Loan for school?

[mrsboz]

My son is in his third year of college and he will be needing a loan for the first time. We have no idea how we should attempt to get one for him? What is the best deal? Do we have to sign for him? I don't know if the Stafford Loans are good but he is only entitled to get one for $5,500. Are these usually a good deal? Where else should we try to get the money? Thanks. We are at a total loss.

 

[clh2]

My son is in his third year of college and he will be needing a loan for the first time. We have no idea how we should attempt to get one for him? What is the best deal? Do we have to sign for him? I don't know if the Stafford Loans are good but he is only entitled to get one for $5,500. Are these usually a good deal? Where else should we try to get the money? Thanks. We are at a total loss.

This is MY opinion. Others may have different opinions, and I respect those

I have a DD who is finishing up her 2nd year of college, so somewhat familiar with the process of things as it relates to our situation.

Have you filled out the FAFSA? That would indicate your "expected family contribution". Our EFC about made me want to toss my cookies.

Anywho...the only real aid that our DD is able too get is an unsubsidized student loan. Parents do not need to sign for them. And, just so that you can have an adult conversation with your son, if the loan is unsubsidized, the interest starts accumulating from day 1. And - while the loan amount you may be eligible for is $5500 (although for juniors, I thought they could get $7500) someone will stick their hand in the cookie jar and take a small processing fee out of it. And - the whole amount doesn't get processed through for the fall semester, they allow half of it to be used for the fall semester and half for the spring semester.

At my DD's school, before she got her first disbursement, she had to go online and do something, perhaps sign the promissory note??? Or maybe it was something else. She hasn't had to do that since, at least that I am aware of.

Everything related to that loan is handled through the financial aid office. And, after the loan is disbursed, we have a loan processor where we can make payments if we want, as well as check the totals.

Nothing will get done, until you fill out the FAFSA. And - if you need more than that from a loan perspective, you might want to contact the financial aid office. Where my DD goes to school, I know they have 2 different "opportunities" for parents to help pay for their child's education via parent loans.

 

[mrsboz]

yes we already filled out the FAFSA thats how I knew that we could get I guess it is actually 6,500. But, how do we get more? Is the financial aid department the way to go or is their a lower cost option?

 

[crisi]

Another possibility is for you to remortgage - the interest would likely be lower than an unsubsidized loan in his name, BUT, you are using your house as collateral against his education - if this is your only child or your youngest, you are still fairly young yourself, you have equity to make it worthwhile, and you value paying for his education - this MIGHT be OK. Not my favorite idea, but its a source of money for a lot of people

 

[SC Minnie]

DD19 had to apply for a student loan for this summer due to some changes here at home. She applied late last week and received an email over the weekend that she was approved for $7500 unsubsidized- she's classified as a Jr. It was rather painless and a little too easy. We fill out FAFSA every January so that was already done.

 

[SC Minnie]

yes we already filled out the FAFSA thats how I knew that we could get I guess it is actually 6,500. But, how do we get more? Is the financial aid department the way to go or is their a lower cost option?

Besides the unsubsidized student loan I believe the only other option is Parent Plus. Have your son go to his Financial Aid office and they should be able to answer any questions.

 

[mrsboz]

No The mortgage thing would never be an option for me. He is our oldest. What is a parent plus loan?

 

[SC Minnie]

No The mortgage thing would never be an option for me. He is our oldest. What is a parent plus loan?

Google it and you'll find more information but that is a loan that the parent have to sign for and are on the hook for paying back.

Here is the website. http://studentaid.ed.gov/types/loans/plus

 

[tvguy]

I you did the FAFSA, your child's college financial aid office should be able to point you in the right direction. That's what they get paid to do.

 

[JillyBean1899]

Subsidized Stafford Loans typically have the lowest interest rates, plus they have the benefit of not accruing interest until your child graduates (which can save a *TON* of money). They also don't have to be paid back until 6 months after the person graduates (or stops attending school by dropping out), and they're eligible for income based repayment, so he won't get stuck with a huge payment if he's working part time at a minimum wage job. Unsubsidized Stafford Loans are similar to the subsidized ones, except that interest accrues from the date the loan is taken out. Both types of Stafford loans are offered based on need, not credit worthiness, so you won't need to co-sign them. The amount you can take out each year is limited, as is the total lifetime amount you can borrow, which helps keep loan amounts under control.

If you don't qualify for need based loans, Perkins or PLUS loans are available, but I don't know much about them since all I have are Stafford loans. Like a PP mentioned, the school's financial aid office will be able to give you the best information.

My Stafford loans have an interest rate of 3.4% and 3.8%. This is a fixed rate, not variable, so it won't go up when the economy recovers.

 

[minnierocks]

I highly recommend that you do your homework and sit down with the financial aid department first. These decisions can affect you and your child's financial status for years to come. Just ask any 27 year old who can't purchase their first home because they have $125,000 in student loans and can't afford the payments. Find out what your options are and then make informed decisions. Decide how much debt both of you are comfortable with, not how much they tell you that you can borrow. Be realistic about what it is going to take to finish school and pay it back. I am not trying to be a downer but there are a lot of young people in financial difficulty because they just took out loans without any idea of how hard it was going to be to pay them back. Take advantage of all government loans and grants first. If that doesn't cover it then the financial aid department will be able to give you options. Mortgaging your home or raiding your 401k for it is not a good option, in my opinion.

 

[crisi]

Subsidized Stafford Loans typically have the lowest interest rates, plus they have the benefit of not accruing interest until your child graduates (which can save a *TON* of money). They also don't have to be paid back until 6 months after the person graduates (or stops attending school by dropping out), and they're eligible for income based repayment, so he won't get stuck with a huge payment if he's working part time at a minimum wage job. Unsubsidized Stafford Loans are similar to the subsidized ones, except that interest accrues from the date the loan is taken out. Both types of Stafford loans are offered based on need, not credit worthiness, so you won't need to co-sign them. The amount you can take out each year is limited, as is the total lifetime amount you can borrow, which helps keep loan amounts under control.

If you don't qualify for need based loans, Perkins or PLUS loans are available, but I don't know much about them since all I have are Stafford loans. Like a PP mentioned, the school's financial aid office will be able to give you the best information.

My Stafford loans have an interest rate of 3.4% and 3.8%. This is a fixed rate, not variable, so it won't go up when the economy recovers.

Perkins loans are need based. They are school specific (not all schools participate in the Perkins program) and fairly rare. They are described as for students with exceptional financial need.

 

[leebee]

Unsubsidized Stafford loans are one of the best "deals" around for student borrowing. DD's subsidized Stafford loans have an interest rate of around 5%. No interest is charged while your son is a student, and repayment doesn't start for 6 months after leaving school. Also, if he should return to school at any time (grad school?) these loan payments can be deferred without penalty while he's in school again. Stafford loans (both subsidized and unsubsidized) are taken in the student's name, without a co-signer, and are based on financial need.

Unsubsidized Stafford loans take more thought. The repayment on these loans (principle and interest) starts on day 1, although there are some costly alternatives. You can start making the payments on both principle and interest, you can pay just the interest, or you can take a deferment but the monthly interest is rolled into the principle.

Graduated repayment (based on the assumption that he will have a smaller salary coming out of college and that'll increase over the years) and income-contingent repayment (payments based on a percentage of income) are also available for Stafford loans.

Parent Plus loans and bank loans are available for parents to take out, in their name, to help their student through school. I don't know much about these. Contact the financial aid office at your son's school; they will know which direction in which to steer you. Although it might not be an option for you, some people take a home equity loan to help with college (although I wouldn't do that), or borrow against their 401(k). The positive to borrowing against retirement is that when you are repaying, you are essentially paying the interest to yourself and not to some nameless finance corporation or bank.

Borrowing for an education isn't a terrible option, if you are smart about it. DD opted to go to our state university. DH is an adjunct there so she gets a 25% tuition waiver, we pay some of her bills, and she has loans (in her name, subsidized) for the rest. Right now, it looks like she'll accrue about $27K in education debt, which means her monthly loan payments will be about $280 for 10 years. That's pretty manageable, especially with help from us. I know many people with car payments more than that!

 

[JillyBean1899]

Borrowing for an education isn't a terrible option, if you are smart about it. DD opted to go to our state university. DH is an adjunct there so she gets a 25% tuition waiver, we pay some of her bills, and she has loans (in her name, subsidized) for the rest. Right now, it looks like she'll accrue about $27K in education debt, which means her monthly loan payments will be about $280 for 10 years. That's pretty manageable, especially with help from us. I know many people with car payments more than that!

That sounds about like me (minus the 25% tuition waiver lol). I'll have about $25-27k in debt when I graduate, but my car will be paid off by then, and the 10 year repayment is less than my car payment is now, so it's totally doable. And I'm majoring in accounting with a minor in hospitality/tourism, so I'm confident I'll be able to find a job after I graduate.