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

[BellsFam]

That's not what I'm saying at all. What I'm saying is that I didn't know anything about student loans. These were things my parents signed me up for because we didn't have any money for me to go to college. I have gigantic loans that I didn't want/didn't sign myself up for. And I knew nothing about how they worked until I had been out of college long enough and desperate for a job (any job that paid more than 7 an hour) to pay for loans. And Sallie Mae switches account managers every month. So even if you get comfortable talking to someone, the very next day it could be someone else. There was never any consistency. And the worst part was that when we spoke to them, my mom and I, and told them that we both did not have enough money to pay back, per month, the amount they wanted, they told us just not to call them until the bill ALMOST went into default and THEN only then could they help us with a better repayment plan.

When I spoke with the other places I have my loans, all three of them were willing to assist immediately. No mind games. It's not a matter of not wanting to pay back the money, it's a matter of how much I can pay at that time. And Sallie Mae is ruthless, in my experience and my sister's. It will be the first loan I pay in full so I never have to deal with them again. :/

Whatever you end up doing, make sure that your kids know completely (even if you don't THINK they'll have any loan debt associated) what you're doing loan wise. Because it's so much better to know what's happening with loans than to be surprised after with the debt.

So why didn't you go to a different college?

When it became clear I would have to fund my education, I ditched the acceptance to the high priced college and went to the local community college and spent a 1/4 on my associates, then when I was working full time I took courses as I could afford them.

 

[steviethegreat]

So why didn't you go to a different college?

When it became clear I would have to fund my education, I ditched the acceptance to the high priced college and went to the local community college and spent a 1/4 on my associates, then when I was working full time I took courses as I could afford them.

I actually did go to community college. I did a collective four years of community college, but to actually get a degree in my major, I needed to transfer to a university, which I did. But only certain credits transfer and at a community college, I could only get an associate's degree, which wouldn't have gotten me anywhere very quickly. (And I only say that because 99% of the jobs I look into require a Bachelor's degree.) At the end of the day, all I was trying to say was that I, personally, have had a terrible experience with Sallie Mae. Everyone that I associate with has had a terrible experience with Sallie Mae. But I'm sorry for causing such a stir! I didn't mean for anyone to question why I actually went to school. I was just giving my two cents on Sallie Mae.

 

[LuvOrlando]

I actually did go to community college. I did a collective four years of community college, but to actually get a degree in my major, I needed to transfer to a university, which I did. But only certain credits transfer and at a community college, I could only get an associate's degree, which wouldn't have gotten me anywhere very quickly. (And I only say that because 99% of the jobs I look into require a Bachelor's degree.) At the end of the day, all I was trying to say was that I, personally, have had a terrible experience with Sallie Mae. Everyone that I associate with has had a terrible experience with Sallie Mae. But I'm sorry for causing such a stir! I didn't mean for anyone to question why I actually went to school. I was just giving my two cents on Sallie Mae.

Don't Apologize, your honest opinion like everyone else's was requested and I appreciate it. I did some of my own research after reading some comments on here and an inordinate number of people seem to be having issues. The reviews I read were so compelling that I actually called Penn State to ask if I can choose another servicer and they told me that it's random and I have no say. The few things that I took away are that I can avoid problems by avoiding human contact over there. It seems that by having things set up directly out of my checking account I can remove the human error part of the problem which seems to be where all issues emanate from with this servicer

 

[LuvOrlando]

Rather than a home equity, you can do a cash out refinance (for say a 10 year period) and lock in the rate and payment period. Put the money in a savings account, accept you will never get even theoretical need-based aid at that point, and use it to pay the 2 college degrees over the next 6 years. That's a loan that is dischargable in bankruptcy, is probably gonna be at the lowest fixed rate you can get, and is the "cheapest" for fees. My parents did a cash out refinance just for college for my siblings and it worked great for them,

Well that's new, I haven't heard of that before at all. Hmm, except it does ring a bell in the case of elderly folks cashing out their homes in order to live more comfortably. Is this the same kind of financial vehicle? I'm gonna look into it

 

[crisi]

Well that's new, I haven't heard of that before at all. Hmm, except it does ring a bell in the case of elderly folks cashing out their homes in order to live more comfortably. Is this the same kind of financial vehicle? I'm gonna look into it

Elderly folks do a reverse mortgage - an annuity with their house as the principal - at the end of which they don't own their house. This is more like selling your house to yourself. Keep whatever equity you want in, take the money you need out - pay off the first mortgage - now you have less equity, but more cash on hand.

Downsides - less equity in the house, bigger chance of ending up upside down. Especially if you live in a area of the country that isn't growing, that could be a problem if you are close to downsizing. You end up with lots of cash - which is not a good place to be on future FAFSAs if you want to be eligible for subsidized loans/work study or federal grants (though it sounds like you are highly unlikely to get a grant in any case) - as more kids go into college, your EFC per kid goes down. And its secured by your house - if you can't pay it off, your house could be foreclosed on.

Upside, the interest is deductible - its a mortgage. Mortgages - being secured - have some of the best rates going for debt - better than federal student loans.

It is a pretty good deal for someone who has the financial means to pay the new mortgage - i.e. sufficient assets or a steady income for the long term. And for college, its a pretty good deal for someone whose EFC is so high they aren't likely to see federal aid anyway.

 

[Mrs. Ciz]

Thanks Marimama, I did just have an interesting conversation with a friend at lunch and she thinks she is going to go the home-equity route. On the one hand interest rates are lower and with a line of credit we can get away without any origination fees but is this smart to do in our 40s when we should be solidifying our stake in the world? Also the line of credit exposes us to variable interest rates. If we do fixed we need to project out the amount and pay interest on money we haven't used yet :/

We do have a lot of equity in the home but not so sure this is smart and I'm very uneasy... Still as I said I'm just using it as a buffer and don't expect to need it for long if at all

So it seems the things on the table are:

Half cash each semester.

The other half:

Stafford, because I want him to have some ownership but we're gonna be paying interest until he's out of school.

Remainder, I want to spread it out over the course of the year to act as a buffer.

Friend of mine used Sallie Mae for this purpose but it sounds a little dicey. I gather the best way to handle this organization is to create an online account and direct deposit interest & payments to prevent human error & needing customer service

Another friend of mine is proposing using home-equity loans but that makes me a little nervous

Parent plus - Im not entirely sure I really have a good understanding of how this works. Seems it is loosely affiliated with federal money and has certain protections and safeguards

Private- I will get great customer service but there are no safeguards and I will pay high origination fees

If you want to use the university's free payment plan, you might want to lock that in now. At DS's school, the payment plan opens in May and breaks it into 5 payments a semester. If you miss the May deadline, it's 10% down and 4 payments. If you miss the next deadline (mid July), it's 20% down and 3 payments. After that, you are SOL.

 

[MariMama]

This thread is a great PSA to parents of younger children to not wait until three months before your child is expected to start college to think about ways to pay for it.

 

[Vernie822]

Can you do some loans in his name and some in yours? Are you trying to avoid your son paying for anything at all?

I understand you're trying to help him, and like I said before, I think that is great. But could you do your plan of half cash, and then each take out a loan? I just don't ever want to put my parents into financial stress because of my college education. Assuming he's 18 or close to it, he is mature enough to understand the student loan process.

Has he considered other schools?? I hate to be the bearer of bad news but perhaps he should consider less expensive options or maybe you should just be OK with the fact that you and he will both take out some loans? It's not the end of the world for a kid to graduate with student loan debt. People do it all the time.

 

[elaine amj]

Can you do some loans in his name and some in yours? Are you trying to avoid your son paying for anything at all?

I understand you're trying to help him, and like I said before, I think that is great. But could you do your plan of half cash, and then each take out a loan? I just don't ever want to put my parents into financial stress because of my college education. Assuming he's 18 or close to it, he is mature enough to understand the student loan process.

Has he considered other schools?? I hate to be the bearer of bad news but perhaps he should consider less expensive options or maybe you should just be OK with the fact that you and he will both take out some loans? It's not the end of the world for a kid to graduate with student loan debt. People do it all the time.

I believe her plan is for him to take out the max Stafford loans (which is in his name?) that he is allowed. And then she will supplement with cash + loans she takes out.

 

[crisi]

Can you do some loans in his name and some in yours? Are you trying to avoid your son paying for anything at all?

I understand you're trying to help him, and like I said before, I think that is great. But could you do your plan of half cash, and then each take out a loan? I just don't ever want to put my parents into financial stress because of my college education. Assuming he's 18 or close to it, he is mature enough to understand the student loan process.

Has he considered other schools?? I hate to be the bearer of bad news but perhaps he should consider less expensive options or maybe you should just be OK with the fact that you and he will both take out some loans? It's not the end of the world for a kid to graduate with student loan debt. People do it all the time.

If her EFC is high enough, he won't qualify for a Stafford, and there are few high schoolers who will have adequate income/assets to get a loan without a co-signer. At the point you need to co-sign for your kid - you are responsible, so its the same amount of financial stress as taking out the loan in your name and having them help pay it off.

 

[tzolkin]

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!

I know many people who think this is the case-- that parents don't "need" to help their kids with college. (Some who are having babies with no regard to future costs because they have the mentality "I did it myself, so why should I pay for my kids?" But the reality in the way the system works is that either parents must be financially responsible or their child's options are limited/non-existent.

Perhaps in your situation your parents' income was such (and there were enough dependents) that your EFC was low enough for you to cover yourself.

That's how it was for me and my siblings. My parents did not pay one cent toward my education, but I was "lucky" enough to be from a large poor family so I was able to manage it myself (through work and loans). However, just because I was able to "do it myself" doesn't mean that's feasible for everyone.

Depending on the parent's financial situation, the EFC may be way too high for a student to ever cover by him/herself. See below:

If her EFC is high enough, he won't qualify for a Stafford, and there are few high schoolers who will have adequate income/assets to get a loan without a co-signer. At the point you need to co-sign for your kid - you are responsible, so its the same amount of financial stress as taking out the loan in your name and having them help pay it off.

In our situation, even with merit-based scholarships our DD would not be able to pay for (state) school without help from DH & I. She does qualify for an unsubsidized Stafford, but that's only $5,500. She works, but could not come up with the rest herself.

 

[ruadisneyfan2]

I actually did go to community college. I did a collective four years of community college, but to actually get a degree in my major, I needed to transfer to a university, which I did. But only certain credits transfer and at a community college, I could only get an associate's degree, which wouldn't have gotten me anywhere very quickly. (And I only say that because 99% of the jobs I look into require a Bachelor's degree.) At the end of the day, all I was trying to say was that I, personally, have had a terrible experience with Sallie Mae. Everyone that I associate with has had a terrible experience with Sallie Mae. But I'm sorry for causing such a stir! I didn't mean for anyone to question why I actually went to school. I was just giving my two cents on Sallie Mae.

Going OT again but most advisors these days recommend to find out in advance exactly what classes will transfer to the 4 yr college of choice and only take those particular classes at a community college. Following the community college's curriculum to get an associates degree is a waste of time. Not that it's not an accomplishment but I have one too and didn't even care to attend commencement. Neither did my friends there. It was kind of a joke among us.
I'm not knocking community colleges. Ds19 will be attending ours in the fall after a semester at an expensive private school which was one of a tiny handful that offered a major in software engineering. He then decided he didn't want SE so it's back to community until he figures out what he wants. It's 1/10 the cost of the private school which we can easily afford OOP.

 

[LuvOrlando]

This thread is a great PSA to parents of younger children to not wait until three months before your child is expected to start college to think about ways to pay for it.

Really? Was this a necessary or helpful comment? I did not wait until three months before my kid went to school to think about it or I wouldn't have all the money in the bank

 

[LuvOrlando]

Can you do some loans in his name and some in yours? Are you trying to avoid your son paying for anything at all?

I understand you're trying to help him, and like I said before, I think that is great. But could you do your plan of half cash, and then each take out a loan? I just don't ever want to put my parents into financial stress because of my college education. Assuming he's 18 or close to it, he is mature enough to understand the student loan process.

Has he considered other schools?? I hate to be the bearer of bad news but perhaps he should consider less expensive options or maybe you should just be OK with the fact that you and he will both take out some loans? It's not the end of the world for a kid to graduate with student loan debt. People do it all the time.

I think the laws have changed and kids are not allowed to take out sizable loans for themselves anymore. He is going to be doing the Stafford but as far as I can tell that's all there is he's allowed to do. Its possible there might be other financial vehicles out there but I suspect the terms would be suffocating, anything the targets high-risk borrowers always has to promise a huge payoff for an investor to think it's worth the risk. As it is with Stafford he's going to be graduating with the equivalent of the cost of a civic & I think that's reasonable.

 

[LuvOrlando]

I know many people who think this is the case-- that parents don't "need" to help their kids with college. (Some who are having babies with no regard to future costs because they have the mentality "I did it myself, so why should I pay for my kids?" But the reality in the way the system works is that either parents must be financially responsible or their child's options are limited/non-existent.

Perhaps in your situation your parents' income was such (and there were enough dependents) that your EFC was low enough for you to cover yourself.

That's how it was for me and my siblings. My parents did not pay one cent toward my education, but I was "lucky" enough to be from a large poor family so I was able to manage it myself (through work and loans). However, just because I was able to "do it myself" doesn't mean that's feasible for everyone.

Depending on the parent's financial situation, the EFC may be way too high for a student to ever cover by him/herself. See below:


In our situation, even with merit-based scholarships our DD would not be able to pay for (state) school without help from DH & I. She does qualify for an unsubsidized Stafford, but that's only $5,500. She works, but could not come up with the rest herself.

I won't even talk about our EFC, it is unreasonable & Penn State is only a fraction of what they think I can spend on school & it's way way way too high

 

[leebee]

OP, I've been reading this thread all along, but it's been a long one and I'm confused. From your early posts, it was my understanding that you CAN afford to pay for your son's college but that you'd prefer not to spend the savings in case you actually need the money for personal needs; essentially hoping to CYA against "something" happening in the near future. Is that correct? I'm just looking for clarification here, not making any kind of judgement.

I have a friend who took a loan against her retirement account to help pay for college. She was comfortable with this (I am not aware of her specific finances, but judging by the house, car, and vacation, she is going just fine financially), and rationalized that (a) the interest rate is better than for private loans, and (b) when you repay the interest, you are actually paying yourself. I am not sure I understand all the specifics, but it worked for her. Might be something else to think about.

 

[MariMama]

Really? Was this a necessary or helpful comment? I did not wait until three months before my kid went to school to think about it or I wouldn't have all the money in the bank

If you have money in the bank to pay for college, why a 12 page angst-ridden thread about how you're going to pay for college?

 

[msmayor]

I won't even talk about our EFC, it is unreasonable & Penn State is only a fraction of what they think I can spend on school & it's way way way too high

That's what every parent says.

But Penn State is a very expensive school. The estimated cost to attend for a PA resident living on campus is somewhere north of $43k per year. It is not 'unreasonable' to expect a family to pay at least half that cost.

If its way too high, then the school is out of reach and should be off the list. Find a more affordable alternative. Again, you can dream about owning a Rolls Royce but if your budget only allows a Chevy, then that's the choice. Both will get you where you are going, but one will do so without crippling debt.

 

[J'aime Paris]

I've been following this thread, as we have a DD who is a junior in HS. Her dream is to be a dentist, and Marquette University ($48K) is her first choice, followed by UW-Madison ($28K). Dental School is a whole other subject, lol!!

EFC is what i call "perceived fairness".

Student#1: Comes from a broken home. Single parent mom does her best, but the family struggles. The family gets federal aid, grants, student receives a few small scholarships, does work study. Very small loan needed. EFC is very small.

Student #1 would have been unable to pay for college without assistance. (I was this student)


Student#2: Comes from an upper middle class home. Parents work very hard to secure their future. The family gets zero federal aid, zero grants, no work study available. Small loan available to student. Parents must supply the majority of the tuition costs, whether through loans or savings. EFC is almost 100%

Student#2 would have been unable to pay for college without assistance. (This is the mostly likely the scenario for our DD)


Who is going to college, the students or the parents???? I don't know a student who is in a position to pay for their own college (I'm sure a few exist)

I can see both sides of the coin, since I lived the Student #1 scenario, and our current family situation is Student #2.
Student #2 has resources that were probably unavailable to Student #1. But Student #2 isn't wealthy or successful---the parents are!
Student#1 may have had a more stressful life situation, and deserves a chance to succeed. A college education would most likely be out of reach without the federal aid and grants.

Every situation is unique...and I wish all the students and parents the very best to figure out what will work out for them!!

 

[herdtoDisney]

I'm going to add my 2 cents, hesitantely as I am feeling shame. Glad this is a message board and not RL!

Oldest kid went to college. Kid did great in HS and got into an expensive school, got a good scholarship. Not full though. Dh and I didn't go to college, and we were not in a position to fully pay. We could pay enough to cover community college, or half of local univ. For kid to go to the school, meant loans. However, the major is skilled and in demand and really, paying should not have been a problem. I cosigned, in the end about the amount of a nice SUV.

...fast forward, kid has a good job, and chose to marry someone who chooses to not contribute financially (no kids). So guess who is paying the private loans? Yup. Because I cosigned, and also want to get a new mortgage soon (moving). It is a MESS. And taking away from my own minor children. We will never again cosign a loan, and I'm not encouraging the others to go away to school. I regret it.

I fully recommend NOT cosigning ever!