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

[PlutoPony]

No, there will be no support for us but don't get me wrong, I'm not complaining. The thing is I'd like to be solvent at the end of the balloon that is college and it seems that if I'm not careful things can go very very badly when we are most vulnerable

Isn't the issue that parents have to sign or co-sign for anything above the $27K Stafford unsubsidized loans noted in a previous post. So it's virtually impossible to avoid some risk on your side of the equation? Parent Plus or private loans - it's all pretty much the same in terms of liability. Obviously there are differences in repayment, servicing, etc. but the basics of who is responsible is pretty much the same for all.

That's the conclusion we came to a couple years ago when we researched this......

 

[LinderInWonderland]

I have a Stafford Loan and I'm repaying through Great Lakes- they've been great to work with! I'm on an income driven repayment plan, which is reevaluated yearly.

I also have Stafford loans (subsidized and unsubsidized). Great Lakes has been a dream to work with. I did the graduated payment plan since I didn't take out loans until I was much older and I knew it would work with my earnings schedule. I am also a public service employee who would get loan forgiveness after paying on the loans for 10 years - but that's a moot point since I will have them paid off in 10 years exactly. Nice to know there is a safety net if things go bad, though.

 

[okeydokey]

The 529 can only be used for qualified education expenses, so not only should that money be going to your children's college costs, it would be hugely detrimental to you financially if you have to pay the penalty for using it on non-qualified spending.

The bottom line is this - the single best thing you can do for your children is guide them to school that you (and they) can actually afford - for most people that is 2 yr community college/transfer to state school or an affordable state-school tuition. College costs have changed dramatically and it's plainly true that a 4-year private school is not a good investment in most cases.

Trying to find private loans for your children should be the 100% last thing you do.

Qualifying expenses like rent and books? Or just tuition?

 

[LuvOrlando]

Oh my this is scary, and both my kids have been corralled into the system by their school heavily since a year or 2 ago. It my guess the co is just data farming on them. Seems it's not very trustworthy, I'll look into usaa and my husbands credit union and start poking around elsewhere. What a big scary mess http://m.huffpost.com/us/entry/us_57214218e4b01a5ebde47a02

 

[LuvOrlando]

I also have Stafford loans (subsidized and unsubsidized). Great Lakes has been a dream to work with. I did the graduated payment plan since I didn't take out loans until I was much older and I knew it would work with my earnings schedule. I am also a public service employee who would get loan forgiveness after paying on the loans for 10 years - but that's a moot point since I will have them paid off in 10 years exactly. Nice to know there is a safety net if things go bad, though.

so how does the Great Lakes thing work? Is this a intermediary like organization similar to sallie Mae because that's the vibe I'm getting off that organization

 

[LuvOrlando]

Isn't the issue that parents have to sign or co-sign for anything above the $27K Stafford unsubsidized loans noted in a previous post. So it's virtually impossible to avoid some risk on your side of the equation? Parent Plus or private loans - it's all pretty much the same in terms of liability. Obviously there are differences in repayment, servicing, etc. but the basics of who is responsible is pretty much the same for all.

That's the conclusion we came to a couple years ago when we researched this......

I think I might be getting there too

 

[LuvOrlando]

I just wanted to take a moment and thank absolutely everyone on here for making contributions to the conversation. Not sure if you can tell by my posts but moving through with all your input has been very valuable in helping me steer through my research.

 

[LinderInWonderland]

so how does the Great Lakes thing work? Is this a intermediary like organization similar to sallie Mae because that's the vibe I'm getting off that organization

I did all my loans through my school's financial aid office. Great Lakes is the servicer.

 

[LuvOrlando]

https://www.nerdwallet.com/blog/student-loan-central/student-loan-servicing/

This seemed useful, now as I process all the information I am wondering whether or not the student or family can pick their loan servicer

 

[limpy]

Maybe this isn't a common opinion, but I disagree that you can actually "afford" something that you don't have the money to pay for without the possibility of raiding your retirement accounts. Also, a job loss is a common reason to appeal your financial aid package mid-academic year, so this might not be as dire as you think.

Your kids won't understand this now, probably, but have you ever heard of the golden handcuffs? It's basically means being stuck in a particular job or field (maybe a "lucrative" one) for financial reasons, and it applies to student loans. I know a fair number of lawyers who found out after law school that they hate practising law, but they can't leave because they need the higher paycheck to pay off their student loans. Although I like my job, I am basically stuck in a certain type of work until I pay off my loans.

It's impossible to predict the future and it's a fantasy at this point assume that teenagers won't change their minds about their careers, or that the well-paying jobs will be there. Talk to your kid about at least applying to some good, but easily affordable schools. The advantage to coming out of college without student loans is tremendous.

 

[DisneyMandC]

Your kids won't understand this now, probably, but have you ever heard of the golden handcuffs? It's basically means being stuck in a particular job or field (maybe a "lucrative" one) for financial reasons, and it applies to student loans. I know a fair number of lawyers who found out after law school that they hate practicing law, but they can't leave because they need the higher paycheck to pay off their student loans.

Preach. Went to law school because I wanted to be able to afford to have horses for the rest of my life. I can barely afford my horse because of my student loan payments. Yes, I realize this is a massive first world problem, but just illustrating that your point is very true.

For what it's worth, my loans are serviced through Penn Higher Ed (also known as Fed Loan Servicing). I've been happy with them, and they've been cooperative when I've had any issues with payment plans changing, etc. I also have a Perkins Loan serviced through my school. This was not offered to me until my last year of law school. I took out all my loans for the year, and then received a notification from the school that I qualified for an $8000 Perkins loan. Basically, the school paid back one of 8k loans and gave me the Perkins loan at 5%. I'm apply additional payments to this one, even though it's my lowest interest rate, and should have it paid off mid-2017.

 

[limpy]

Qualifying expenses like rent and books? Or just tuition?

Room and board costs are also qualified expenses.

 

[Woth2982]

I had a horrible experience with Sallie Mae. I had over $120k in loans, I worked my butt off, and lived at my parents house for 8 years to pay that off. I worked two jobs too. One to pay for the student loan (my full time job) and another so I could have a bit of a life when I had a day off. Sallie was the WORST. I would pay over $1000 a month, but they would apply it to ONE of the 8 loans, not distribute it, then I would go into default! It was their job to distribute it properly, they sent me the invoice and I mailed back one check every month (this was before online payments). From what I understand, this still happens with some people. I also used Chase for a student loan as well when I got to grad school as I was done with Sallie Mae and their incompetence. The interest rate was about 3.5% (sallie was about 12%), and they were incredibly helpful and never screwed up a payment.

 

[Sagginit]

As someone I once knew said, Sallie Mae is a witch (I think it may have been stronger language lol). I had private loans thru them and I did qualify for Perkins. I graduated in 2006 when the bubble was bursting and the recession started kicking in. I had a terrible time finding a job. I was interviewing for entry level and it was that old joke of wanting years of experience. I ended up in retail and worked my way up (which as I say I am a small percentage to get out but then again having a great college education I was able to map out a career). Sallie Mae jacked up my student loan interest rate after I graduated to a peak interest rate of almost 14%. That was not something I had factored in or understood would happen (it said a slight raise but it more than doubled the month I graduated). I spent the first few years ONLY paying interest. They also messed with me when I tried to pay off principle. I would write them a letter and mail a check. The letter would state the exact loan (they had numbers to ID them) and to apply to principle. Most of the time it was fine but towards the end they kept doing different things with it. At first they would happily fix it but a few times they tried to argue with me that they couldn't undo the wrong payments. When I tried to pay them off in full at the end they even managed to screw up that payment. I honestly don't think it was an accident that the more I paid off the more incompetent they became at processing my payments. If you can avoid them I do recommend it. They are a bit of a monopoly so they get a lot of people sucked in and then do as they will.

The Perkins loan went to some smaller company, I think ACS education or something. They had me pay quarterly and did not ask me to start repaying until a year after I graduated. Sallie Mae was six months. If you can find a smaller company other than Sallie Mae try to go with them. To pay off my loans because of the massive hike in interest I had to live at home for a few years (which really was a blessing as it worked out for other reasons). I actually learned a lot about how to get out of debt here and started snowballing. I ended up paying off my 15 year loans in 7 years, $42,000 in total, which BTW I was making less than that a year up until about year 5 of repaying.

I would also only loan what you need. I worked in the summer to pay for textbooks and spending money during the year. While on campus I also had a work study job to help make some cash (although I was only paid a touch above minimum wage so it didn't do much financially in the long run as it was 12 hours a week I qualified for). I know people who took an extra 1-3K a year to pay for extras. That adds up and with interest it is not worth it.

Before you take out another type of loan keep in mind the terms & conditions are specific to that type of loan. I have heard of people taking out personal loans but they can't be deferred or put off after graduation like student loans can be. I have heard of people doing this for things like community college for 1-2 years but it came back to haunt them when they realized it was not as flexible.

I will say this, I would involve your child and if possible have ONLY them sign on the loans. I had 1-2 friends who graduated in massive debt as they go to college and discovered how much they liked to party. They flunked classes and ended up on a 5 year plan which is costly. I think if your child understands the situation better they will be less inclined to fall in that trap. My student loans were unexpected (long story....) but being involved and knowing the terms I stayed the course to graduate on time. I also worked while in college at a job on campus and in summer. That experience was helpful down the road.

Right now college costs don't look like they're going down. That was part of my problem too, we planned out our finances based on the tuition when I was accepted. By the time I graduated costs had gone up $8000 a year from the first year. That gradually increase of $2000-$3000 more a year was a lot in the end. They did increase my FASA but it was minor, mostly increasing my Perkins loan. So also plan out what will you do if it goes up several thousand a year. Can you still afford it? Will you need a different type of loan?

 

[xCourxCorex]

I worked at Sallie Mae a LONG time ago (as in over 15 years ago). At that time, companies who serviced student loans HAD to follow certain rules from the government. If you didn't and the person defaulted on their loan, the government would not pay the money to the servicer. One of the rules was that if a borrower was behind on their loans, the servicer had to call them twice a month. It was very strict. Again, that was over 15 years ago. I really don't know what the rules are now. I don't even know if student loans are still guaranteed by the government.

As for financial aid offices at colleges/universities, they aren't allowed to make recommendations to families for loans. It is up to each family to research. Families all have different needs and what's good for one isn't necessarily good for another.

I work at a university. We recently had a presentation explaining student loans, the repayment process, etc. Do you know how many students attended? 5. A few thousand attend school here, but only 5 came to the workshop.

One of the best things that a high school student can do, but most don't want to, is spend their 1st 2 years at a community college. I wouldn't do it blindly. I would have the student work with the community college and with the university where they'd like to spend their last 2 years to make sure that all of the credits will transfer. It costs almost $30k a year to attend school where I work and that doesn't even count boarding. That's $120k for 4 years, and lots of students take longer than 4 years to graduate. Then they want to be social workers (which is a much-needed job that takes a special person) maybe where I live pays $25k a year. How are they ever going to pay off those student loans??

So many students attend a 4 year college because they want to continue playing whatever sport that they played in high school. They don't research careers to see what salaries are, to see if they can pay back their loans. A nearby community college has a yearly tuition of about $7k. Spending their first 2 years there drastically cuts down on tuition.

It is very difficult to see kids attending college that might not be able to afford the bills when they graduate. Some parents make their kids go to college. The kid goofs off all semester and has to leave at the end. When I think of the money that the parents/student wasted, I get so sad. Some parents want to be able to tell others that their kid is going to (insert name) college, rather than the local community college.

In my opinion, which doesn't count for anything, college financial aid workshops need to be done at the high school level. High schools should be bringing in speakers to education seniors and their parents about the different options.

I don't mean to upset anyone and I apologize if I did.

Yes, yes, yes to everything here. So many high school students (and parents) know NOTHING about financial aid or loans. My fiancé was one of those kids. He went to a VERY expensive, private college, and took 5 years to graduate. Over 120k in loans as of 2011. He worked barely above minimum wage for 2+ years, and was incredibly lucky to get accepted into the police academy as soon as he did. Even still, his debt totals 65k today, and that's after 5 years of paying loans, some years very aggressively paying them down. His debt had a huge impact on his post-grad life - had to move back home with his parents, pay them "rent" while paying minimum loan payments that were more than some mortgages. He had absolutely no clue about what he was getting himself into when he and his parents signed for those loans. The interest rate, what the monthly minimums would be, his expected salary out of school. Right now our extra money goes to paying for our wedding, but once that is done, we are re-focusing our energy on his highest interest loans.. I cannot wait to be done with them.

I also work with many people (RNs) who have taken on astronomical amounts of debt for nursing school. Some pay upwards of 2k a month - more than their rent or mortgage! They absolutely feel trapped, even in a well-paying job, because the debt is just so outrageous for one person.

 

[ruadisneyfan2]

OP I'm sorry you are feeling so lost. I just went through it all last year with ds19.
It was all very crystal clear for us, explained almost on a remedial level on all the websites, to the point I found it almost offensive that they thought parents were all morons. (Unless English is not a family's native language.)
Our HS did have parent meetings starting early in senior year but also I read up on it as much as possible. This really is time consuming but worth it. Our school stressed very much that one should never assume they won't qualify for aid and at least apply with FAFSA. That's where it all begins. Thoroughly read their website & studentloans.gov. Once your FAFSA is processed they give you your EFC, Expected Family Contribution. This is the amount that you are expected to contribute, whether it's by loans or savings or a gift by Grandpa, or whatever. At that point the school should send your child a financial aid package. For ds, this listed what the approximate total would cost for the year, based on the room/board/meal plan/major ds selected, then subtracted his scholarship funds, then listed our responsibility. His school did offer a 10 month payment plan but it was more than we could afford and like you said, we didn't want to be cleaned out.
Does Penn State not explain this? Did they say you don't qualify for any federal loans? Is that what you mean when you say "we're on our own"?

The financial aid offer listed what federal loans we qualified for and told us that private loans are also an option. They listed a few private loan providers that are reliable but again, as a pp mentioned, they can't help you decide. We could get the $5500 loan in his name, with part of it subsidized. The rest was on us to provide. We chose the parent plus loan mainly because if either myself or ds should die or become disabled, the loans would be discharged. Sorry, I work in a large hospital/trauma center/spinal cord injury center. I know logically, the odds are low but I can't help but worry about these things. Even if I chose a private loan, I would have bought life & disability insurance that would cover the loans just in case, which would be added cost.
http://www.today.com/health/after-d...-forgiveness-her-200k-student-loan-1D79996678

Also, from what I read, private loans should be one's very last choice. They are not forgiving and can kind of make up their own rules which you should completely understand before agreeing to. They do offer lower rates than federal loans and that's great if nothing ever goes wrong/unplanned with your future or your child's future. I couldn't count on that. If you're ever a tiny bit late on a payment, they have permission to gouge you, and you would have agreed let them when you signed up. No thanks.
It would be a cold day in you know where before I'd put student loans on a home equity loan. That's just way too risky imho.
Parent plus loans, go in your name & do have origination fees which get deducted from the amount that actually gets sent to the school. Even though the actual money comes from the Dept. of Education, you pay them back through one of many loan servicers. You don't get to choose this; one is assigned to you and you would be notified who the servicer is. Their website lists all the possible servicers. Ours is Cornerstone and they've been fine. Again, the servicer simply collects the money on behalf of the Dept. of Education. You don't get the loan directly from them.

In the process of applying for and accepting the Stafford & Parent Plus loans, we both had to read a long tutorial, mostly text but with some animated video, that explained it all using words that a 3rd grader could understand. I'm not kidding. (Seriously, if one is entering college and doesn't understand what the word LOAN means, maybe college isn't the right choice.) I sat with ds while he read this part because he had to sign that he understood completely in order to accept the loan and I wanted to make sure he didn't just skip over the fine print. (This is not like downloading a game from Steam with lots of fine print that he skips over.) It explained the different choices in repayment (standard, extended, graduated, income-based, etc.) and also explained how interest rates and repayment terms affect the total cost of the loan. It explained deferment, forbearance, etc. Again, it was on a 3rd grade level. Ok, maybe 7th grade at this point.

Maybe this is all new and students in the past didn't go through so much explanation but I paid for my own college with the 10 month payment plan and PT job. Even then I clearly knew the difference between a loan and a grant. It seemed like everyone did back then and why I'm surprised that they dumb it down like they did. I'm sad for the pp who said her mom signed her up for lots of loans and she didn't know it. That is really messed up to just throw your kid under the bus like that. In fact, I would think that's probably fraud of some sort.

OP, I know it's a lot to think about and just like so much in life, you learn as you go through it. Just be sure to read everything and re-read it. Maybe make a list of the pros and cons of each choice and that will help you to narrow it down.

 

[ruadisneyfan2]

Also I would stop looking at what other students are paying/not paying. Each family has their own unique circumstances so comparing will only distract you. We paid through the nose and my nephew, also graduated HS last year, got almost a free ride ($3k oop at a private school 1000+ miles away) He ranked 3rd in his graduating class and his mom has MS and his dad broke his back at work. My ds was in a very competitive HS, did well but not spectacular, and we are both healthy so none of those situations apply to us. I wouldn't rather be in their shoes.
Just as the schools do not wish to be in a position to help parents decide which loan to choose, I wouldn't be wanting that responsibility for someone else's kids and their choices either. jmho.

 

[ruadisneyfan2]

http://time.com/money/4315466/college-decision-day-son-accepted-afford/

 

[Mrs. Ciz]

OP I'm sorry you are feeling so lost. I just went through it all last year with ds19.
It was all very crystal clear for us, explained almost on a remedial level on all the websites, to the point I found it almost offensive that they thought parents were all morons. (Unless English is not a family's native language.)
Our HS did have parent meetings starting early in senior year but also I read up on it as much as possible. This really is time consuming but worth it. Our school stressed very much that one should never assume they won't qualify for aid and at least apply with FAFSA. That's where it all begins. Thoroughly read their website & studentloans.gov. Once your FAFSA is processed they give you your EFC, Expected Family Contribution. This is the amount that you are expected to contribute, whether it's by loans or savings or a gift by Grandpa, or whatever. At that point the school should send your child a financial aid package. For ds, this listed what the approximate total would cost for the year, based on the room/board/meal plan/major ds selected, then subtracted his scholarship funds, then listed our responsibility. His school did offer a 10 month payment plan but it was more than we could afford and like you said, we didn't want to be cleaned out.
Does Penn State not explain this? Did they say you don't qualify for any federal loans? Is that what you mean when you say "we're on our own"?

The 10 month payment plan does not have to clean you out! You can choose how much money you want to spread out over the 10 month payment plans. We only pay room and board charges through the payment plan. Tuition and fees are paid another way (529 Prepaid for us, but you could do loans for tuition and fees). A combo of loans and the 10 month payment plan may work for you. It would allow you to pay in cash what your budget can support and borrow the rest, keeping loans to the absolute minimum. We have one in college now and another going in a year. We are saving tax returns now to help cover the 2nd child's costs. Our goal is to keep loans to the bare minimum if we have to use them at all.

 

[Sarah'sMomfrom PA]

The 10 month payment plan does not have to clean you out! You can choose how much money you want to spread out over the 10 month payment plans. We only pay room and board charges through the payment plan. Tuition and fees are paid another way (529 Prepaid for us, but you could do loans for tuition and fees). A combo of loans and the 10 month payment plan may work for you. It would allow you to pay in cash what your budget can support and borrow the rest, keeping loans to the absolute minimum. We have one in college now and another going in a year. We are saving tax returns now to help cover the 2nd child's costs. Our goal is to keep loans to the bare minimum if we have to use them at all.