Financial WWYD? Loan question

[Tap]

Ds17 starts college in a few weeks, due to circumstances we are just now figuring out payment. :001_huh:

 

Tuition is 21,000

He got 11,000 in scholarships/grants, 7,000 in Stafford loans.

He still needs about 3,000. We can help inconsistantlly with payments but we have another child in private school, and her tuition is going to hit us hard financially this year.

 

Our options:

 

1. We can take out a parent loan of about 7%. The benefit is that we could defer payments until he graduates/leaves school. We would have the option of making interest only payments if we wanted to. One benefit that the fin aid office pointed out, is that with of this type of loan is that if the student or parent is disabled/killed, the loan goes away. He will have $7000 in stafford loans to pay off next year. We are focusing on trying to pay off the $3000 during the school year, so there is less for him next year.

 

 

2. He can take out a loan from the University itself with no interest ($50 fee) and repay the loan in 10 months. This is not a deferred loan, he would start making payments immediately. The problem: His payment would be more than he currently makes at his job. He is applying for on campus jobs today to increase his paycheck. He will need to make the loan decision before he gets a job, so it would be a leap of faith.

 

3. We have a car for him that has a small loan on it. We pay $100 month for the car payment for him (required payment is $80). We could refinance the loan at 2.?% to get the money. It would raise the payment by $25 a month for 5 years (we will pay it off much earlier than that). The car is worth $9,000 and this would bring the loan balance to $5,000. If the car was in an accident, the payoff from the insurance company would be more than the loan (we wouldn't be upside down in it). It is an 03 Honda Accord, so it will retain at least a value of $5000 for several years.

 

4. We could look into other styles of loans for him but he is 17 and not legal to sign on most of them. We would rather sign our own loan independent of him, than co-sign (complicates the loan).

 

 

 

ETA: The loan decision/degree is a long-well thought out-decision. This is going to happen, we just need to figure out the $$. The plan right now is to go now, and then skip a year, paying off the loans accrued, before going back for another year.

Edited August 15, 2012 by Tap, tap, tap

[Annie G]

I think you have to consider not just this year but the next few that he's in school, too. On the Living Like No One Else website, the forums are FILLED with people whose biggest debt is student loans- and many have had them for 20 years or more. You probably don't want him to be that guy...who has a wife and kids and is still paying off school 15 years later.

 

Option 2 is the cheapest in the long run but only if you can help make payments. Option 3 is very attractive because the rate is so low.

Option 1's rate seems high.

[Tap]

I think you have to consider not just this year but the next few that he's in school, too. On the Living Like No One Else website, the forums are FILLED with people whose biggest debt is student loans- and many have had them for 20 years or more. You probably don't want him to be that guy...who has a wife and kids and is still paying off school 15 years later.

 

Option 2 is the cheapest in the long run but only if you can help make payments. Option 3 is very attractive because the rate is so low.

Option 1's rate seems high.

 

This is a big concern. Our Intentions are to have this small loan paid off this year. I can see some circumstances that may necessitate it going a bit longer (if he doesn't get a new job etc) but that is the goal. He is going to live at home, and I think it would be a good step for him to have, getting used to making payments (on time, in full etc).

 

I also think it will help him appreciate the repayment aspect of a student loan....it isn't just hypothetical future money. And he won't owe as much when he gets out.

[besroma]

I would take option 3 for two reasons:

 

1. The rate is a good, low rate.

 

2. You are not locked into the higher payment that the 0% loan requires.

 

 

 

I would be concerned about the stress on your son if he felt the pressure to come up with the payment for the 0% loan (unless you could make up any difference he could not pay).

 

Option 2 appears that it would require a payment of approximately $300/mo.

 

 

By taking 2.?% loan, he is only locked into $25 more in payment. I would have him make the $300 payment to the car loan as if he took out the 0% loan (or something around that). That way, he would pay it off faster, but if there were a financial emergency, or if his job fell through for some reason, he would not feel the stress of making the higher payment while he is trying to study and make good grades.

[cjzimmer1]

Is it possible to increase the amount of the Stafford loan? My husband went back to school after he was laid off and couldn't find another job. One semester they wanted us to pay about $1000 but we didn't have the cash since we were living on unemployment. He told the school and they said no problem, we'll just increase your loan amount. They also told us if we ever had trouble covering books or living expenses to let them know and they could increase our loan amount to give us some extra money to help with the other expenses. I'm sure there are rules as to when/how this applies but it helped us immensely. We just needed to ask (of course they had never told us this in advance so we didn't know that we COULD ask).

[regentrude]

I would opt for the car refinancing.

$25 per month seems like a very reasonable option - your son might even be able to contribute this amount, if this should be necessary.

 

Since you will be paying the parent loan in option 1, I do not see how deferring until his graduation will be of any help - unless you expect to have significantly more money then. Also, while deferring sounds nice, it means having to pay interest for several additional years, something I'd try to avoid.

[sleeplessnights]

I would definitely run the numbers about the total loan debt and repayment schedule for each of the options to see what is reasonable. You also haven't talked about other living expenses while in college, and this will compound your money situation. Finally, I saw in your sig that he will be getting a pastoral studies degree. What is a reasonable starting salary for a job with this degree? Obviously the less loan debt you have coming out of college, the more flexibility you'll have when you graduate.

 

I worked full time every other semester while in college at a job in my field. I earned well over the normal student average salary, got good job experience, and had far less debt when I graduated. I used this money to pay the difference in the cost of college and the stafford loans I got. So, my choice would be to find a way to get him to earn the difference. $300 really is'nt that much money a month, and if you can help inconsistently, even better! This way you could pay off the car faster and have money available as your second gets ready for college.

 

Best of luck!

[coffeefreak]

Can he go part time? Go to a cheaper school and get his pre-requisites done? Maybe hold out a year or two to go to this school until he gets more money or even a scholarship under his belt?

 

ETA- I see he already got some scholarships. Can he use them somewhere else, or are they specific to that school?

[Karen in CO]

I would take option 1 and have him make the interest payments now if possible.

 

Yep. Payig the interest now will reduce the payments later. And is this the total 4 year bill or is it going to repeat every year? If it is going to accumulate every year, the definitely option 1.

[MindyD]

First off, both my dh and I have religious degrees and went to a private, Christian university. I would STRONGLY advise you to rethink this plan. Just looking the numbers, you're talking about the possibility of $40,000 total in loans of some sort when he graduates, not even counting interest. That is a huge amount of debt that he will carry around for a very long time. He is not going to make an income that will pay that off quickly or easily. If he wants to go on the mission field long-term, that won't be an option until his loans are paid off. Many seminaries will not allow a student to take loans to pay for school so he'll have to find a way to pay for that himself later on top of student loans if he wants to continue.

I'll just be honest and share our experience. Of all the people we went to school with that graduated with us, I can only think of 2 that are actually earning an income actually using their degrees. All of these people are using what they learned in churches and serving, including us, but they (and we) are not using our degrees for a paid position in that field. We have a good friend that has a construction business, and his joke is "If I need more workers, I'll go find another Christian Studies graduate!" Please please please don't go into debt for this degree.

[Tap]

Is it possible to increase the amount of the Stafford loan? My husband went back to school after he was laid off and couldn't find another job. One semester they wanted us to pay about $1000 but we didn't have the cash since we were living on unemployment. He told the school and they said no problem, we'll just increase your loan amount. They also told us if we ever had trouble covering books or living expenses to let them know and they could increase our loan amount to give us some extra money to help with the other expenses. I'm sure there are rules as to when/how this applies but it helped us immensely. We just needed to ask (of course they had never told us this in advance so we didn't know that we COULD ask).

 

The only way for that to happen, is for us (as parents) to not qualify for the parent loan. We will qualify....we told the kids we will help with some college expenses but not pay for tuition.

[Tap]

I would opt for the car refinancing.

$25 per month seems like a very reasonable option - your son might even be able to contribute this amount, if this should be necessary.

 

Since you will be paying the parent loan in option 1, I do not see how deferring until his graduation will be of any help - unless you expect to have significantly more money then. Also, while deferring sounds nice, it means having to pay interest for several additional years, something I'd try to avoid.

 

:iagree:

[Tap]

I would definitely run the numbers about the total loan debt and repayment schedule for each of the options to see what is reasonable.

 

Honestly, each option is about the same. The parent loan would cost the most but would also be the most forgiving in the long run.

 

You also haven't talked about other living expenses while in college, and this will compound your money situation.

 

He is staying at home. The school is 20 minutes from our house. He is happy to live at home and save the money. He is rarely home anyways.

 

Finally, I saw in your sig that he will be getting a pastoral studies degree. What is a reasonable starting salary for a job with this degree? Obviously the less loan debt you have coming out of college, the more flexibility you'll have when you graduate.

 

A job at starbucks. LOL not really LOL :( He will hope to work in a church or if not, possibly for a non-profit and move on from there.

 

I worked full time every other semester while in college at a job in my field. I earned well over the normal student average salary, got good job experience, and had far less debt when I graduated. I used this money to pay the difference in the cost of college and the Stafford loans I got. So, my choice would be to find a way to get him to earn the difference. $300 really isn't that much money a month, and if you can help inconsistently, even better! This way you could pay off the car faster and have money available as your second gets ready for college.

 

The plan is to do the same, but going year to year, and pay off in between. Many of his classes are only offered fall term or spring, so it is better to do a year at a time.

 

Best of luck!

 

Thanks!

[StephanieZ]

I voted the uni. 0% loan.

 

You can always take the money out of the car later if he can't pay it all off. He can work now, and plan to work HARD over the summer so that he has money for next year to try to avoid another loan.

 

I wouldn't borrow money in your name.

[katilac]

I voted "other," because, like others, I would strongly discourage going into that kind of debt for a degree with limited job prospects.

 

I'm assuming he will need to pay roughly the same amount every year; is that correct? That is a LOT of debt to graduate with, even for graduates who have a good chance of snagging a well-paying job right away.

 

It would be hard to change plans at this juncture, no doubt, but I would seriously encourage him to do so.

[kalanamak]

I would opt for the car refinancing.

$25 per month seems like a very reasonable option - your son might even be able to contribute this amount, if this should be necessary.

 

 

:iagree:

[Tap]

First off, both my dh and I have religious degrees and went to a private, Christian university. I would STRONGLY advise you to rethink this plan. Just looking the numbers, you're talking about the possibility of $40,000 total in loans of some sort when he graduates, not even counting interest. That is a huge amount of debt that he will carry around for a very long time. He is not going to make an income that will pay that off quickly or easily. If he wants to go on the mission field long-term, that won't be an option until his loans are paid off. Many seminaries will not allow a student to take loans to pay for school so he'll have to find a way to pay for that himself later on top of student loans if he wants to continue.

I'll just be honest and share our experience. Of all the people we went to school with that graduated with us, I can only think of 2 that are actually earning an income actually using their degrees. All of these people are using what they learned in churches and serving, including us, but they (and we) are not using our degrees for a paid position in that field. We have a good friend that has a construction business, and his joke is "If I need more workers, I'll go find another Christian Studies graduate!" Please please please don't go into debt for this degree.

 

I really (honestly and truely) appreciate your input. We have thought and rethought this decision. There have been a few threads where people here generously gave us wonderful input from both sides and we have discussed it up and down, beat it to death. We have looked at an considered many, many different paths for him. Honestly, this is going to be his path for this year.

[Tap]

Can he go part time? Go to a cheaper school and get his pre-requisites done? Maybe hold out a year or two to go to this school until he gets more money or even a scholarship under his belt?

 

ETA- I see he already got some scholarships. Can he use them somewhere else, or are they specific to that school?

 

He is only 17 but has been at CC for 2 years already. They are accepting/applying 52 of his credits. :D This brings the 4 year degree down to 2 full years/1 half-time year. There are only 2 other classes that he can transfer in. He may take them at the CC and transfer them in, or just take them as part of block pricing....he will weigh that decision when he gets to it.

 

To answer your question...Some are FAFSA grants, some are school specific.

[abacus2]

I voted the university payments. College is expensive. Now is the time to scrounge and work hard to minimize the debt, because $7,000 times four is already going to be hard work to deal with upon graduation. Don't put off paying what is within the realm of possibility to pay now; it will not be easier after graduation.

[Scuff]

If you're planning on repaying anyway (parent loan), have him get the 0% and help him with the payments. You could pay a set amount each month, and he will still have the benefits of payments/responsibility/ect. (though personally, I'd go with delaying it a year to prevent the debt in the first place. ;) )

[Tap]

If you're planning on repaying anyway (parent loan), have him get the 0% and help him with the payments. You could pay a set amount each month, and he will still have the benefits of payments/responsibility/ect. (though personally, I'd go with delaying it a year to prevent the debt in the first place. ;) )

 

The plan is for him to pay it ,but we will help as we can. If we can pay it, that would be great, but we don't want him to expect it. He is very good at saving money, but he has never had to make payments before. You know, the little things like remembering to make the payment and having the funds available. LOL Even if we do help out, we will put the money into an account and let him be responsible to pay it.

 

:svengo: He is a bit of a procrastinator, so I want to get him used to payments, while I'm still available to 'supervise' it. LOL

 

 

 

We aren't going to delay a year, because he is qualifying for a Pell grant/college financial need grants due to our low income last year. Once our income heads back up, he won't have that help any more. If he waits a year, it will cost him $8000 in aid.

[TranquilMind]

I think you have to consider not just this year but the next few that he's in school, too. On the Living Like No One Else website, the forums are FILLED with people whose biggest debt is student loans- and many have had them for 20 years or more. You probably don't want him to be that guy...who has a wife and kids and is still paying off school 15 years later.

 

Option 2 is the cheapest in the long run but only if you can help make payments. Option 3 is very attractive because the rate is so low.

Option 1's rate seems high.

 

Option 3 or sell the car outright and use that money. Is he going to live on campus anyway? The less debt, the better.

[Tap]

Option 3 or sell the car outright and use that money. Is he going to live on campus anyway? The less debt, the better.

 

Living at home, it is just 20 minutes away. His job, church, us and his 2 bffs are all in a 5 mile area. He will need the car. It would be another $7200 for him to live on campus. :svengo:

[Plucky]

The plan is for him to pay it ,but we will help as we can. If we can pay it, that would be great, but we don't want him to expect it. He is very good at saving money, but he has never had to make payments before. You know, the little things like remembering to make the payment and having the funds available. LOL Even if we do help out, we will put the money into an account and let him be responsible to pay it.

 

:svengo: He is a bit of a procrastinator, so I want to get him used to payments, while I'm still available to 'supervise' it. LOL

 

 

 

We aren't going to delay a year, because he is qualifying for a Pell grant/college financial need grants due to our low income last year. Once our income heads back up, he won't have that help any more. If he waits a year, it will cost him $8000 in aid.

 

Does he have any church backing? He can intern or work part-time for them and often members will donate money towards a future pastor's education.

 

Is he going to live at home or will there be room and board costs? I just don't see this working out as laid out here. I'm sorry.

[Plucky]

Living at home, it is just 20 minutes away. His job, church, us and his 2 bffs are all in a 5 mile area. He will need the car. It would be another $7200 for him to live on campus. :svengo:

 

Does he have any other educational options to earn his pastoral studies degree?

[Tap]

Does he have any church backing? He can intern or work part-time for them and often members will donate money toward a future pastor's education.

 

Is he going to live at home or will there be room and board costs? I just don't see this working out as laid out here. I'm sorry.

 

Our church doesn't have the budget to help students. Ds will make 5 students currently attending this school, so requesting help from the congregation won't happen either.

 

He will be an intern shortly, but it is going to be an unpaid position. There isn't any money for it right now. He already does the same job as an intern, just as a volunteer, but having the title will be nice for future resumes.

 

There is a lot going on this summer with camps and moving leaders around, and a large group (including DS) headed to Haiti today. Once they get back and fall college schedules are settled, they will make the official decision.

[Tap]

Does he have any other educational options to earn his pastoral studies degree?

 

There are online options, but he hasn't done well historically in online classes. The other Christian colleges are just as expensive. There is one other college that some people use in our area, but it is not accredited. I don't want him to go this route.

[Plucky]

There are online options, but he hasn't done well historically in online classes. The other Christian colleges are just as expensive. There is one other college that some people use in our area, but it is not accredited. I don't want him to go this route.

 

Does he have a plan to pay off the loans? Is he willing to live at home for a couple years after graduation and pay everything off? That could work.

[Tap]

Does he have a plan to pay off the loans? Is he willing to live at home for a couple years after graduation and pay everything off? That could work.

 

Yep, that is the plan.

 

He is going to go for one year and then work for a year to pay his loans. Then go back for a year. Hopefully, essentially 'leapfrogging' his way through school. On the alternate years, he can work full time (not in the church) and focus on using his education, putting what he is learning into practice at the church.

 

He plans to stay at home, and finish school. Even going every-other-year he will still be done at 22yo. His friends are living at home through their time in school also, so it isn't uncommon in his circle of friends.

[Audrey]

I would go for option 2. You said you could help him out inconsistently. Well, perhaps instead of big chunks of money, you could help him pay the loan off. He can use his paycheque and you could top it off to make the payments. No-interest loans are very sweet deals. I'd try to find a way to make that work before anything else.

[coffeefreak]

He is only 17 but has been at CC for 2 years already. They are accepting/applying 52 of his credits. :D This brings the 4 year degree down to 2 full years/1 half-time year. There are only 2 other classes that he can transfer in. He may take them at the CC and transfer them in, or just take them as part of block pricing....he will weigh that decision when he gets to it.

 

To answer your question...Some are FAFSA grants, some are school specific.

 

Yep, that is the plan.

 

He is going to go for one year and then work for a year to pay his loans. Then go back for a year. Hopefully, essentially 'leapfrogging' his way through school. On the alternate years, he can work full time (not in the church) and focus on using his education, putting what he is learning into practice at the church.

 

He plans to stay at home, and finish school. Even going every-other-year he will still be done at 22yo. His friends are living at home through their time in school also, so it isn't uncommon in his circle of friends.

 

In light of what you posted above, that's actually a really good plan, and doable! Just the fact that he was able to shorten his school time by almost 2 years is great! I guess in light of that, I'd go with option 2, the University loan. 7% interest is so high. Ours were originally at 8.25% and the minimum payments killed us. Now, they're on an ARM, so for now, they're at 3.25%, but I wouldn't take out student loans at 7-8% if I could help it.

 

Good for him!

Blessings!

Dorinda

[ktgrok]

Sell the car and get a cheaper one and use the difference to pay for school? A college student does NOT NOT NOT NOT NOT need a $9,000 when he can't afford tuition! Heck, neither my car nor my husband's is worth that much. I bought a perfectly nice used van last year for about 6,500, and hubby is looking at pick up trucks right now (his was totaled) for $5,000 or less.

 

Oh, and a cheaper car would possibly lower his insurance payment as well.

[Beth S]

Never mind!

Edited August 15, 2012 by Beth S

[Scuff]

The plan is for him to pay it ,but we will help as we can. If we can pay it, that would be great, but we don't want him to expect it. He is very good at saving money, but he has never had to make payments before. You know, the little things like remembering to make the payment and having the funds available. LOL Even if we do help out, we will put the money into an account and let him be responsible to pay it.

 

:svengo: He is a bit of a procrastinator, so I want to get him used to payments, while I'm still available to 'supervise' it. LOL

 

 

 

We aren't going to delay a year, because he is qualifying for a Pell grant/college financial need grants due to our low income last year. Once our income heads back up, he won't have that help any more. If he waits a year, it will cost him $8000 in aid.

 

Oo, yeah, that wouldn't be worth it.

[Scuff]

Sell the car and get a cheaper one and use the difference to pay for school? A college student does NOT NOT NOT NOT NOT need a $9,000 when he can't afford tuition! Heck, neither my car nor my husband's is worth that much. I bought a perfectly nice used van last year for about 6,500, and hubby is looking at pick up trucks right now (his was totaled) for $5,000 or less.

 

Oh, and a cheaper car would possibly lower his insurance payment as well.

 

That's an idea, too. Do you know someone who knows cars? My uncle fixes up cars and found us a used Buick for $1200. It'd still be running strong, if it hadn't gotten stolen and gutted.

[Tap]

Sell the car and get a cheaper one and use the difference to pay for school? A college student does NOT NOT NOT NOT NOT need a $9,000 when he can't afford tuition! Heck, neither my car nor my husband's is worth that much. I bought a perfectly nice used van last year for about 6,500, and hubby is looking at pick up trucks right now (his was totaled) for $5,000 or less.

 

Oh, and a cheaper car would possibly lower his insurance payment as well.

 

I am a stickler about safe cars. The car is a Volvo S40, we only paid $4000 for the car, it is just has a higher loan value. It had one owner, who we know, and had every maintence done on time. We live in the PNW where we get all 4 seasons. We get ice fairly often in the winter and it snows occasionally. I insist the he has a reliable, safe car that is heavy enough to handle the wind on the large bridges that cross the Columbia river. Insurance will be the same pretty much the same if we go for a cheaper car, becauase the cost is based mostly on his age/sex. Insurance is about $100mth.

Edited August 15, 2012 by Tap, tap, tap

[tntgoodwin]

Can he get a (second) part-time job to pay for it? I wouldn't go into debt for it.

[Tap]

Can he get a (second) part-time job to pay for it? I wouldn't go into debt for it.

 

Nope, he volunteers a lot so his job needs to stay 1/4 time. The volunteer work is essential because it is like an internship at the church. He is also getting ready to take over as leader of the Jr High youth group. These are key steps for his future career.

 

He is going to try and apply for on-campus jobs so he can maximize his time on campus. Right now he is an upper level math/reading tutor at a learning center (min wage) but the hours are very limited. Working on campus would open up more options for him with hours.