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

[crisi]

I see your point of view but no, my conflict is with the complexity of the situation and the riciculous number of variations in financial vehicles offered as 'aid'- which is a poor choice of words at best. Most schools cost about the same as a moderate house at the end and considering that, I guess I expected things to be more transparent with cut & dry options like a 30 year fixed mortgage and what I have been seeing is anything but that . As a result of my confusion I tried researching what might be best for us but there are so many variations that it's impossible to understand any circumstance but your own more than a few months before you are expected to sign your life away & then with the swirl of change (I'm in it now) it's mind boggling to try and sift through. So I checked in here and am, from the bottom of my heart, grateful I did. Really, I am conflicted because it's a messy, scary, intimidating & binding process not because we are trying to live a champagne life on a tap water budget.

Yes "aid"is a poor choice of words. And you aren't alone - most people get to this point and have a lot of confusion as well as the uncomfortable discovery that someone giving you a loan at a market interest rate is supposed to be aid.

Like others here, I'd discourage an school that would be a stretch in terms of affordability - affordable but with some pain and sacrifice - and do the estimated math for the loan payments to make sure they are the same or less than what you've been setting aside for college all along. That way you know it will fit into your budget - at least for today. And as to the risk - someone is going to end up paying those loans - the only way to mitigate the risk is to avoid them as much as possible.

 

[elaine amj]

UGH - this sounds like a very frustrating process. And everything I have read sounds about as clear as mud.

For my own kids, we have been saving money since birth in an education plan. When my daughter started high school, I sat her down and explained that we have money saved and that it will go towards tuition. Whatever is there will hopefully be enough to cover her tuition (at our local school anyway). If it is not enough, it will be her responsibility to cover the difference - jobs, grants, loans etc. She'll be expected to work to pay for her own living expenses. I wanted to make sure expectations were clear from a young age.

I'm really hoping school choices won't be as complicated as you've found it (most likely my DD will choose our local school). I've just heard that even for more conventional degrees, our local community college has a good agreement with our local university. Unfortunately, while my DH is actually a professor at this community college - I'm discovering that his agreement does not provide for free tuition for my kids like I had hoped for. Boo. One student I just spoke with did a 3 year marketing diploma and is transferring that to the university. One more year and he'll get a full degree. That's what my DH did way back when to get his nursing degree. That sounds brilliant to me and I'll definitely be steering my kids towards the cheaper path.

I remember when I was choosing a school, I was the kid who immediately nixed all the $$ schools because I didn't see the point (even though I knew my parents were paying for my education).

 

[limpy]

OP, you said most people don't buy a house without taking a mortgage. That's true, but aren't you talking about trying to getting loans in your child's name? That's like trying to buy a house with a mortgage when you are 18 with no income and no job prospects for the next four+ years. I think we can all agree that no one could or should do that. Also people don't take out mortgages because they are buying a house, they (usually) take out the mortgage because they can't afford to buy the house outright.

Even if the loans are in your name, would be financially advisable or logical to buy another house right now, now with no equity to be gained? If you had to, wouldn't you probably look at a smaller, more affordable house? That's all we are saying.

 

[pandamom]

The entire process seems a lot more complicated and confusing than it should be. Because of our income we only qualified for a 3500 subsidized loan and a 2000 unsubsidized one via FAFSA. Our daughter worked hard and earned (all merit based, didn't qualify for any need based ones) an academic scholarship, school grant, and 3 art scholarships. Unfortunately the scholarships reduce the 3500 subsidized loan to 0 instead of going towards the outrageous mandatory room and board cost. We are lucky that she'll have less loans to pay off after college and tuition is covered but we could of really used the money towards the remaining $13,000+ housing cost.

 

[runwad]

The entire process seems a lot more complicated and confusing than it should be. Because of our income we only qualified for a 3500 subsidized loan and a 2000 unsubsidized one via FAFSA. Our daughter worked hard and earned (all merit based, didn't qualify for any need based ones) an academic scholarship, school grant, and 3 art scholarships. Unfortunately the scholarships reduce the 3500 subsidized loan to 0 instead of going towards the outrageous mandatory room and board cost. We are lucky that she'll have less loans to pay off after college and tuition is covered but we could of really used the money towards the remaining $13,000+ housing cost.

We're on our way out tonight to a scholarship award banquet for my dd. She already got $2500 at anther award night. I'm anxious to see if any of this new found money is going to reduce either her subsidized loans or grant monies she got from her university. I think it will and it kinda sucks that we will be no further ahead with her additional scholarship money

 

[tzolkin]

We're on our way out tonight to a scholarship award banquet for my dd. She already got $2500 at anther award night. I'm anxious to see if any of this new found money is going to reduce either her subsidized loans or grant monies she got from her university. I think it will and it kinda sucks that we will be no further ahead with her additional scholarship money

Yeah, that's the problem with scholarships. Most schools just reduce any financial aid you are to receive. So if you get a $1000 scholarship, it's saving the college $1000 and you are still responsible for paying the same amount. I felt that I wasted a lot of time on scholarship applications when I was a senior because I didn't wind up even $1 ahead.

On another note, my DD (HS senior) just had one of her university grants reduced because they decided to factor in a $5500 unsubsidized stafford loan. Essentially they replaced a grant with a loan and now say that they can't give her the remainder because it was need-based and we don't "need" it anymore (since she can take the loan instead).

That award obviously played a role in her decision to attend this school, so it has been very disappointing that it will now cost several thousand dollars more than we anticipated. She did write a letter to the dean, but their response was just that they will change their wording in the future so they're not misleading recipients.

 

[Mrs. Ciz]

Yeah, that's the problem with scholarships. Most schools just reduce any financial aid you are to receive. So if you get a $1000 scholarship, it's saving the college $1000 and you are still responsible for paying the same amount. I felt that I wasted a lot of time on scholarship applications when I was a senior because I didn't wind up even $1 ahead.

On another note, my DD (HS senior) just had one of her university grants reduced because they decided to factor in a $5500 unsubsidized stafford loan. Essentially they replaced a grant with a loan and now say that they can't give her the remainder because it was need-based and we don't "need" it anymore (since she can take the loan instead).

That award obviously played a role in her decision to attend this school, so it has been very disappointing that it will now cost several thousand dollars more than we anticipated. She did write a letter to the dean, but their response was just that they will change their wording in the future so they're not misleading recipients.

We're on our way out tonight to a scholarship award banquet for my dd. She already got $2500 at anther award night. I'm anxious to see if any of this new found money is going to reduce either her subsidized loans or grant monies she got from her university. I think it will and it kinda sucks that we will be no further ahead with her additional scholarship money

This is terrible! I didn't realize colleges did this with scholarships and loans. At least you don't have to pay back the scholarships…so that is one plus. Seems like the schools really want the parents and students on the hook for that EFC!

We keep encouraging DS (just finished his 1st year) to apply for scholarships. We'll encourage DD17 to apply for them as well. We pay for tuition & fees with our 529 plan and are using to 10 month payment plan to pay room and board. ANY money they get will reduce our out of pocket costs. We'll need to for the 2 years they overlap in college!

 

[Sadie22]

Some scholarships are designated for tuition only while others can cover tuition, fees, books, room, board. It's important to read the fine print with this as with everything. It's also important to complete the FAFSA every single year as well as any forms the particular school requires. There may be scholarship programs for upperclassmen or students in a particular major, so keep searching (and having the student search) throughout the academic career. The financial data may be required for merit scholarships as well as those based on financial need.

 

[msmayor]

Yeah, that's the problem with scholarships. Most schools just reduce any financial aid you are to receive. So if you get a $1000 scholarship, it's saving the college $1000 and you are still responsible for paying the same amount. I felt that I wasted a lot of time on scholarship applications when I was a senior because I didn't wind up even $1 ahead.

On another note, my DD (HS senior) just had one of her university grants reduced because they decided to factor in a $5500 unsubsidized stafford loan. Essentially they replaced a grant with a loan and now say that they can't give her the remainder because it was need-based and we don't "need" it anymore (since she can take the loan instead).

That award obviously played a role in her decision to attend this school, so it has been very disappointing that it will now cost several thousand dollars more than we anticipated. She did write a letter to the dean, but their response was just that they will change their wording in the future so they're not misleading recipients.

Its not 'saving the college $1000', its freeing up the grant money for another student that needs it. There will be plenty of students with need who may have been at the end of the grant line when the money ran out; now they will get some.

When a student earns/wins a scholarship, their 'need' as calculated by the school is now less than what it was.

Now if the Stafford Loan was not a part of the original aid package, then it becomes an increase in the student's resources and reduces the needed aid. If the loan is part of the aid package, then it shouldn't reduce any grants offered.

 

[tzolkin]

Its not 'saving the college $1000', its freeing up the grant money for another student that needs it. There will be plenty of students with need who may have been at the end of the grant line when the money ran out; now they will get some.

When a student earns/wins a scholarship, their 'need' as calculated by the school is now less than what it was.

Now if the Stafford Loan was not a part of the original aid package, then it becomes an increase in the student's resources and reduces the needed aid. If the loan is part of the aid package, then it shouldn't reduce any grants offered.

Sure, I could have phrased that differently. Yes, another student will benefit. And of course I understand that their "need" is technically less after receiving outside money.

My point was to agree with another poster that (despite what most people think) receiving outside scholarships may not actually benefit the recipient. In my case, I was awarded about $5000 in scholarships from various community organizations. Not one cent of that money went toward lowering what I had to pay for college. My aid was reduced by that amount so it wound up being a "wash". Sure, it may have freed up $5000 to increase the financial aid package for another student. But HS seniors are not spending hours filling out scholarship applications, writing essays, and attending interviews out of an altruistic mindset that the money they "earn" will benefit someone else. They're doing it in the hopes that their hard work will result in lowering their own tuition/student loan bills.


The part about the Stafford Loan was a different situation (my DD this year). Apparently the school gave out Chancellor's Awards before they completed their financial aid calculations, so then "took the money back" that was no longer needed (after students had already enrolled). This would have been fine if the students were told they were "eligible for UP TO $XXXX depending on financial need", but instead they received phone calls and award letters telling them they had already received $XXXX. That was highly misleading and essentially saying "now that we're 'giving' you this loan, you no longer need this grant".

DD has been working hard toward a goal of not needing to take out loans. She was told about this award at the beginning of Feb and just recently told that they will be taking a good portion of it back. Now she will need to take a loan because the school will cost more than she was anticipating. It's just disappointing. It would have been better if they had just waited until now to say, "Congrats! We're giving you a $1500 Chancellor's Award" rather than telling her several months ago that she received a $5000 award that's now being cut back to $1500.

 

[Vernie822]

I am probably the exception, not the rule, but here is my experience..

Going into college I was dead set on attending Ohio State. Being from Pennsylvania, I had to pay out of state tuition. (Penn State was also on my list, my sister goes there).

I was torn in two about my college choice because of a few things, one of the main factors being MONEY. I had my heart set on attending OSU, but it would have cost me about $16,000 per year after scholarships and financial aid. Going in, I applied to any/all schools I was interested in, especially those w/ free applications. That way, when I had received acceptance letters and financial aid packages, I could see the range of what schools were able to offer.

I happened to qualify for a great deal of financial aid because at the time my dad had lost his job & I was the oldest of 5 kids, and I also received a good amount of academic scholarship.

Long story short, my "dream school", OSU, would've cost me $64,000 total, bare minimum, for 4 years. The private local school I was accepted to (with a program that I really liked), cost me less than $16,000 TOTAL for four years. Again, I know this is not the norm. But in looking for schools, I think it's really important to weigh all of your options.

Currently, my loans are manageable. I pay $200/month for 10 years.

OP, I didn't read every single post on this thread, but what I'm trying to say is college is EXPENSIVE. Like I said, I know I am not the norm, but I wouldn't change my education or the experiences I had for anything! I'm not trying to say your child should re-think their college choice, but just make sure that should anything happen, they're comfortable paying these loans.

 

[crisi]

My point was to agree with another poster that (despite what most people think) receiving outside scholarships may not actually benefit the recipient. In my case, I was awarded about $5000 in scholarships from various community organizations. Not one cent of that money went toward lowering what I had to pay for college. My aid was reduced by that amount so it wound up being a "wash". Sure, it may have freed up $5000 to increase the financial aid package for another student. But HS seniors are not spending hours filling out scholarship applications, writing essays, and attending interviews out of an altruistic mindset that the money they "earn" will benefit someone else. They're doing it in the hopes that their hard work will result in lowering their own tuition/student loan bills.

Yeah, its a shame that high school counselors and others don't do a better job explaining this to kids and parents.

But its up to the college if the outside scholarship is applied first to grant money or loan money. My daughters current top choice (she is only a sophomore) applies it to loans first - then grants - and reduction in loans is still awesome. You can often find out what the college your kid is most likely to go to does with scholarships on their website. If they have a school that is a good match (i.e. they like it and they are really likely to get in), you can determine if its worth the effort or not.

 

[msmayor]

Sure, I could have phrased that differently. Yes, another student will benefit. And of course I understand that their "need" is technically less after receiving outside money.

My point was to agree with another poster that (despite what most people think) receiving outside scholarships may not actually benefit the recipient. In my case, I was awarded about $5000 in scholarships from various community organizations. Not one cent of that money went toward lowering what I had to pay for college. My aid was reduced by that amount so it wound up being a "wash". Sure, it may have freed up $5000 to increase the financial aid package for another student. But HS seniors are not spending hours filling out scholarship applications, writing essays, and attending interviews out of an altruistic mindset that the money they "earn" will benefit someone else. They're doing it in the hopes that their hard work will result in lowering their own tuition/student loan bills.

I see your interpretation, but the idea that the scholarship is not benefiting the recipient is wrong. It WILL benefit your daughter...it still is reducing the amount she has to pay because she won't be paying full price. The fact that it means any other aid is reduced doesn't change that.

Your EFC is your EFC. That 'contribution' is supposed to come from personal funds, not scholarships, grants and Federal Student Loans. Very few schools will consider scholarships as your 'personal funds'; they are considered part of your aid package.

 

[tvguy]

I see your interpretation, but the idea that the scholarship is not benefiting the recipient is wrong. It WILL benefit your daughter...it still is reducing the amount she has to pay because she won't be paying full price. The fact that it means any other aid is reduced doesn't change that.

Your EFC is your EFC. That 'contribution' is supposed to come from personal funds, not scholarships, grants and Federal Student Loans. Very few schools will consider scholarships as your 'personal funds'; they are considered part of your aid package.

EFC can be mind blowing for first time college students and their parents. Especially since this amount is what a typical family in the U.S. can afford to pay based on their income. Not much different I guess than bankruptcy, when the court rejects your bankruptcy filing because you HAVE enough income to pay your bills.

 

[dsimon9318]

To any parents reading this post. Start setting aside money as soon as you can for your kids. I graduated college about a year ago, I was lucky enough to only have about $25k in loans. Yes lucky. My girlfriend and many close friends have over $100k in loans. The biggest difference between me and my friends with $100k in debt is my parents put money into a college savings plan. I was able to use it to pay for about 2.5 years of school. You have no idea how big of an impact that will have on your child's life. I know it might not be an option for everyone, but just know what's available and consider all your options.

 

[tvguy]

To any parents reading this post. Start setting aside money as soon as you can for your kids. I graduated college about a year ago, I was lucky enough to only have about $25k in loans. Yes lucky. My girlfriend and many close friends have over $100k in loans. The biggest difference between me and my friends with $100k in debt is my parents put money into a college savings plan. I was able to use it to pay for about 2.5 years of school. You have no idea how big of an impact that will have on your child's life. I know it might not be an option for everyone, but just know what's available and consider all your options.

I agree. And for my kids, one Grandmother held back a little on the Birthday and Christmas gifts, and included a savings bond as a gift for each. After 18 years, it really added up, and with our savings, made a huge difference.

 

[crisi]

I see your interpretation, but the idea that the scholarship is not benefiting the recipient is wrong. It WILL benefit your daughter...it still is reducing the amount she has to pay because she won't be paying full price. The fact that it means any other aid is reduced doesn't change that.

Your EFC is your EFC. That 'contribution' is supposed to come from personal funds, not scholarships, grants and Federal Student Loans. Very few schools will consider scholarships as your 'personal funds'; they are considered part of your aid package.

None will if any of your aid is federal - the law says that any scholarship over $300 has to be applied first to federal aid - the school has a choice if this is applied to loans, work/study or federal grants first.

If the aid is private (i.e. the college endowment itself) then the school can decide whether to apply that scholarship to your EFC, or take it themselves and give the grant money to a different student.

 

[LuvOrlando]

UGH - this sounds like a very frustrating process. And everything I have read sounds about as clear as mud.

For my own kids, we have been saving money since birth in an education plan. When my daughter started high school, I sat her down and explained that we have money saved and that it will go towards tuition. Whatever is there will hopefully be enough to cover her tuition (at our local school anyway). If it is not enough, it will be her responsibility to cover the difference - jobs, grants, loans etc. She'll be expected to work to pay for her own living expenses. I wanted to make sure expectations were clear from a young age.

I'm really hoping school choices won't be as complicated as you've found it (most likely my DD will choose our local school). I've just heard that even for more conventional degrees, our local community college has a good agreement with our local university. Unfortunately, while my DH is actually a professor at this community college - I'm discovering that his agreement does not provide for free tuition for my kids like I had hoped for. Boo. One student I just spoke with did a 3 year marketing diploma and is transferring that to the university. One more year and he'll get a full degree. That's what my DH did way back when to get his nursing degree. That sounds brilliant to me and I'll definitely be steering my kids towards the cheaper path.

I remember when I was choosing a school, I was the kid who immediately nixed all the $$ schools because I didn't see the point (even though I knew my parents were paying for my education).

Local school is out & not because I don't value it but because our area in PA is very depressed economically & is hitting the skids so I need to get my kids outta here ASAP. When we bought here in 96 it was a haven but now... No jobs, people have lost hope, I'm noticing foreclosures on the uptick, heroin is a crazy growing problem & so is crime. My gut says staying would be a mistake--- not how I expected things to go but it is what it is now

 

[lost*in*cyberspace]

.......

The one thing I will tell you is to please, please, please understand that anything you personally sign or co-sign for in terms of borrowing money (Such as with a PLUS Loan) - you, personally are obligated to pay if your child doesn't pay the loan for whatever reason. You child not having a job, your child becoming ill or passing away, anything ... you are obligated. It is just as if you co-signed a mortgage or a car loan with your kid. If the first borrower misses a payment, they will be immediately coming to you for the money and you are legally obligated to pay the money.

You are absolutely correct. I have read several stories over the past few years of parents or grandparents co-signing for private school loans and then were bewildered when the child died and they were responsible for repayment. You never know what is going to happen; if you co-sign for a private loan, make sure you take out a life insurance policy on the student to pay off the loan if the unexpected happens.

 

[ruadisneyfan2]

Actually, federal loans are forgiven if the student or parent (for loans that include a parent's name) should die or become disabled.
One of the reasons we opted for the parent plus loan vs. private loans.