schildi
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Post by schildi on Jul 12, 2024 15:32:29 GMT -5
So our second kiddo is starting college here soon, and it looks like we have been offered a fed direct parent plus loan.
The conditions are as follows, if I looked this up correctly: - interest rate = 9.08%, fixed for the duration of the loan - one time fee = 4.28% of the loan balance
Here is the cost calculation:
$60,000 annual tuition (rounded) - $30,000 scholarship he received - $5,000 Student Fed Unsubsidized Loan that he qualified for ------------------------------------------------------------------- $25,000 <--- this is what's left for us to pay per year
Now they offered us this $25,000 fed direct parent plus loan. It would basically take care of the remainder, but we'd be paying it back at the conditions listed above.
I read up on this, and the advantages of the fed direct parent plus loan are: - loan is cancelled if the parent dies - loan is cancelled if the student dies - loan may be cancelled if the parent becomes permamnently diabled.
We can pay for our portion (the $25k) out of pocket, but I was wondering what you all would do and/or recommend. Is the security of the loan worth the (fairly high) cost?
Thanks for any feedback!
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pulmonarymd
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Post by pulmonarymd on Jul 12, 2024 15:59:06 GMT -5
What does the next 4 years look like in regards to paying for college? Is his scholarship guaranteed for 4 years, or is it year to year? Do you have more than 1 in school at a time, and will that continue? How close to retirement are you? The interest rate makes me second guess it. If you can pay it from savings(or cash flow it) that would be what i would(and did) do. Knowing that I am done with that commitment with graduation was a weight off my mind.
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schildi
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Post by schildi on Jul 12, 2024 16:13:03 GMT -5
What does the next 4 years look like in regards to paying for college? Is his scholarship guaranteed for 4 years, or is it year to year? Do you have more than 1 in school at a time, and will that continue? How close to retirement are you? The interest rate makes me second guess it. If you can pay it from savings(or cash flow it) that would be what i would(and did) do. Knowing that I am done with that commitment with graduation was a weight off my mind. His scholarship is guaranteed for the next 4 years, and so is the tuition amount (fixed tuition). Our older son is also in college, we have an overlap for two years where we pay for two. I am (hopefully) very close to retirement. My plan is to retire in 4 years - when our younger son (who starts college now) is through school. Yes, we can pay for it through a combination of cash flow and savings if needed. Not sure if that's the best route to take, hence my post. Thanks for replying, pulmonarymd!
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pulmonarymd
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Post by pulmonarymd on Jul 12, 2024 16:23:39 GMT -5
Are you thinking it is a one time thing? Or would you consider it for all 4 years. Having to pay a student loan of 6 figures in retirement would give me nightmares.
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minnesotapaintlady
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Post by minnesotapaintlady on Jul 12, 2024 16:32:20 GMT -5
There's no way I would pay a 4% origination fee and 9% interest if I could afford to just cashflow it instead. That's an expensive loan. You could buy a lot of life insurance on a teenager with just what you'd pay in origination fee.
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schildi
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Post by schildi on Jul 12, 2024 17:13:47 GMT -5
I am thinking along the same lines, it's an expensive loan. The only advantages are the forgiveness provisions. You could buy a lot of life insurance on a teenager with just what you'd pay in origination fee. It would be life insurance on me more than the teen, as the loan would be forgiven also if I were to pass. But it's still an expensive loan, no matter what, and I am with both of you. I posted to get some other input, and make sure that I am not forgetting something important here. It's a rather big decision.
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schildi
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Post by schildi on Jul 12, 2024 17:17:20 GMT -5
Are you thinking it is a one time thing? Or would you consider it for all 4 years. Having to pay a student loan of 6 figures in retirement would give me nightmares. True. I am thinking of some sort of forgiveness maybe. If I was 100% sure we pay back all of the potential loan, then it's a crappy deal. Agreed.
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minnesotapaintlady
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Post by minnesotapaintlady on Jul 12, 2024 17:25:29 GMT -5
There are people purposefully taking them to get on the new SAVE program where payments are income-based and forgiven after X years (20 maybe?) Unlike old income-based programs, if the payment amount does not cover the interest, it is forgiven. I personally wouldn't do it myself because all those government loan programs have been such a cluster in the past...and of course, depending on income you may end up having to pay all the interest anyhow. Possibly a good choice if you're retired and can keep your income artificially low, but you'd have to do that for many years.
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jerseygirl
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Post by jerseygirl on Jul 12, 2024 17:36:52 GMT -5
I’d cash flow (we did for our 3 plus private HS and one med school). It was a lot when we were paying but didn’t want payments going on for years and years. Is the interest rate guaranteed? And yes that’s pretty high for a long time
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pulmonarymd
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Post by pulmonarymd on Jul 12, 2024 17:40:21 GMT -5
Are you thinking it is a one time thing? Or would you consider it for all 4 years. Having to pay a student loan of 6 figures in retirement would give me nightmares. True. I am thinking of some sort of forgiveness maybe. If I was 100% sure we pay back all of the potential loan, then it's a crappy deal. Agreed. I would never take it out hoping for forgiveness. Given a closely split Congress, it is highly unlikely to pass. And every executive order gets taken to court. If trump wins, forget about it. If t took one iut, I would plan on paying it. But I would only take it out if there was no other option. I would not want to be paying it after I retired
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NancysSummerSip
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Post by NancysSummerSip on Jul 12, 2024 18:18:58 GMT -5
So our second kiddo is starting college here soon, and it looks like we have been offered a fed direct parent plus loan. The conditions are as follows, if I looked this up correctly: - interest rate = 9.08%, fixed for the duration of the loan - one time fee = 4.28% of the loan balance Here is the cost calculation: $60,000 annual tuition (rounded) - $30,000 scholarship he received - $5,000 Student Fed Unsubsidized Loan that he qualified for ------------------------------------------------------------------- $25,000 <--- this is what's left for us to pay per year Now they offered us this $25,000 fed direct parent plus loan. It would basically take care of the remainder, but we'd be paying it back at the conditions listed above. I read up on this, and the advantages of the fed direct parent plus loan are: - loan is cancelled if the parent dies - loan is cancelled if the student dies - loan may be cancelled if the parent becomes permamnently diabled. We can pay for our portion (the $25k) out of pocket, but I was wondering what you all would do and/or recommend. Is the security of the loan worth the (fairly high) cost? Thanks for any feedback! Absolutely not. I worked in the student loan industry. True, the loan is cancelled on death. Disability means enrolling in the TPD (Total and Permanent Disability) program and the cancellation takes three years to complete; it is not instantaneous. Also, the direct parent plus loans are not SAVE plan eligible on their own. You would have to consolidate them into direct loans. And the interest rate is absurd.
From Federal Student Aid website: Which Loans Are Eligible for SAVE: Eligible:
Direct Subsidized Loans Direct Unsubsidized Loans Direct PLUS Loans made to graduate or professional students Direct Consolidation Loans that did not repay any PLUS loans made to parents
Eligible if Consolidated into a Direct Consolidation Loan:
Subsidized Federal Stafford Loans (from the FFEL Program) Unsubsidized Federal Stafford Loans (from the FFEL Program) FFEL PLUS Loans made to graduate or professional students FFEL Consolidation Loans Federal Perkins Loans
Ineligible:
Direct PLUS Loans made to parents Direct Consolidation Loans that repaid PLUS loans made to parents FFEL Program Loans (some types can become eligible if consolidated) Federal Perkins Loans (can become eligible if consolidated) Any loan that is currently in default
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schildi
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Post by schildi on Jul 12, 2024 18:24:47 GMT -5
So our second kiddo is starting college here soon, and it looks like we have been offered a fed direct parent plus loan. The conditions are as follows, if I looked this up correctly: - interest rate = 9.08%, fixed for the duration of the loan - one time fee = 4.28% of the loan balance Here is the cost calculation: $60,000 annual tuition (rounded) - $30,000 scholarship he received - $5,000 Student Fed Unsubsidized Loan that he qualified for ------------------------------------------------------------------- $25,000 <--- this is what's left for us to pay per year Now they offered us this $25,000 fed direct parent plus loan. It would basically take care of the remainder, but we'd be paying it back at the conditions listed above. I read up on this, and the advantages of the fed direct parent plus loan are: - loan is cancelled if the parent dies - loan is cancelled if the student dies - loan may be cancelled if the parent becomes permamnently diabled. We can pay for our portion (the $25k) out of pocket, but I was wondering what you all would do and/or recommend. Is the security of the loan worth the (fairly high) cost? Thanks for any feedback! Absolutely not. I worked in the student loan industry. True, the loan is cancelled on death. Disability means enrolling in the TPD (Total and Permanent Disability) program and the cancellation takes three years to complete; it is not instantaneous. Also, the direct parent plus loans are not SAVE plan eligible on their own. You would have to consolidate them into direct loans. And the interest rate is absurd.
From Federal Student Aid website: Which Loans Are Eligible for SAVE: Eligible:
Direct Subsidized Loans Direct Unsubsidized Loans Direct PLUS Loans made to graduate or professional students Direct Consolidation Loans that did not repay any PLUS loans made to parents
Eligible if Consolidated into a Direct Consolidation Loan:
Subsidized Federal Stafford Loans (from the FFEL Program) Unsubsidized Federal Stafford Loans (from the FFEL Program) FFEL PLUS Loans made to graduate or professional students FFEL Consolidation Loans Federal Perkins Loans
Ineligible:
Direct PLUS Loans made to parents Direct Consolidation Loans that repaid PLUS loans made to parents FFEL Program Loans (some types can become eligible if consolidated) Federal Perkins Loans (can become eligible if consolidated) Any loan that is currently in default
Thanks to you and all others who have responded. You all basically confirmed what I had thought already: I'll stay away. Probably do the same as I did with our older boy: some credit card with a sign-on bonus, and 15-18 months on 0% for purchases. Then pay it off just forfore the end of the 0% period. At least I get *something* back this way.
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pulmonarymd
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Post by pulmonarymd on Jul 12, 2024 18:58:01 GMT -5
Do they not charge 2.75% for paying by credit. I seem to remember that from my kids.
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schildi
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Post by schildi on Jul 12, 2024 20:18:34 GMT -5
Do they not charge 2.75% for paying by credit. I seem to remember that from my kids. They are charging 1% at that college, my older son's charges 2%. I get 1.5% cash back with this particular card, had a $300 sign-on bonus, plus 18 months no interest. It's worth it, at least to me. Collecting 5% interest right now on the cash balance in my Fidelity account, which is where the money is waiting to be used eventually to pay off that credit card. :-) Funny side fact: I did get around the 2% a couple times by calling the University directly and paying over the phone. The first time it was because the website wouldn't take my card. It's a third party vendor that actually does the payment and charges the fee there, and when they did it directly, they couldn't charge the fee. The second time, I was on vacation with no Internet access and no computer, 😆 lol.
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Knee Deep in Water Chloe
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Post by Knee Deep in Water Chloe on Jul 13, 2024 0:42:04 GMT -5
We took out Parent Plus Loans for two of our four children. (For the other two, one didn’t stay in community college, and we cash-flowed the youngest’s expenses.)
We did not have that high of interest on either PP Loan nor do I recall an origination fee. However, I may have blocked out an origination fee. I’d struggle with that level of interest.
We’re also mean and make our children work while going to school. So, I wouldn’t be contributing that entire $25,000. I’d expect my child to work at least 15 hours per week and pay (based on my state’s current minimum wage) $8,000/year. That would leave $17,000/year for me.
We were also mean and only paid the amount that equaled in-state school tuition and living expenses. One child went to an out of state school, so she had to come up with the difference between the remaining amount due and what we would contribute based on in-state expenses.
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TheOtherMe
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Post by TheOtherMe on Jul 13, 2024 10:04:53 GMT -5
Chloe, you were not mean. You were being responsible and teaching your children to be responsible.
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garion2003
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Post by garion2003 on Jul 15, 2024 7:54:01 GMT -5
Does the school offer a payment plan? Rates are so high now (esp for PLUS loans) that even if you could cash flow it, an interest free payment plan through the school might also buy you some breathing room (sometimes there's a small enrollment fee for the plan).
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