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

[HopperFan]

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.

This is our experience (in applying) as well. Private schools will often have lots of money and more flexibility in handing it out. Know quite a few who attended smaller private schools for very little money and received a good education. There are SO many out there I would never rule it out as an option.

 

[LuvOrlando]

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.

Might just be semantics but I wasn't looking to take out loans in his name, I thought students take out loans that benefit them in their own names since the education benefits them not me. Used to be students took out their own loans, although I didn't have one its how I remember things going. It seems things are very different now and loans are in the parents names, this is not really well known to the uninitiated. You must be very rich if you think mortgages are not the commonplace way to buy a home so maybe that's where the disconnect is coming from? I don't know anyone who never used one as a way to offset the outlay of cash but that's just me, if you & everyone you know had that money in the bank good for you but you will never understand me & that's ok to me.

It is advisable and logical for us to invest in our children's education right now. Not so sure about the allusion to equity, personally I think education is the most valuable resource there is for humanity in general, and singularly the most beneficial investment for my family & my kids even if it's not measurable in the traditional sense so maybe there lies another misalignment in how you & I view the world which explains things. Lots of people don't value education in general and some think kids should pay their own way so I get it, no such thing as right or wrong, just right or wrong for me & right or wrong for you.

 

[LuvOrlando]

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.

That's awful. If a person has the demonstrable need to qualify for grants why in the world punish by withdrawing support equal to his or her academic achievement? What a terrible message :/ so aggravating

 

[LuvOrlando]

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

Just as awful as the previous poster reported. Its rotten that we have all these "stay in school" and work hard campaigns that are followed by the withdrawal of support. I get that funding is limited but a young person who has persevered through financial hardships is probably statistically far more likely to succeed if given a chance than a stab in the dark kid who is just giving it a go because its free

 

[LuvOrlando]

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.

Bait & switch, that's just rotten

 

[LuvOrlando]

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.

Freeing up would make sense if the students who stood to lose were all evaluated based on academic ability as a second tier factor but I know a few kids who got free support to a community college with a 2.0 GPA, and while its admirable they are trying its not quite apples to apples that they bump out a kid with a 4.0 who might go on and be a Nobel Peace Prize winner.

 

[LuvOrlando]

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.

Funny you say that, my son was looking at that same as you plus UMASS Amherst & NYU, he got into NYU but the cost was staggering, we counseled him to save that one for grad school. Lots of good schools in PA, thank goodness.

Hopefully there will be no loans for anyone at the end of 5 years but even if so it seems students are legally limited to max at $31,000, my kids will probably have $29,000 which is roughly the cost of a civic so I don't think it will break them and that's ONLY if either they screw up or if our finances hit the skids, which can happen.

 

[tzolkin]

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.

I'm sorry, maybe I'm completely dense this evening, but I do not get what you are saying at all.

Let's say after financial aid, school is going to cost $12,000.
Student receives $3,000 in local scholarships.
Financial aid is reduced by $3,000. School still costs $12,000.

How is the student benefitting from the scholarship? How is the scholarship "reducing the amount she has to pay"? She's still paying the exact same amount.

 

[LuvOrlando]

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.

You are not kidding, I think the EFC is positively nutty and would only apply to a person with a good job living in a hut with an outhouse in a temperate climate that does not require utilities using public transportation & candles and who eats pasta and PB & J. It does not at all take into account any version of a normal middle class existence - so its designed for the survivalists ROTFL, ain't that a kick in the pants of irony- guess whose laughing now. I have yet to find a single person who saw their number and said, "OH yeah, I got that right on the nose." Its weird, just like the poor kid who worked fingers to the bone to get a little extra on top of financial need provisions and who was denied funding I feel like my husband and I made tons of sacrifices to get ahead for the sake of bettering our lives only to see it swallowed up by trying to help our kids provide for themselves in the ever more competitive future. Its a quicksand existence and I am beyond frustrated that it is taking so much effort to see this through

 

[LuvOrlando]

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 totally agree! We are lucky to have the plan but even so those costs are much higher than I expected plus I didn't know it would be on us to absorb the loans. In truth, I figured it would cost in the range of a car and the kids would be able to easily take it all on and we could go off into retirement in peace. Naive I know & we can do it, thankfully, but it will be demanding & we will still be making sacrifices for a while. I just don't want to make any missteps right now because right now the waves are big but we can ride them - I do not want to create my own tsunami

 

[limpy]

... You must be very rich if you think mortgages are not the commonplace way to buy a home so maybe that's where the disconnect is coming from? I don't know anyone who never used one as a way to offset the outlay of cash but that's just me, if you & everyone you know had that money in the bank good for you but you will never understand me & that's ok to me.

Must be some miscommunication because I have no idea where this came from.

...Lots of people don't value education in general and some think kids should pay their own way so I get it, no such thing as right or wrong, just right or wrong for me & right or wrong for you.

I also have no idea where this came from. I have a doctorate and a significant amount of student loans. I am offering the prospective of the future borrower, and what I disagree with isn't the value of education, which I obviously value highly. You are saying that you can afford the tuition, but are planning to take out loans. There is a disconnect there and it is illogical to me. If it makes sense to you fine. I wish good luck to your children.

 

[LuvOrlando]

So I just made the first of many payments. This one is for the summer so I just paid it instead of making a mistake - time is ticking for deciding how best to arrange things for the fall so I'm still listening as I process.

It seems that while private funding avoids origination fees it also avoids some of the protections of federal parent plus money such as forgiveness in case of death or forgiveness for social service sorts of jobs after 10 years. Consolidating is bad because it pushes out the date requirement for the 10 years of solid payments needed to qualify for social service forgiveness, if you do want forgiveness you need to get onto a direct withdrawal plan to avoid lapses which mess this all up. I need to make sure my kids understand whats going on with the Stafford stuff & I need to figure out how I can manage paying for interest

 

[LuvOrlando]

Must be some miscommunication because I have no idea where this came from.



I also have no idea where this came from. I have a doctorate and a significant amount of student loans. I am offering the prospective of the future borrower, and what I disagree with isn't the value of education, which I obviously value highly. You are saying that you can afford the tuition, but are planning to take out loans. There is a disconnect there and it is illogical to me. If it makes sense to you fine. I wish good luck to your children.

OK I didn't really understand why you didn't think loans are useful since even big businesses use them as a way to ensure liquidity. Loans can be useful because they act as a buffer against unknown expenses and changes in fortune. In general, only very very wealthy people are not concerned with changes in fortune.

I also understood you asking me (in different words) to weigh whether or not it was a good choice to mean you would not do the same as I am planning to do if in the same position

 

[crisi]

This is our experience (in applying) as well. Private schools will often have lots of money and more flexibility in handing it out. Know quite a few who attended smaller private schools for very little money and received a good education. There are SO many out there I would never rule it out as an option.

You just need to be cautious because you might get more aid, but the higher tuition may mean more out of pocket - or you could come out ahead. Just caution your kid not to get their heart set on anything until all the information is in - where they've been accepted, what the aid package looks like, etc.

I have a friend whose daughter ended up in the "my heart is set on it" category - and while the private school gave her a ton of grants the public school didn't - at $30k more a year, it didn't make up the difference.

 

[tvguy]

You are not kidding, I think the EFC is positively nutty and would only apply to a person with a good job living in a hut with an outhouse in a temperate climate that does not require utilities using public transportation & candles and who eats pasta and PB & J. It does not at all take into account any version of a normal middle class existence - so its designed for the survivalists ROTFL, ain't that a kick in the pants of irony- guess whose laughing now. I have yet to find a single person who saw their number and said, "OH yeah, I got that right on the nose." Its weird, just like the poor kid who worked fingers to the bone to get a little extra on top of financial need provisions and who was denied funding I feel like my husband and I made tons of sacrifices to get ahead for the sake of bettering our lives only to see it swallowed up by trying to help our kids provide for themselves in the ever more competitive future. Its a quicksand existence and I am beyond frustrated that it is taking so much effort to see this through

I have warned friends with kids heading to college to expect their EFC to come to right about 27% of your gross income, AFTER adding any 401k and IRA contributions back into that income number.

 

[HopperFan]

You just need to be cautious because you might get more aid, but the higher tuition may mean more out of pocket - or you could come out ahead. Just caution your kid not to get their heart set on anything until all the information is in - where they've been accepted, what the aid package looks like, etc.

I have a friend whose daughter ended up in the "my heart is set on it" category - and while the private school gave her a ton of grants the public school didn't - at $30k more a year, it didn't make up the difference.

Completely agree. My point is do not rule them out and let "private" scare you. They may have many more options to offer scholarship wise than public schools, particularly if you are looking out of state.

And I feel there should never be a "dream" school to set your heart on, but a collection of schools that you are interested in and provide the education you are looking for. Then start the comparison process to narrow down to a few. Have known way too many who began the whole dream school thing early on in high school only to be disappointed later for a variety of reasons.

 

[limpy]

OK I didn't really understand why you didn't think loans are useful since even big businesses use them as a way to ensure liquidity. Loans can be useful because they act as a buffer against unknown expenses and changes in fortune. In general, only very very wealthy people are not concerned with changes in fortune.

I also understood you asking me (in different words) to weigh whether or not it was a good choice to mean you would not do the same as I am planning to do if in the same position

The nuts and bolts message that I was trying to convey, and what I would do in your situation, is optimization - seriously consider a less expensive school and look at loans as a last resort. That would ensure the best footing for all, the least risk, and makes the value of the education even greater (because that decreases as costs go up).

 

[crisi]

You are not kidding, I think the EFC is positively nutty and would only apply to a person with a good job living in a hut with an outhouse in a temperate climate that does not require utilities using public transportation & candles and who eats pasta and PB & J. It does not at all take into account any version of a normal middle class existence - so its designed for the survivalists ROTFL, ain't that a kick in the pants of irony- guess whose laughing now. I have yet to find a single person who saw their number and said, "OH yeah, I got that right on the nose." Its weird, just like the poor kid who worked fingers to the bone to get a little extra on top of financial need provisions and who was denied funding I feel like my husband and I made tons of sacrifices to get ahead for the sake of bettering our lives only to see it swallowed up by trying to help our kids provide for themselves in the ever more competitive future. Its a quicksand existence and I am beyond frustrated that it is taking so much effort to see this through

It assumes that you started setting aside money for your kids to go to college when they were born, and set aside a fairly substantial part of your income towards that knowing it would be a huge expense.

Then it further assumes you'll take advantage of a school with reasonable tuition.

What the government doesn't want is to subsidize families who have always driven new cars, taken expensive vacations, and generally spent their kid's college education money on luxuries - and then wonder why someone else isn't paying for their kids educations to go to NYU (which really is ridiculous in terms of its cost - the tuition is bad - but room and board in NYC sends it over the top - its on my daughters list).

 

[Mrs. Ciz]

Must be some miscommunication because I have no idea where this came from.
I also have no idea where this came from. I have a doctorate and a significant amount of student loans. I am offering the prospective of the future borrower, and what I disagree with isn't the value of education, which I obviously value highly. You are saying that you can afford the tuition, but are planning to take out loans. There is a disconnect there and it is illogical to me. If it makes sense to you fine. I wish good luck to your children.

I didn't understand it either at first. My plan is to cash flow college expenses as much as we can using the 10 month payment plan at DS's school and keep loans to a bare minimum if we have to use them at all. We are also saving our tax returns to make bulk payments.

From what I read earlier in this thread the OP has the money to pay for college now. She is worried about the economy taking a dive, which would tighten up credit. And then in the event of a job loss in the family (not that a job loss is imminent) or some other catastrophic event, they would have no way to pay for college and no way to get loans. She'd rather get the loans now, while she can, to protect herself against a possible economic crash. Did I get it right OP?

For what it's worth, if there is a big economic crash, we'd be in trouble too. DS would probably have to live at home and commute - a 2 hour round trip. His tuition and fees are already paid up for 4 years.

 

[limpy]

I didn't understand it either at first. My plan is to cash flow college expenses as much as we can using the 10 month payment plan at DS's school and keep loans to a bare minimum if we have to use them at all. We are also saving our tax returns to make bulk payments.

From what I read earlier in this thread the OP has the money to pay for college now. She is worried about the economy taking a dive, which would tighten up credit. And then in the event of a job loss in the family (not that a job loss is imminent) or some other catastrophic event, they would have no way to pay for college and no way to get loans. She'd rather get the loans now, while she can, to protect herself against a possible economic crash. Did I get it right OP?

For what it's worth, if there is a big economic crash, we'd be in trouble too. DS would probably have to live at home and commute - a 2 hour round trip. His tuition and fees are already paid up for 4 years.

I would understand such a hedge if it was set in stone for 4 years, but fafsa is submitted each year, plus an option to appeal mid year for a job loss or other significant financial change in circumstances. Anecdotally, I got a student loan after the crash of 08 with a parent consignor. Also, your education account shouldn't be subject to market fluctuations once you get close to using it. If you already have four years saved up and cannot ride out a crash, change your asset allocation in accordance with your risk tolerance asap.