Researching student loans, wow my head is spinning. Any info?

[LuvOrlando]

I sort of feel like the opposite - I'm always a little shocked when people don't understand how this works. Its like people suddenly wake up one day to the realization that college is expensive, there isn't a lot of free money for it, and most of what you will get will be loans at market rates. I wonder if they have been wearing blindfolds. The big posters for college loans at Wells Fargo aren't there because there is ample public funds - and Wells Fargo is advertising them because they make money off them.

But why shocked? How exactly did you come across the details? how were you exposed to the arrangement?

 

[msmayor]

You have to qualify for this type of loan, I don't think too many people do.

If the school puts a Stafford Loan in the student's aid package offer, the ONLY thing they have to do to receive it is go through the 30 minute web-based Entrance Counseling to get the money. There is no credit check, because quite frankly at 18 most kids don't have much of a credit history.

As far as the Parent PLUS Loan, again...the standards for this loan are lower than other personal or secured loans. As I mentioned before, we needed to bridge some funding for a year while my husband was unemployed and we felt that getting this loan for school would be easier than finding a loan to pay the mortgage if we exhausted our savings. One page 'application' and after hitting "Send" we had our approval emailed back to us by the end of the day for $28k.

 

[teller80]

Sorry, I should have been more clear. Not many people qualify for subsidized Stafford Loans (when the gov't pays interest while the student is in school).

 

[Vernie822]

To add another perspective - a lot of parents don't put ANY money towards their child's college education. I know you are trying to help your kids OP, and I think it is so nice that you are figuring all of this out. My mom and dad did all the research they could as well - but ultimately the loans are in our (the kids') names, not our parents. Maybe I'm coming from a different place (having 4 younger siblings) but plenty of my peers in high school and college paid for our education ourselves. I think it is really nice that you are trying to help, so this is not meant in a negative way, but few parents are in the position to fund their child's college education. The students taking out loans isn't such a bad thing!

 

[crisi]

But why shocked? How exactly did you come across the details? how were you exposed to the arrangement?

I remember my own parents experience - they were pretty middle class and didn't get any aid when I went to school, or for my sisters. We all went to state colleges. And I figure that back then there was more aid, since I know government aid tightened when I was in school, I remember the protests. I remember being a straight A student, active in the community, with excellent SAT (National Merit semi finalist) and ACT scores who didn't get any of the scholarships I applied for.

I remember my husbands experience. He was raised by a single mom who had filed for bankruptcy - and in 1988 was $20k+ in debt on leaving school. This was with huge grants from a very well funded private school and work study.

I remember the recession, when the state raised tuition to help cover gaps in the state budget - and the discussions about how difficult it would be to pay for school with higher state tuitions and aid not covering the tuition that had been in place.

I read. If I'm hanging in the library with my kids I pick up Money or Kiplingers - there is a college issue every year.

I talk to people of all ages - so when my kids were little, I was talking to people who had kids going to college who would tell me about the aid situation. If you don't want to talk in person - this conversation has been happening every year for as long as I've been posting - and happens on all sorts of other internet boards.

I notice. I notice that Wells Fargo seems to do a thriving business in for profit student loans from the flyers and advertising they do when I go into a branch. If they are offering the loans, its because there is a market for them and they can make money. That implies that the aid package given isn't always sufficient.

I play around - years ago I ran a sample FAFSA for our income and savings. The kids were probably still in elementary school when I had an estimate of our EFC.

And I think....money doesn't come from thin air. It doesn't seem realistic that in an environment where we want lower and lower taxes and where charitable dollars are expected to cover so much - from food shelves to museums, that there would be a lot of money available - particularly for people like me who can afford to vacation at all

 

[mistysue]

Ohh ok, I get it. This isn't about college financial aid, this is a dialogue about how much you disagree with the valuation of grades & formal education. I won't disagree, there are lots of ways to be successful that do not demand formal education, but IF you are a person who is looking to be in a field that demands the particular skills and precision of a formal education, such as a neurosurgeon or Federal Reserve Economist then I think that particular kid needs to get on the same page as the field he/she wants to engage & an agreed upon education is sort of demanded. You can't even get into some fields without passing various licensing exams so test taking will remain a necessity for some beyond the SATs. If a kid isn't doing anything with that sort of vibe then I think he/she should seriously consider what path is best for him or her. & shouldn't give a second thought to this path if it's not theirs. But, this thread was started because my kid is actully looking to go into one of of the former sorts of disciplines so the whole grades & formal education issue does matter for me so here I am.

Not at all, I was replying to a specific quote from you- you are applying it broadly in a way to change what is being said.
Good grades in high school do no predict college success in a way that I read you were suggesting- that kids who are not at the top of class should not be eligible for funding so as to prevent higher GPA students from taking ALL the money. That is what I understood from what you said, I quoted it before so you knew what I was responding to. You then said that lower grade kids are going "just because they can" and I honestly perceive it to be the other way around.
I went to a private high school. Because I transferred I was not allowed to take honors or AP classes. (having been an honors NHS and GHS student at the first HS) As a result, my GPA was lower because honors and AP class kids got a boost plus they adjusted down my grades from my former school. I then went on to run circles around many of those peers- the ones who got all the scholarships for being so much more promising- when it came time for grades in college. I went because I wanted to be there not because I was expected to be. Anecdote, but everything is an anecdote. You can't assume the top GPA high school kids are more deserving because high school and college grading systems are different. HS tends to grade on rote memorization, college grades on actually thinking, understanding and coming up with ideas. It's a completely different game. A kid who can memorize a medical book may initially test well, but is not as useful as a kid who can understand and apply it.

 

[limpy]

But why shocked? How exactly did you come across the details? how were you exposed to the arrangement?

All you have to do is be vaguely aware that college tuition costs have skyrocketed over the past 20-30, and you should be aware of this if you have kids with the intention of sending them to college. (That is why the widely-publicized 529 plans encourage saving over the course of many years.)

I.e., if a college cost 35K/year and I am thinking of sending my child there, I assume that I will have to pay 35K/year to send my child there and will plan according, whether that be savings or loans. If they happen to qualify for a grant or a scholarship, that's great, but I have no basis to assume any free money until it is actually happens.

Frankly, I don't think it's an accident that things are so opaque. These misunderstandings are what's driving the bus on many many educations that would totally go a different way if everyone knew what was actually going to happen so why on earth would the schools remove the leverage they have over us?

What is the misunderstanding that you are referring to? The tuition is what it is.

Again, if you can't afford a school without taking out loans, you can't afford the school, whatever qualifiers you want to throw in there notwithstanding. There is nothing wrong with that. But you seem to be hung up on the unfairness of the financial aid process instead of just considering a less expensive school.

 

[LuvOrlando]

I'm kind of at a loss and dropping the tangent because it's not going anywhere useful to me.

Getting back to the point and original discussion: I wrote a check for the summer program because I'm still not sure what I am doing. I still have not figured out what kind of loan would best work for the fall ( I was thinking Sallie Mae but there are a lot of horror stories out there so I'm a tad spooked) and I'm still trying to navigate that process. If there are any parents with kids who are going to college in the fall or who have been recently through the process and found something that works I'd love to hear about it.

There are lots of different kinds of loans with all sorts of weird pitfalls I'm learning about and I'd like to learn as much as possible between now and August

Wondering if we cosign for our son on a private loan with the intent of paying it for him would that help him get a good credit history in order to buy a house in a couple years? Maybe he'll be able to buy himself a car with his first job - or could that backfire

 

[PlutoPony]

OP I'm not exactly sure what kind of info you're seeking at this point. You seem to have a pretty good handle on your options so at this point isn't it evaluating the data and making a decision that works for your particular situation?

You seem to be up to speed on the various lending programs out there. At this point isn't a matter of determining how much $ your family will want to borrow for this coming school year and who you are going to go with for the loan? The hope is that your son will pay back the loan but you are (wisely) looking at what happens if he is unable to work and pay back the loans, in which case ot falls on you.

Am I oversimplifying?

 

[Mrs. Ciz]

All you have to do is be vaguely aware that college tuition costs have skyrocketed over the past 20-30, and you should be aware of this if you have kids with the intention of sending them to college. (That is why the widely-publicized 529 plans encourage saving over the course of many years.)

I was the PTO president for a year at my kids elementary school when my kids were 4 and 6 years old. I had to put on 2 parent education seminars. For one of them, I invited the Virginia 529 people to come and speak (it was super easy to plan). Of course I attended because I was in charge of the event. But I could not believe how few parents came! Because of what I learned in that seminar, I signed both my kids up for the prepaid tuition 529 plan. I took everything we'd saved for them up to that point, plus a couple years' tax returns and some inheritance money and paid as much as I could upfront. The rest we paid monthly for years. Now 13 years later DH and I are SOOOOOO happy we did it way back then.

 

[teller80]

Wondering if we cosign for our son on a private loan with the intent of paying it for him would that help him get a good credit history in order to buy a house in a couple years? Maybe he'll be able to buy himself a car with his first job - or could that backfire

What is the difference in the interest rate between him getting a loan vs you getting a parent loan?

He can get a good credit score w/o paying a higher interest rate.

 

[crisi]

I was the PTO president for a year at my kids elementary school when my kids were 4 and 6 years old. I had to put on 2 parent education seminars. For one of them, I invited the Virginia 529 people to come and speak (it was super easy to plan). Of course I attended because I was in charge of the event. But I could not believe how few parents came! Because of what I learned in that seminar, I signed both my kids up for the prepaid tuition 529 plan. I took everything we'd saved for them up to that point, plus a couple years' tax returns and some inheritance money and paid as much as I could upfront. The rest we paid monthly for years. Now 13 years later DH and I are SOOOOOO happy we did it way back then.

Blinders. "we have plenty of time" "our kids will get scholarships" "my parents have money, they'll fund the kids educations"

We took some good advice that I found on a finance board. Our kids had been daycare kids. As their daycare expenses went down as they got older - and finally stopped - the money moved into college funding. I stopped saving for them when they were still in middle school - and could fund two private school tuitions (room and board would have to come out of pocket).

It did mean that we didn't have those sweet years of no daycare expenses. And my kids didn't do a lot of expensive activities because of it.

 

[LuvOrlando]

OP I'm not exactly sure what kind of info you're seeking at this point. You seem to have a pretty good handle on your options so at this point isn't it evaluating the data and making a decision that works for your particular situation?

You seem to be up to speed on the various lending programs out there. At this point isn't a matter of determining how much $ your family will want to borrow for this coming school year and who you are going to go with for the loan? The hope is that your son will pay back the loan but you are (wisely) looking at what happens if he is unable to work and pay back the loans, in which case ot falls on you.

Am I oversimplifying?

The "who" was at the beginning and still is the main question so it's about as simple as, "Who should I marry," simple in that it's not a very long question but not so simple in its enormity.

If you don't think it's a big question or have anything to offer byway of "x sort of loan was great because of y" then I don't see how you can help

 

[PlutoPony]

The "who" was at the beginning and still is the main question so it's about as simple as, "Who should I marry," simple in that it's not a very long question but not so simple in its enormity.

If you don't think it's a big question or have anything to offer byway of "x sort of loan was great because of y" then I don't see how you can help

Ok, I'm sorry I asked for clarification of what you were asking at this point.
My bad for asking a question when I couldn't help you.

 

[LuvOrlando]

What is the difference in the interest rate between him getting a loan vs you getting a parent loan?

He can get a good credit score w/o paying a higher interest rate.

Trying to create a grid right now with the interest rates and contingencies

 

[LuvOrlando]

Ok, I'm sorry I asked for clarification of what you were asking at this point.
My bad for asking a question when I couldn't help you.

I just don't want to defend my choice, I am looking for insight into the best kind of loan to select not justify why I want one

 

[LuvOrlando]

We h

I was the PTO president for a year at my kids elementary school when my kids were 4 and 6 years old. I had to put on 2 parent education seminars. For one of them, I invited the Virginia 529 people to come and speak (it was super easy to plan). Of course I attended because I was in charge of the event. But I could not believe how few parents came! Because of what I learned in that seminar, I signed both my kids up for the prepaid tuition 529 plan. I took everything we'd saved for them up to that point, plus a couple years' tax returns and some inheritance money and paid as much as I could upfront. The rest we paid monthly for years. Now 13 years later DH and I are SOOOOOO happy we did it way back then.

We have 529 plans for our kids too, it's a big comfort

 

[msmayor]

I just don't want to defend my choice, I am looking for insight into the best kind of loan to select not justify why I want one

You now see that there are quite a few directions to go, and the grid you are putting together is a good start. But the bottom line is that you shouldn't take what anyone here says is a 'good loan' as good advice...because what's good for one isn't going to be good for another. There are far too many variables in the equation.

Answer these basic questions...if a parent loan am I going to be able to afford the payment. Run calculators to see what the monthly payments will be, decide if you can at least make interest payments to prevent the balance of the loan from growing while your child is still in school.

Ask yourself...do I have other obligations coming up that I will need to make sure I have the 'credit space' for, like a car loan? You already know that loans in your name count against your total debt, but if you cosign for your child's private loans 100% of the balance due counts against your debt load, and will continue to count against your debt load until its paid off...even if your child is the one making the payments.

Remember that student loan debt can NOT be discharged in bankruptcy. A full load of Stafford Loans (the maximum all four years) equates to approximately $320/month...for 10 years. Imagine making a car payment on the same car...for 10 years. What will happen if your child doesn't find a job right away? Well, he/she can apply for forbearance, but that only delays the inevitable and the interest will continue to add up.

Student loans can be a great way to bridge the gap in college funds. But make sure you have a plan to make the payments before that first disbursement ever happens, because it can be sobering to the joy of graduation when you get that letter that says "Your payments will begin in just a few months at $XXX.

 

[LuvOrlando]

That's useful. I hadn't considered taking up credit space that could mess with loans. We were thinking of a new car but probably shouldn't until I get a better handle on things... seems to be lots of rabbit holes I keep finding

 

[crisi]

What is the misunderstanding that you are referring to? The tuition is what it is.

For the sake of argument - college tuition is sort of like airfare. The full fare price is what it is, but not everyone pays that - and its complicated on who pays what. Especially with private schools who have more discretionary endowments. A local student might get a local student scholarship - one of my husband's discretionary grants was specifically for students from within a ten mile range of the inner city campus who did not do great academically, but had shown potential - which was my husband - lousy grades his freshman and have his sophomore year, then he figured it out and his grades improved - topped off with excellent test scores. It was a grant specifically for under achieving local low income students. Someone else without all three of those attributes wouldn't have gotten the money.

Now, was it fair that another kid who had a better GPA might not have even gotten into the school, much less gotten aid? Maybe not, but it wasn't fair that my husband was raised by a single mom in poverty and got stuck in a public high school that was underfunded and performed poorly, where graduation wasn't necessarily a goal. Life isn't fair.