So we think we need to help the ILs file for bankruptcy. For those following along, we avoided this in 2010 by getting them out of their house, giving them a car, and making some other changes. But the changes didn't stick (and FIL lost his job a few times - layoffs, not for cause) and here we are again, with like $15K in debt (and climbing). We think they can do Chapter 7--they basically have no assets.
But here's the problem... Chapter 7 will make them ineligible for PLUS loans. When SIL went to undergrad, PLUS loans in the ILs names made up about half the cost of school (SIL pays them now, not the ILs). Now BIL is applying to schools, and we expect he will have similar need. But the bankruptcy will make them ineligible to co-sign.
Had SIL been in this situation, I would have been happy to figure out a way to cosign or otherwise finance personally. She was in school for a well-paying trade, she has always been a good student, etc. I wouldn't have had any doubts that the money would be well-used and paid back.
BIL on the other hand... Not been the greatest student. Showed little willingness to study for standardized tests or work hard on his essays. Currently leaning toward a major we think is unlikely to lead somewhere stable.
But at the same time...he's only 18 and it's college.
So first of all, assuming ILs cannot cosign or help, how much would you personally help BIL finance college? Second, any ideas on how that would work? I assume not PLUS loans...? We could theoretically finance the difference in cash if we had to, but I'm not sure I'd want to use cash that way. With some specific terms for GPA, attendance, etc.? His first choice school is private and likely more expensive--would you push him to something cheaper?
I think that given his lack of general direction in life, my help would be contingent on him going to CC for his gen classes for a year or 2. It sounds like he still needs some time to mature and figure out what he wants to do.
Post by mylifeincolor on Nov 22, 2014 12:56:53 GMT -5
I have a daughter in college so we have been researching FA. If his parents apply for the Parent Plus loan and are denied, then the school can give him more unsubsidized federal loans than the normal maximum. There is a maximum for this situation also, but I cannot remember what it was. At the very least, it would cut down on the amount he would need if you did choose to help him.
I wouldn't necessarily push for a cheaper school, but I'd set a limit myself on what I thought was reasonable. Once they declare bankruptcy, have no assets and are not eligible for PLUS loans, I'm assuming that BILs financial aid package might be pretty decent. He will be attending next year, correct? So he'll get a financial aid package this spring after acceptance.
Assuming he hasn't already applied early decision and gotten in, I'd encourage him to apply to several schools of varying prices, as well as any scholarships he is eligible for, and then compare financial aid awards. I might be willing to give him whatever the parental contribution amount is in cash towards tuition and then have him make up the difference with other federal loans, scholarships, work study, etc.
This is usually no more than an extra 2k, at least based on where I work. I would look into fin aid options at a variety of places and let the kid decide where to go based on what can be afforded. You can apply for fafsa in February to get an early estimate, just call the school about max additional u sub rates after being denied plus (meaning what they are, not applying yet). Most schools also offer payment plans so that might be an option so the student pays some of the monthly amount due and the rest is worked out.
Both of my parents filed for bankruptcy right before I went off to my private college. I took out private student loans through Sallie Mae and my grandmother cosigned because she knew how driven I was. It's true that if his parents are denied a PLUS loan he'll be able to get more from Stafford loans, but I don't think it's that much. Maybe a couple of thousand?
Personally, I wouldn't cosign anything in this situation. He sounds like a risky candidate for repayment and the fact that he wants to major in something that might not lead to employment is concerning, particularly if he's going to shell out $$$ at a private college. He should be able to cover community college with stafford loans (maybe a state university depending on where you live) and that's the option I'd push him towards.
I would research as many angles as possible before you stick your neck out on this. I think it's great you want to help in some way, but I think you are wading into murky territory if you start attaching strings sand conditions on the offer. I certainly understand why you'd do that particularly given his grades, etc, but what happens when you are in the situation where the conditions aren't met? It seems like you'll either agree to let him keep going, or he drops out and then your on the hook for a partial degree, which is not sure is better than being in the hook for a completed degree for a mediocre student.
Does his high school have an advisor that can give you guys more information about options for financing college? Based on what people here are saying, it sounds as though PLUS isn't the only option.
Are there state schools he could attend?
It's my understanding that schools, particularly private ones, often give more money to people from out of state/region to increase geographic diversity, so even with mediocre grades, he may be eligible for grants if he broadens his search.
Post by tripleshot on Nov 22, 2014 13:28:23 GMT -5
My mom never consigned my student loans and didn't give a penny. My school was paid with 100% student loans. Can he do the same? Maybe things have changed in 10 years, though. Also, if he can't afford a private school, he'll have to go somewhere else. It's that simple. I went to a satellite campus of a state university and it saved a lot of money.
One of the things you should check out is that the sticker price on private schools is almost never the price that students actually pay there, especially those who demonstrate financial need. With the aid they offer, the cost can often be very similar to that of public schools.
My mom never consigned my student loans and didn't give a penny. My school was paid with 100% student loans. Can he do the same? Maybe things have changed in 10 years, though. Also, if he can't afford a private school, he'll have to go somewhere else. It's that simple. I went to a satellite campus of a state university and it saved a lot of money.
Things have changed. My understanding is that most students need a cosigner to get loans. He would probably not be loaned what he needs without a cosigner.
I guess I've watched too much Suze Orman, but I wouldn't cosign unless I was prepared to pay 100% of his college costs myself. I would offer him what I could each semester, and let him and his parents figure out the rest. If that means that he has to go to a CC with what you can give him and what his parents scrape together, so be it.
If he was an exceptional student, I'd feel differently. But given the situation described, I'd extricate myself and let him and his parents figure it out.
Post by phunluvin82 on Nov 22, 2014 14:43:12 GMT -5
I would work out how much you might be willing to contribute and let him know. I would not cosign and would not put contingencies on it either. Both of those options have the potential to get messy.
I would say, 'We are willing to contribute x amount per year for your school' and let him figure out where he can afford to go with whatever other funding options are available to him. He's only 18, but navigating this could be a good life/financial lesson for him. He is technically an adult, so he is going to need to start making some adult decisions.
You can still help him fill out the fafsa, decipher the different aid options, etc. Encourage him to look at the cost v. benefit and whether a particular school or degree is a wise investment likely to pay off. Encourage him to consider not just his major, but his career options in the longer term. But that is as involved as I'd want to get. I would not want to be on the hook for years of cosigned loans...or on the hook for years of tracking his grades and/or attendance under the threat of withdrawing my financial support.
I kind of think college has become out of control and people need to choose a college that fits their means. Yes, it sucks for BIL, but there is absolutely nothing wrong with community college followed by state school. I don't think 18 year olds should be entitled to pick a $40K/year private school (not saying it is in this case) just because the campus is pretty, if it means they will be deeply in debt.
If I were you, I would offer to cover semester 1 of community college, if it fits in your budget. He and his parents could save that semester to cover semester two. If he did a good job and was responsible, you could cover semester 3. Maybe by the time he gets to regular university, the financial situation will have improved somewhat.
I realized my post makes it sound like I am totally anti-loans. I'm not. I just think it's crazy to be $50K i(or much higher sometimes) in debt over a bachelor's degree.
DH would like to clarify he's an average student--Bs with an A or a C or two mixed in.
We think community college means no college for him.
I'm not sure what this means, honestly. He sounds like a perfect candidate for community college. Two years locally while he matures, then transfer to a 4-year school when he has a track record. If he proves himself with stellar performance those first two years he'll enhance his chances for financial aid, too. I'm coming to terms with my underperforming 11th grader going this route. I really really really want the house to myself in two years, but my gut is telling me he's not going to be ready maturity-wise.
DH would like to clarify he's an average student--Bs with an A or a C or two mixed in.
We think community college means no college for him.
I'm not sure what this means, honestly. He sounds like a perfect candidate for community college. Two years locally while he matures, then transfer to a 4-year school when he has a track record. If he proves himself with stellar performance those first two years he'll enhance his chances for financial aid, too. I'm coming to terms with my underperforming 11th grader going this route. I really really really want the house to myself in two years, but my gut is telling me he's not going to be ready maturity-wise.
I get it. Community college drop out rates are very high. They offer an amazing service to many students, but just because someone's a so-so student of limited means doesn't mean that CC is the answer. Some people struggle at CCs but may thrive at a four year college because of the structure of it, the nature of the student body, and resources available there. CCs are a great resource for many, many people. But I think it's harder to succeed there because there's less hand-holding, and they tend to be less outcome-driven. There are a lot of students there (not all by any means, and obviously the makeup is going to vary from school to school) who are only there because someone is forcing them to just give college a shot.
My sister was an unmotivated high school kid, and my parents forced her to try out community college when she was 18. It was a disaster - worse for her than high school. It was harder to make friends and build a support system, and there wasn't a sense of community. There was too much freedom to choose working and partying over studying. While that is an issue for all college kids, I do think some people benefit from a situation where they are living on campus and around people who are studying, KWIM?
She's now older and back in school part time trying to get her degree, and she's getting straight As because she actually wants to be there. She's smart and capable, it just wasn't a good fit ten years ago.
... But I think it's harder to succeed there because there's less hand-holding, and they tend to be less outcome-driven. ...
Actually, I never thought of this part, and you make an excellent point. My son's going to need a LOT of handholding, for sure. You've given me something else to stew about!
I think it's very nice of you to want to help, first of all. I'd see if his school is going to be having any financial aid nights and see if you can make it to one of those to ask questions. My HS had a couple with various financial aid people from nearby colleges.
And I'd caution the community college thing. If there are good CCs in his area definitely make sure he knows about them but I agree with pp that not all of them are great. The CC where I grew up has a horrible drop out rate, very low transfer rates, and their job placements are not good unless you are in one or two specific areas (AG related majors had decent contacts b/c of the area). Like pp said, CCs aren't for everyone. So maybe help him look into them but also look into local state schools and even like pp said some private colleges give great scholarships.
I'd offer to cosign for loans for one semester at the closest decent state school. Base what happens next on his grades that first semester.
This is kind of what we're leaning toward. Here's a try out, make it work.
Thanks everyone for the feedback!
Step one is actually getting ILs to recognize that bankruptcy is the right move even though it creates this problem. But if we don't get there, then they'll sign Plus loans that will ultimately become our problem when he and/or they can't pay them.
Why are they filing now? Is it just the 15K in unsecured debt? Is there some pressing need for NOW (I know there are situations where it's about more than $). The "climbing" gives me great pause about whether they should file now, because once they file they can't file again (at least for a long time). If they haven't changed their spending, filing now can actually hurt them.
Why are they filing now? Is it just the 15K in unsecured debt? Is there some pressing need for NOW (I know there are situations where it's about more than $). The "climbing" gives me great pause about whether they should file now, because once they file they can't file again (at least for a long time). If they haven't changed their spending, filing now can actually hurt them.
So the plan is for us to buy them a house in the next few months - in exchange for freezing credit, us regularly running reports, etc. With no housing cost, they should be fine to live on what they make.
But to your point - we were originally going to give them some money to spend on Christmas, and then we realized it makes more sense to charge that on their cards as they normally would. Moral hazard maybe. But ultimately the card companies are the ones who extended these fools these lines of credit.
Does that make sense?
I appreciate your post because it gave us some pause.
Why would BIL loans automatically become your problem if he or his parents can pay them?
If he can pay them they wouldn't. But I am skeptical of that given his dream of becoming a sports journalist.
If he can't, Student Loan companies can garnish wages (of the ILs). Since we are taking on supporting ILs beyond where they can support themselves, that becomes our problem.
Why are they filing now? Is it just the 15K in unsecured debt? Is there some pressing need for NOW (I know there are situations where it's about more than $). The "climbing" gives me great pause about whether they should file now, because once they file they can't file again (at least for a long time). If they haven't changed their spending, filing now can actually hurt them.
So the plan is for us to buy them a house in the next few months - in exchange for freezing credit, us regularly running reports, etc. With no housing cost, they should be fine to live on what they make.
But to your point - we were originally going to give them some money to spend on Christmas, and then we realized it makes more sense to charge that on their cards as they normally would. Moral hazard maybe. But ultimately the card companies are the ones who extended these fools these lines of credit.
Does that make sense?
I appreciate your post because it gave us some pause.
Do you need to buy them a house? Could you simply pay their rent and see if the situation resolves?
So the plan is for us to buy them a house in the next few months - in exchange for freezing credit, us regularly running reports, etc. With no housing cost, they should be fine to live on what they make.
But to your point - we were originally going to give them some money to spend on Christmas, and then we realized it makes more sense to charge that on their cards as they normally would. Moral hazard maybe. But ultimately the card companies are the ones who extended these fools these lines of credit.
Does that make sense?
I appreciate your post because it gave us some pause.
Do you need to buy them a house? Could you simply pay their rent and see if the situation resolves?
Where they live it's silly to not buy. It's so LCOL and with a mortgage we could actually retain some equity out of those payments, versus losing them entirely. They have long term earning issues that I don't anticipate will resolve themselves.