off early with no penalty. I am NOT planning on some type of loan forgiveness or something for the reason to get the Direct Plus. I am thinking while it cost more, the direct plus loan is the safer?

If you were me what might you do…pay the higher interest and fee? Mostly looking for any bad experiences with the non Direct Plus loans if any.

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If you have a 529, why not use that first?

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Are you instate in CA?

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Our students accept the federal loan since it’s the best deal financially. Then we use the 529’s, and then private loans, we pay the interest monthly. Sallie Mae has a 12 month co-sign release and better rates if you pay the interest. We have 5 kids so we don’t want their loans in our names (2 have graduated, our names were taken off, and the loans have been paid, fortunately both found good paying jobs after graduation, living home during Covid made it easier, they are both out now.

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You say you have savings and a 529. Unless your intent (which would be valid!) is to have your child undertake the debt why wouldn’t your first source of funding be your 529 and savings?

Beyond that I would go with wherever gave me the lowest interest rate. The origination fee (used to be 4%, not sure what it is now) is a bit of a scam IMO - paying a fee on top of an interest bearing loan. At least when you pay points on a mortgage the result is a reduction of the interest rate.

It might be the state I live in but I can’t think of any loan structures we even have available to us that have prepayment penalties. Have you seen some that do?

I would be inclined to stay with something that’s fixed interest knowing I could always refinance into a lower rate in coming years if it was advantageous.

You may not want to use your HELOC but a full refinance of your home (pay off HELOC, cash out) may be an option depending on your original mortgage terms and equity position.

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almost always it is best to start with the student taking the direct loan for $7500 (assume your student is a junior or senior?). It will have a 1% origination fee that they will take out of the distribution. It will be in student’s name only, but you can make payments on it. With this loan, student can use government repayment programs like Public service loan forgiveness, IBR, deferments.

If you still need to borrow more (and if you do, after using 529 and savings, you might want to reconsider this school as too expensive), then I’d look for the best deal. Private loans may have cheaper interest rates but will not have some of the government guarantees, releases, cancellations that private lenders give. Each private lender will have its own conditions.

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The 529 was my wifes idea…once I read all the complications about using it I had her stop using it years ago…There’s enough in there to pay for 1/2 a year tution…but as you know…its gone down since the stock market went down…I was thinking just leave it alone till the market goes up a bit more…so its there…we can use for expenses…and I understand we can transfer it to another child…our plan was to use it in bits and pieces…computers, furniture…things like that I guess.

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As far as using savings…you know mentally…its hard to see a big chunk go out…at least for me…so we were going to get a cosigned loan(to help with childs credit)…they pay the loan off in big chunks…so we will lose a little interest, but each loan is for a year…but u know how it goes…once I do the paperwork and look at the amortization schedule…i want to make sure we are not paying mostly interest when we make a payment…I know in the past with house loans it was kinda like that…but I don’t know about these type of loans…IMO…they keep the thing purposely hazy…make it really easy…so they can get ya right? With the interest.

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yes CA

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Oh yes forgot to say…besides savings…My wife and I both work and make decent money…so as we work…we pay towards the school expenses…its not forever but at least for next several years.

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anybody else here willing to admit they got zero money? Every time I come to a forum I just read…“all paid…” …full tuition…grants…yadah yadah yadah…it must be hard…l:>)

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We got zero money from the UC’s and Cal states. Had no complications in using the 529 plan money for both son’s (majority of the costs) and supplemented with current income. We filled out the FASFA for each son Freshman year only but since we did not qualify for any FA and did not need to take out the Federal student loans, never filed again.

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Actually, it seems that this forum is overrepresented with students / parents who get no need-based financial aid, although many of them are hunting for merit scholarships from less selective colleges that want the “overqualified” students to enroll to boost the college’s student profile.

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Great! I thought we were the only ones :>)…welcome to the club…Actually years ago I guess I was so naive…I mean…I knew we would not qualify for much money…but I mean…not even 1 penny? We did not even qualify for 1 cent? Just dumbfounding…I thought everyone got at least that…but I guess I realized…after several college tours…they have to pay for all those buildings and landscaping and professors somehow…so I understand the deal better.

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I’m not sure I understand your comment.

If you qualify for need based aid you need to apply to schools which meet that need (not all do). If you don’t live in CA, you can’t expect to get any financial aid from the UCs.

And if you don’t qualify, but need merit $$, you need to apply to schools that have auto merit for your stats or at least where you have a strong likelihood of getting merit money. In other words, where your student is overqualified vs most admitted students.

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For tuition paid directly to the school, it’s as simple as can be. Most 529 plans let you pay (a lot of) colleges directly electronically.

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We were a full pay family that searched for merit. Our state pays full tuition for qualified students so my D’s fall back was attending one of our in-state schools, but she wanted to go to a small school OOS. That drove her application list.

She had acceptances with no aid at $70k++. She did not attend those schools. :wink: She is attending a school that gave her great merit.

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While you might find an amortization schedule online, you won’t get one with the federal loans paperwork. You’ll (son) do the master promissory note the first semester, and then see very little paperwork until 6 months after he leaves school/graduates. He will not be required to make any payments while in school. It is not like getting a mortgage where you get a nice truth-in-lending statement that shows you the payments and the interest before you take the money. For direct student loans, you don’t know the payment amounts until the end when you start making payments. Why? Because you may borrow more, may pay some of the interest as it accrues, pay some principal…

Don’t take out a loan to have your son build credit. Get a credit card, charge some things pay it off, rinse and repeat.

Each loan is not for a year. You take out the loan year by year (really semester by semester) but the repayment can be for up to 10 years.

It’s not just a little interest. It’s really quite a bit. If he borrows $7500, and there is a 1% origination fee, that’s $75. And interest will start accruing right away (on 1/2, for the first semester) but you won’t make any payments.

If you don’t want to withdraw all the money from savings or the 529 plan at once, some schools have a payment plan and you can make 2-3 payments each semester, or up to 10 in a year. There is usually a charge for the payment plans.

You can get a private loan and pay it off in a year, but IMO you are just wasting money (interest, fees) doing that.

My kids got some FA, but not enough to cover it all. They took the student loans. And they’ve had to pay them back. It is not easy to have to pay student loans when they’d much rather be paying for a new car, rent, a phone.

Many people on CC are full pay. Many get no need based aid. There are many ways to pay for college, but I think those who have 529 accounts use those to pay for college before taking loans, or do a combo of splitting the 529 into 4 years of college, and then borrowing for each year as needed.

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The thumper family funded college out of current earnings. We used my income on total to pay for college costs at two expensive private universities. We did this for 7 years. My husband’s income paid our other living expenses.

We did have our kids take out the part of the federally funded Direct Loan every year. Our graduation present to them was paying off the loans.

We didn’t take out any additional loans.

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Getting off topic…i was curious if anyone had experience with non-Direct plus loans…but…I live in CA…UC and CA state schools are a good value even without Aid…because part of the cost is subsidized…for example…If i went to Michigan from out of state tuition is $53,000 where as if you are in state $17,000 last i checked…so in a sense many families are almost forced to go in state given the cost of college these days. I am sure you understand that?

So I am good.

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