Paying for College advice

[cjcouple]

Please no judgements.  I know I screwed this up and should've been saving all along but I dropped the ball.  Id love some advice about how to move forward.

My oldest child is entering college.  I have a very small 529 and he did receive some scholarships which don't kick in until after semester 1 ($2300). I just hung up with the financial aid adviser with the school and got a pretty close estimate for the first year.  17.5k
I applied and am taking out a Parent plus loan (only option I have due to credit - I know its not the best option but it is what I could get). 

I'm definitely going to be making payments immediately.  My question is: should I pay interest only and throw extra money toward his second year in a saving plan and hopefully avoid taking a second parent plus loan and therefore keeping this his loan at 17,500.  Second year will be less expensive because he can get a dorm with a kitchen so he is not forced to buy a $6600 meal plan.  Often year 3 or 4 are spent in an off campus apartment or commuting so those will also be much less. All of this are assumptions and Im aware I'd be throwing way $120 a month to interest. 

Also, I have a second child - 3 years behind.  Do I start adding a little into a fund for him to try to get ahead? 

I know on one hand just paying whatever I can toward year 1 will get that paid off quicker but its still a number of years and then I will have to take loans for years 2-4.  And be in the same spot for DS2 (4 more loans)   

My kid will also be contributing assuming he can get an on campus job.  I hear its relatively easy to get one so I was thinking of just having him do the interest payments. While I save for year 2-4.  I figure I can save enough to pay for half of year 2 and get a payment plan with the school for the remaining balance.  Hoping in the end I will have 1 x 17.5k loan and I can just make the usual payments once he graduates ($233/mo) and he will ONLY have his federal loans for himself - the more he contributes to year 1 loan will also allow me to help him with his fed loans (lower interest rate).    So how dumb is this plan? Please be nice....lol

I am working a second job so that money will be exclusively for college. 

      

[wanderingback]

I have no specific advice but my goodness please be easy on yourself. There is no judgement whatsoever in not saving for college. I’m behind on retirement and have no clue if my kid will want to go to college so it is not a priority at all to save. I’m fine with that and don’t think that makes me a bad parent or worthy of judgement.

But I do hope someone has answers with your more practical question since you do want to pay something!

[ssmjlm]

Is this your cost after student aid?

I would focus on paying the interest and having something to cash flow next year. Interest rates will hopefully go down, so in theory you can refinance later and then tackle the principal.

And if you do have anything else for the younger child, then I would put aside a small amt for him, whether it's college or something else after HS.

[cjcouple]

Jun 18, 2024 13:03:17 GMT -5 ssmjlm said:

Is this your cost after student aid?

I would focus on paying the interest and having something to cash flow next year. Interest rates will hopefully go down, so in theory you can refinance later and then tackle the principal.

And if you do have anything else for the younger child, then I would put aside a small amt for him, whether it's college or something else after HS.

yes, cost after aid.

[cjcouple]

Jun 18, 2024 12:56:11 GMT -5 wanderingback said:

I have no specific advice but my goodness please be easy on yourself. There is no judgement whatsoever in not saving for college. I’m behind on retirement and have no clue if my kid will want to go to college so it is not a priority at all to save. I’m fine with that and don’t think that makes me a bad parent or worthy of judgement.

But I do hope someone has answers with your more practical question since you do want to pay something!

It just hit me that my poor kid is looking at a lot of debt before he even gets started in life. I feel like I let him down. It stinks.

[jobae1234]

So year 1 is 17.5k, year 2 is about 11k, years 3 and 4 may be closer to 9-10k? Are my assumptions right?

The first 17.5k will get a parent loan and the interest will be paid as you go by your child, so hopefully it will stay at 17.5k.

How much do you have to put towards college per year? And how much is the federal loan, 5k?

I think I’d let the first year loan sit and try to avoid further loans, rather than pay off one loan just to take out a second loan. Administratively it’s a hassle, plus then you’re looking at loan consolidation and all that down the line, and if interest is covered what’s the difference really?

Similarly I wouldn’t save for the second child yet. No reason to save for one while taking out parent loans for the other.

[cjcouple]

jobae1234, thats what I was thinking. Thanks - I can save/pay about $400-500 a month which will give me a good 4-5k and I can pay the balance on a payment plan.

Year 3 & 4 are really hard to determine. His federal loans increase each year
Freshman $5500
Sophomore $6500
Junior and Senior $7500 each

I'm hoping by the time Junior and Senior year come, my monthly contributions will also be higher. I get a decent Cost of Living increase each year. I could lower my 401k contributions temporarily as well if needed - hoping not too but its an option.

Its not a perfect plan but thats the goal at least. I'll likely need to take a loan for my second sons first year as well, and he may go to a more expensive school. He's looking at a bigger university BUT his field of study (Computer Science) will also be higher to start with a Bachelor's so he might need more in loans but we will cross that bridge in a couple years. He may also get a bit more in aid/merit scholarships with his grades.

His freshman year will be tough with DS1 in his senior year but we will do everything we can to get through with decent loans for each.

[cjcouple]

and thanks for the thoughts

[simpsongal]

Can I ask, how are the interest rates on parent plus loans these days? do you have any other lines of credit available? Asking b/c I recall they were north of 8%.... is there an upside to a parent plus loan over another type of loan?

[cjcouple]

simpsongal, 8.05% plus an origination fee. It sucks but I tried a couple other private loans (including my own credit union) and was denied. I'm rebuilding my credit but its not going fast enough. literally goes up like 3 pts a month.

No other lines of credit.

[bcv513]

I don’t have any advice but I just wanted to say to be kind to yourself. You didn’t let your kid down! I think this board is an anomaly in the sense of paying for college. I don’t know anyone who can just come up with that kind of money or even save enough to pay for it. You are a great mom!

[wanderingback]

Jun 18, 2024 13:19:15 GMT -5 cjcouple said:

Jun 18, 2024 12:56:11 GMT -5 wanderingback said:

I have no specific advice but my goodness please be easy on yourself. There is no judgement whatsoever in not saving for college. I’m behind on retirement and have no clue if my kid will want to go to college so it is not a priority at all to save. I’m fine with that and don’t think that makes me a bad parent or worthy of judgement.

But I do hope someone has answers with your more practical question since you do want to pay something!

It just hit me that my poor kid is looking at a lot of debt before he even gets started in life. I feel like I let him down. It stinks.

You definitely didn’t let him down. Be kind to yourself.

[jobae1234]

cjcouple I think that’s a very reasonable debt load for him to carry. I know $0 is the ideal but $20-30k for a Bachelor’s is really great in this day and age. Unless he’s also taking on the 17k parent loan payoff, but even then he will be fine!

[cjcouple]

thank you! I just hope to help them start off on a great path. I know I can't predict the future but I'm hoping to help them as best i can

[sparty04]

I know very few people irl whose parents paid for their college. Mine certainly didn't and I have no hard feelings towards them. We have zero intentions of paying for our kids education, we will do what we can but we are prioritizing retirement. Be gentle on yourself.

[simpsongal]

Jun 18, 2024 14:50:30 GMT -5 cjcouple said:

simpsongal, 8.05% plus an origination fee. It sucks but I tried a couple other private loans (including my own credit union) and was denied. I'm rebuilding my credit but its not going fast enough. literally goes up like 3 pts a month.

No other lines of credit.

Got it - it’s not even that bad bc interest rates are still around 7%.

Ditto ops that said to be kind to yourself.

[wesleycrusher]

Not sure if this is an option, since you'll have 2 in college back to back, but my DH's parents had him take out loans for college then helped him pay off his loans after which spread out how much they had to put out at one time.

I've been reading your posts over the years, you're a great mom and have done a great job with your boys!

[rooster222]

I don't have any advice regarding the loans but with our college student she is working hard to graduate in 3 years to save money. Supplementing with community college courses can help get there faster/cheaper. She is also going to a very affordable school. She didn't work her first semester (per our advice) but otherwise she works year round. We've had a lot of conversations about how we want her to graduate with minimal debt but we can't cover it all.

I have another one starting college in a year.

Also, keep looking for scholarships!! Have your kid go talk to their advisor, dept chair, financial aid.

I'm also hiring someone to help with a few scholarship essays. It's not very expensive and I figure it's worth a shot!

[mae0111]

rooster222 makes a great point... there are a lot of scholarships out there, and many are still available. Maybe he could try to apply for some to try to lower your out of pocket cost?

www.scholarships.com/financial-aid/college-scholarships/scholarship-directory/residence-state You can choose by state here...

You're doing a great job! This is really daunting, IMO, and we're not there yet. My oldest is going into 9th in September and college already keeps me up at night LOL!

[formerlyak]

Look at local scholarships that like to give to students from your high school. Or scholarships that are affiliated with your work if your company has them. DS qualifies for zero need-based aid, but got $6000 in local scholarships and one affiliated with one of our workplaces. The workplace one is $2000 renewable for three more years.

[sadlebred]

Jun 21, 2024 12:28:00 GMT -5 formerlyak said:

Look at local scholarships that like to give to students from your high school. Or scholarships that are affiliated with your work if your company has them. DS qualifies for zero need-based aid, but got $6000 in local scholarships and one affiliated with one of our workplaces. The workplace one is $2000 renewable for three more years.

Are you a member of any organizations or civic groups that offer a scholarship? Also, check to see if anyone in your county does scholarships like the Farmers of County X. Google "County+State+Scholarship". I kid you not-at my university at the time there was a $500 scholarship for a "left handed student from County X majoring in A, B, or C" renewable yearly.

Is your kid involved in any sports or anything like 4-H, National Honor Society, Junior ROTC, Junior Civitan Club?? They have scholarships available.

[maudefindlay]

I hope you aren't shouldering this all on your own. You have failed no one. You were your DS1's biggest advocate and went to great lengths to get him help for his SM and he made great progress as a result.

[macmars45]

As others have said cjcouple , be kind to yourself. Among my friends my parents were the anomaly in paying for the bulk of my college expenses. The rest of my friends graduated with debt. I married into college debt and helped pay back the $65K my H owed.

ETA: I will advise your DS to look into scholarships/grants given by his college for the coming years.

ETA2: you didn't let him down. The system in our country let him down. Other countries have figured out better ways to handle paying for school and ours could too.

[cjcouple]

thank you everyone. I will keep looking for scholarships. Its really hard to weed them out. I have looked online and a lot of them just seem like phishing to sell something.

He got about $2800 from high school. Most these are payable after semester 1. These will go toward year 2.

He also got some merit aid, so altogether we cut his tuition in half. I will definitely keep looking.

i actually met with his finncial aod ascisor and asked if there were scholarships and he kind of blow is off an said no. He said they used to have more to give but not the last few years.

[wildrice]

Jun 22, 2024 20:38:23 GMT -5 maudefindlay said:

I hope you aren't shouldering this all on your own. You have failed no one. You were your DS1's biggest advocate and went to great lengths to get him help for his SM and he made great progress as a result.

This! If there is one thing I know about you, it's that you are a great mom. There is no failure here!

I would try to cash flow years 2+ as much as possible since each loan will have an origination fee, so paying down one only to take on another doesn't really make sense IMO. I guess if somehow the interest rate is slashed on future loans that could change, but I doubt that will be the case. I think your plan to pay the interest while he's in school is also a good one, so that he doesn't start the payback with a higher balance than you took out to begin with.

If you truly feel badly about your kids taking out loans now, you can always help with payoff in the future if you are able to/want to. Loans do suck but they are also a reality for the vast majority of students, so your kids aren't going to start any further behind than most of their peers. They will be fine.

[circa1978]

cjcouple, I am just in here to say PLEASE do not have so much guilt about this. I work in higher ed. I can tell you that some very lucky students graduate debt-free but it is not the norm. Off the top of my head, I can cite that the average medicine student from my school graduates with 200K of debt that does not include their undergraduate loans. Well more than half our undergraduates leave with debt. You can find the average debt by state here: educationdata.org/student-loan-debt-by-state.

It's a bad system but you did not fail your kids.

He will not be behind his peers.

[niq]

Would your kids consider ROTC, or some of the scholarships that try to steer your to specific jobs after college, like teaching or some civil engineering careers? Those are probably the scholarships that are the most straightforward to qualify for.

I think a lot of PPs have good advice. Helping with future payoffs might be smoother than taking a second job to pay it all off up front, but I think that depends on how you feel about working more now vs more later.

I think even if you did nothing, your oldest would have an average level of student debt at graduation or close to it. Which is not great but not world-ending. Every little bit helps though.

[awkwardpenguin]

I’m having a little trouble following, but I think you have more options than you are considering. I also agree that you should go easy on yourself, parenting is hard and money stuff is hard and you’re doing your best!

Basically I would have your son take out the full federal loan amount he is eligible for. Undergraduate loans have very flexible repayment options and the new SAVE plans are especially favorable. Honestly people fret about student loan debt but people who only borrow the maximum federal undergraduate loans should not have trouble repaying if they graduate with their bachelor’s and get any kind of college grad appropriate job.

For your contributions to his education, I think parent PLUS loans are a fine option. I would not do any elaborate rob peter to pay paul arrangements to cash flow more in later years. I would just borrow as much as you need to cover whatever is left after your son’s contributions from scholarships, loans, and earnings. Parent PLUS loans have several repayment options, including a 30 year plan for higher balances and income contingent options if you do a direct consolidation loan. The outstanding balance is also cancelled if you pass away.

I am personally not in favor of student responsibility for Parent PLUS loans because I think it mingles parent and student finances too much. In terms of using a campus job as a funding source, I would either expect to use campus job earnings for non-tuition expenses like meals, books, transportation, etc. or use this year’s earnings to help fund next year’s tuition.

This is how my family funded college and we’re all fine! I paid off my undergraduate loans ($27k in 2002) without ever defaulting despite multiple years of $12/hour jobs, a divorce, a period of disability, and going to grad school. My mom finished repaying her PLUS loans this year and while she didn’t love it the payments were manageable and she was able to keep saving for retirement while we were in college so that she didn’t put her own financial stability at risk. My sister consolidated her loans and is still repaying (she graduated in 2006) but the payments are very low and she’s been able to use income driven repayment.