Saving for college or getting loans?

[motherto2]

I'm watching the show on CNBC about the student loan crisis. Just curious how smart spenders are going about sending kids to college. The ex and I always told the kids we would pay for their first 4 years, anything after that was on them. I tried to get him to agree to take out at least one 529 plan, and then invest in stocks to supplement and/or pay for the second. Wouldn't think of it, so we ended up just putting some money into 3 different stock plans. Would have been better off putting it in a savings account, since they never made much money. Since we were divorced along the way, there was no changing the investment. Now, we are taking out student loans for each. DD has racked up about $55K for the first 3 years, and still has one to go. DS is in his first year, but due to grants and scholarships, etc. we only have about $6,500 for him. His will be paid off before it's time to start the next one. All will be paid off before retirement in a few years. What have you smart spenders accomplished for college?

[Sharon]

There are no savings for DD's college due to a variety of factors. She is working very hard at getting scholarships and grants. I fear there will be student loans but how much remains the question.

[emptypockets]

I'm watching the same CNBC show on college loan defaults, too, and this is the 2nd time. Our #3 son got a small scholarship from his high school graduation for college, so he used it until it ran out. He worked the next 3 years to pay his tuition. We provided free room, board, gasoline, car insurance, and all the other stuff. When he graduated with his master's degree, he owed only about $8,000, which we paid off for him, but that was 12 years ago. #2 son joined the Air Force and got his degree during his active duty. His wife wants to put both their kids through college, but we don't think she's up to reality yet. and yes, the CNBC show on the college loan crisis is right on spot. Another thing to remember. As a general rule, student loans are not dischargeable in bankruptcy court. You/student would do better to take out conventional loans, and if something very bad happens to you/student, you/student would be able to file for bankruptcy and get it off your back. Or HELOC loan on your house, which can be repossessed if bad times should happen, like now, with the housing crisis. You have to check which loans can be discharged by bankruptcy court or not. In these economic times, you have to be very creative to pay for college, but also look to protect your educational investment and for your tomorrow. Yes, bankruptcy will kill your credit FICO score for 10 years, but that might not be that bad of an alternative if your amortized student loans will take 20-30 years to pay off with the accrued interest.

[❤ mollymouser ❤]

Motherto2, have you looked into various options the military offers for assisting with paying for college, and for repaying loans afterward? It might be worth the time to research. Be sure and ask over at the About.com military forums ~ those people are true experts! (I post over there as Mollymouser, too)

forums.about.com/n/pfx/forum.aspx?webtag=ab-usmilitary

[emptypockets]

ROTC scholarships are free, repaid with military service upon graduation, one year of military duty for one year of ROTC scholarship. Or an appointment to one of the military academies.

[sccdf]

My daughter has been accepted to a private college that charges $20K in tuition each year. So far she has $10K in scholarships. We are on pins and needles about another $5K scholarship and we have leads on another $8K.

When she graduates high school she will have 15 credit hours under her belt.

I think it is great to help your children, but they have a responsibility as well.

[motherto2]

DS goes to a military college already, and so it's not the same as going to a university and joining rotc. They have some scholarships, but not many. And they have to take rotc every semester no matter what. He does get a grant and scholarship, so that's helped alot. And he gets some sort of stipend at the end of each semester (as long as he's filled the requirements). That helps towards personal spending money, books, etc. I agree that they have a responsibility, but I was told growing up that I would have to pay for 1/4 of my college expenses, which I was fine with. My parents changed it on me 2 weeks before I left and said I would have to pay for it all. I tried to work during school, etc. but ended up having to quit (a long story, please dont' ask ) It's important enough to the ex and I that they get their degree, so we've always been on board for paying. They do have to pay alot of their own stuff. DD has a part time job, and is now in the Army, so she's taking care of herself. DS doesn't have that flexibility. I have talked to him about going to the rotc folks and find out if there is anything else out there for him. Keep your fingers crossed!

[Sharon]

We are in the big scholarship push right now. I keep telling DD to hold on for the next six weeks then most of the deadlines for the scholarships will be done. DD will have 60 college credits from the local community college when she graduates high school. The community college does terms and the college she hopes to attend does semesters. We are hoping that the credits will transfer to almost one year complete and that she will be able to complete college in 3 years.

[motherto2]

Way to go Sharon! That would be awesome if she can lop off a year that is already paid for. Good luck!

[Agatha]

My late husband left enough for my son to get through undergraduate school without debt. Actually what he told me about the money was "He can buy himself a red Corvette if he wants to." I demurred about telling him that (still do) but always stated simply, "It's your college money." As all his friends were going off to college it seemed like a natural progression to him. We lucked out and there was enough to get him through the local university without incurring any significant amount of debt which was my goal. Graduate school? Necessary with his major and career goals but he's on his own. Fortunately he's a frugal, independent guy and the loans will be payable in less than ten years.

My nephews will not be as lucky. Super talented guys but only one of them got a full scholarship and one is in his mid-thirties and still paying student loans. I worry about them. #undecided# #undecided#

[dragonfly7]

No kids of my own yet, so I'm drawing on my own recent experience.
My parents opened a regular savings account for each of us and saved up to a preset amount. (These were also the family emergency funds, but the money was always eventually replaced) It was made clear that this was what was available to us, and we were responsible for choosing our colleges wisely and making up the difference with scholarships or student loans. As of today, I have about $22,000 in student loans (private college with large scholarships) and a bachelor's degree, while my sister will complete an Associate's degree in May with no debt (scholarships) and insists on working her way through as much of the next two years as possible. My parents have occasionally contributed a little money beyond what was in those savings accounts as they can.
My short version is that I think both the parents and the child have some financial responsibility for higher education, but the child has the burden of deciding the wisest course of action for completing it. I approve of the way my parents did it and think my younger sister made better decisions than I did.

[jsjjkelly]

Funny, I just looked into this for myself. I thought, while my kids were elementary school aged, I could go back to school to get my teachers certificate. 53 hours at the local college down here at a rate of over $300 a credit hour. Add in books and all those miscellaneous fees they charge, and it will cost $20k!!!

It wasn't something I had my heart set on, just viable employment I guess. Needless to say, I didn't jump on it.

Shawn in FL

[sccdf]

Shawn: If you want to work with special needs children, teach math/science or work in a rural area, there probably is a teachers student loan forgiveness program for you. If we have them in SC, I bet Florida does.

If you teach in a troubled school or in a high demand area your loan is forgiven.

[auntiali]

Ds is in college. He went from applying to Ivy League schools to making the decision to go to our local community college. He has a smal 529 which he used money from that to buy his laptop. His scholarships that he got cover his tuition. Books come out of his 529. He works 2 part time jobs spring/summer/fall and 1 pt job in the winter.

We provide him with a room, food, car, car and health care insurance. I got dh a big screen tv for Christmas and now I'm realizing that ds may never leave. He'll just commute to a 4 yr school. Just joking but I wouldn't be shocked.

If the dks ring up loans dh and I will sit down and discuss what we are willing to do to help them out.

[kccini9]

My kids are still young (1 and 5), but they will be getting their father's GI Bill. The ex transferred his to DS. He said he'll split it if there are more kids from him, but DD got all of her dad's GI Bill transferred to her. It covers everything with a living allowance.

I completed my Masters almost 2 years ago and have about $40K in student loans. I don't have a job now either, since the military moved us overseas. I'm looking and I've had some interviews, but nothing has come up yet.

[Peace77]

There are other options for paying for college besides loans and parents paying for it.

1. Student works prior to college. I worked summers in high school. Then my senior year, I worked for 2 hours after school every day and 8 hours on Saturdays.

2. Student works during college. My financial aid package included working on campus part-time. Other students may find off campus work.

3. Scholarships and Grants. There are lots available. Some are available through the parents' employer, unions, past military service, and family heritage. Some depend on the student's grades, volunteer service, memberships, major or interests.
Some are available only through the schools so go ahead and apply even if it seems that the school may be too expensive.
I believe it is Harvard that is offering free tuition to children of parents earning less than $60k.

4. Working at job that includes tuition reimbursement or payments toward college credits.

5. Attending a cooperative education college (alternates work semesters with study semesters.)

6. Loan forgiveness programs was mentioned above. There are national programs for doctors and teachers. Other professions in high demand in rural or inner city areas may also be included.

[Frugal Nurse]

My own experience: My parents saved nothing for my college education. I got frustrated trying to work and keep up my classes, so when I got married, I quit and worked full time. I lucked into a receptionist job at a law office where they trained me to do paralegal work and I made about $40K/ year but hated the job. I decided to just bite the bullet, use up all my personal savings, and take out loans to finish up school. I went to community college to earn my LPN diploma, and when i graduated in May, I went straight into the LPN to RN program. All told, when I graduate my loans will be about $20K for a 2 year degree, but a lot of that is because I needed loans to cover my cost of living for 2 years (I had to leave the law office job to go to school and now make MUCH less). However, when I graduate from my RN program, I will be signing a contract with my employer to work for them for 2 years and in return they will reimburse me for $10K of tuition. Because I'm in a public service career, I just have to make minimum payments on my loans for 10 years and then they will be forgiven (thanks Obama!). I also think there is a loan forgiveness program in my state for registered nurses, but I haven't looked into it much. Once i get into a groove at my RN job (probably after the first year) I will go back and earn my bachelor's, but my employer will pay for it! Plus I will get a raise after that So for young people who have no $$ for college, I would recommend they choose a major that will offer loan forgiveness benefits or get a job at a company that offers tuition benefits (VERY common in the medical field)

[Frugal Nurse]

When I have children, I plan to start a 529 the minute they are born, so they will have more choices than I did. I wish I hadn't had to work full time when I went to college at 18, I think things would've turned out differently as far as my career path (I had originally wanted to be a psychiatrist).

I don't think student loans have to cause a crisis, but as with any kind of loan, people need to borrow responsibly. A lot of the people who are buried under debt are the ones who borrowed every cent they could to go to Harvard and earn a liberal arts degree, then discovered that liberal arts degrees are about as useful as high school diplomas in the job market. Or the ones who borrowed the $20k/semester that one of the banks use to advertise so they could live the high life. Parents need to remind their children that the payments on $60-$100K in loans will be similar to a house payment, and that it will limit their options after graduation.

I also think a financial education class should be MANDATORY at freshman orientation. They should teach kids about ways to save, and especially about the consequences of taking out huge amounts of student loans.

[readsalot]

We didn't save for college but we have no debt including mortgage. We took out Parent Plus loan and DD has a smaller loan. We are able to pay it in full this first year. Grandma offered to pay for books With our rate of savings we will be able to pay in full next year also and still have and EF, etc. Hopefully we will just continue this way thru the whole 4 years. I think for graduate school she might be on her own. I can see Grandma saying that won't happen though and paying some.

[littlebell]

In my experience (no kids yet), my parents paid my first year at a public University. After that, I took student loans, and by years 3-5, I worked part time at a job where I received tution reimbursement. There are a number of employers in my area who offer some sort of tuition assistance. I always, always had a part time (25-30 hrs/wk) job while in school, and worked 40 hours (or more if I was working 2 jobs) during the summer.

DBF on the other hand took out loans for school, and lived off of them too. He had some grants, but still has an enormous amount of debt. I believe he only worked during the summer part time.

I never really understand the mentality of not wanting a student to work during school so they can "focus on their studies"...it's totally possible to be a successful student and still hold a part time job, and even have an active social life. Not to mention, having decent work experience upon graduation looks good to employers.

Another option that's (unfairly) looked down upon by some is going a year or two at community college and then transferring. This is a great way to save a huge amount of money, especially if the student is undecided and just gets the basic requirements out of the way at the CC. I've never seen a situation where someone has been at a disadvantage by doing this.

[Gardening Grandma]

I started a 529 for my grandsons when the oldest started middle school. My plan is to be able to fund the first two years. After that, if they are doing well, I'll help as I can, but they might need to take some loans.

[Peace77]

Another option that's (unfairly) looked down upon by some is going a year or two at community college and then transferring.

Great option. Just make sure the credits will transfer ok.

I never really understand the mentality of not wanting a student to work during school so they can "focus on their studies"...it's totally possible to be a successful student and still hold a part time job, and even have an active social life. Not to mention, having decent work experience upon graduation looks good to employers.

Not only is it possible but studies have shown that students who work while they attend college get better grades. They learn to manage their time wisely and study. They understand the value of their education and generally don't waste time or money.

Students whose way is paid 100% by Mom and Dad just don't appreciate it the same way.

[kansasflower]

Another option that's (unfairly) looked down upon by some is going a year or two at community college and then transferring. This is a great way to save a huge amount of money, especially if the student is undecided and just gets the basic requirements out of the way at the CC. I've never seen a situation where someone has been at a disadvantage by doing this.


It depends on the degree program. Every person I met in engineering school who started at a community college was at a disadvantage. One, many of the classes taken at the CC did not transfer, meaning that even though they had spent one or two years at CC, they still had at least 4 years of engineering classes to take. Two, those who managed to take math and science classes at the CC that did transfer over were still at a disadvantage as the CC classes were not always as rigorous as the same classes at engineering school. Since math and science classes build on one another; i.e. Calculus I is applied in Calc II which is then applied in Calc III which is then applied in Differential Equations, etc, those who started at the CC tended to struggle in the upper level courses.

[sbcalimom]

My father chose not to pay for my college education though he could have easily. I was lucky though that since he and my mom had divorced so many years prior his 6 figure income did not impact my ability to get grants since mom really made very little. I got scholarships and grants so I made it out of undergrad with only $14K of SLs. I stupidly made the decision to go get my MBA and while I did get a raise, I doubt I ever really use it since I'm not a huge fan of corporate America. This pushed my student loans to $53K. I still think though that it is a pretty manageable amount that I can pay off eventually.

DH had the opposite where his parents paid for everything except a few smaller loans that they then paid off after he graduated. He's now in grad school for his PhD and took out some more substantial loans for his masters program prior to this. His parents just offered to pay off his remaining loans for him.

We plan to walk a middle ground with our kids. We definitely want to help pay for school in a significant way but we do expect them to work summers at the very least to contribute to their own living expenses. I agree it is very useful for students to contribute to their own educations as it tends to help them appreciate it more. I do though hope that we can fund their 1st year's entirely so no work is required since that year can be tougher with all the adjusting.

[Regis]

We told our kids that we'd pay for half their college education and they'd have to do whatever they could for the other half. DS1 refereed soccer games from age 12 and worked during summers and breaks. Now a sophomore in college majoring in actuarial science, he was able to get scholarships to pay for his half. Since he had saved the money he had made, he'll come out of college with no SLs and money in the bank. DS2 is a junior in HS and wants to get a DPT. He's worked summers but not during the school year due to athletics. Based on SAT and ACT scores, he should be eligible for some decent scholarships but I think he'll end up having to get student loans. DD is a freshman in high school and has saved her babysitting money. She wants to get a job this summer to put towards her half.

[littlebell]

kansasflower, good point, but some community colleges near large colleges/universities list equivalency courses between the 2 schools to help eliminate the problem of credits not transferring or not transferring at the level the student expected.

Both my university and the community college nearby provide a list of which course at one school equals what course at the other on their websites. Since the two schools numbers their courses differently, it might list something like History 171 at CC = History 201 at Univ.

[readsalot]

We plan to walk a middle ground with our kids. We definitely want to help pay for school in a significant way but we do expect them to work summers at the very least to contribute to their own living expenses. I agree it is very useful for students to contribute to their own educations as it tends to help them appreciate it more. I do though hope that we can fund their 1st year's entirely so no work is required since that year can be tougher with all the adjusting.

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totally agree with you. This is what we are doing with our child who is a college freshman. She needs to take 2 or 3 classes here at home this summer at our local community college in order to make sure she graduates in 4 years since she is double-majoring, so we aren't going to require her to work too many hours! Luckily she left high school with 15 AP credits, so technically she is a sophomore credit-wise @ her university.

[Peace77]

Check out the book by Zac Bissonnette , "Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching Off My Parents.".

[donnafreedman]

I second the emotion on Zac Bissonnette's book. If your library doesn't have it, ask that it be purchased or at least obtained through an inter-library loan.
I interviewed Zac for my MSN Money column, "Finish college with zero debt":
articles.moneycentral.msn.com/CollegeAndFamily/CutCollegeCosts/finish-college-with-zero-debt.aspx?ucpg=2
Parents and students alike: Please read the piece and take at least some of the tips under consideration.

[donnafreedman]

Let's make this thread even more interesting: I have a copy of "The Complete Idiot's Guide to Paying for College" that I will give away.
If you are interested in entering to win this book, send an e-mail to [e-mail]. Next week I'll use a random number generator to select the winner.