Why do you think the dad is making $16,000/month? OP states he makes $120,000/year.
@sushiritto Are you a kid?
(A quick google puts Hawaiian life expectancy at 80, 3 years longer than the rest of US. That’s not that much. If he’s working into his 70s and 80s that doesn’t leave much time for retirement?)
The dad’s income is $16,000, which includes $5,000/mo from his prior military service.
At the age of 56, 6 years ago, the parents could have taken out a 15 or 30 year loan. I don’t know which it is. I’d recommend a 30-year and if you wanted to pay it back faster, you could always make additional principal payments, if so desired. Or if not, just make the lower 30 year payment.
A new loan at age 62 is not gamble in it of itself. The questions are:
I’m sure there’s other things, but really, lending money to a 62 year old is not uncommon, especially in terms of money coming from Asia (near HI) and buying and selling property.
@redpoodles Are you being sarcastic? I find it insulting either way.
Let’s just say I see and have seen ALOT of loans (and leases) over the years.
I wasn’t but I see now where you got the numbers.
First of all, I would like to say that yes, I’m fairly certain that this engineering degree will help get me a job in business. While I obviously did not spend enough time on researching FA for schools I applied to, I can assure you that I spent time choosing my major and that my major is a good path to take for my long term career goals. Just search up employment rates for graduates with business management degree vs. industrial engineering degree. No matte where I get my undergrad, this is the major I’m going to enter.
I do not have a strong back ground in advance math prep, because the IB program at my school didn’t allow it, but math comes naturally to me, which can be testified by my current IB math teacher (who has a PHD and has been teaching for sometime), and I was on the math team, so I am aware that Calc and physics in college for engineering will be tough but I am willing to put in extra work to catch up. I know engineering is hard, I wasn’t looking for easy.
The mortgage is 30 years. That I know.
Look, the parents may not want to do anything other than give them x amount of dollars for college. And that’s fine.
But yes, some 62 year olds are winding down their financial lives and some may want to continue investing, whether it’s a building, home, a stock or bond, or their children’s education. Cal or UW is possible to me in my mind and I don’t think it’s automatically financial disaster or huge gamble (if properly protected) just on the face of it.
And I know this with first hand knowledge.
Yes we have life insurance, it’s a pretty good policy, as well as whatever we would get from him being retired military. Credit is good, civilian job in military is stable, and he will most likely not be replaced by a younger worker. They don’t lay people off easily in his job bc of age, only for misconduct.
@sushiritto There are no guarantees of health or longevity or future employment when you’re 62 years old. I seriously think you’re giving the OP awful advice. If there’s equity in her dad’s home right now, that’s great. But housing is cyclical–it’s been nearly 10 years since the last crash–and the last thing he needs is his home to be underwater when (not if!) there’s another recession–and for the whole family to go into debt for a college that may or may not provide a better education or means to success. The dad is taking home $11,000 a month (not $16,000) and $7,000 is for set expenses and that leaves $4,000 a month for college and additional expenses–which we all have! Encouraging the OP to set down a path of debt is simply not responsible.
OK, first of all @jql2017 you’re to be commended for your fantastic record and acceptance to these schools. You’ve done nothing wrong.
My question now (realizing I missed your dad’s military retirement income and all those benefits) is: Why can’t he kick in more than 15K for you and your sister? Why can’t he kick in that entire retirement amount (is it 6K/month? 5K/month?) to your college? That would put you each at 30-36K. Just about every school has a pay by month option, where the payments are broken out into 10 equal payments for the year. So he doesn’t have to front it, just pay it without taking on stupid loans.
120K should be plenty for him to live on even with a 4K house payment. He might downsize too, once you are both gone.
His military retirement money can go right back to him in 4 years when you graduate. I can see he’s going to be fine retiring whenever he wants to.
Okay I’m not exactly sure about how much money goes where, but the $30,000 per year was a conservative estimate on my part. He said he makes $11,000 per month salary and $7,000 in bills. That leaves $4,000 per month in theory, but I used $2,500 to be safe. Oh and I believe he has to pay alimony to his ex wife. She doesn’t work. And we recently purchased a car.
The thing is my dad doesn’t think the loan is a bad idea. And I know he’s not financially stupid. So I’m thinking he is not telling me somethings as well…but I really need him home from his business trip to answer questions about net income and how much he can REALLY spare
I recall AGI is $190,000. I’m just flabbergasted that a family of four making that kind of money would have to go into the crazy amount of debt everyone is talking about. I agree with the sensible posts about a gap year and reapplying to a great school with high merit, etc., but how can a family that makes that much money, and receive a regular pay check (and btw will probably get a pension for retirement) can’t make this work with some creative planning. No, I’m not suggesting $300K or more in loans or even considering UCB full pay, but doesn’t it count for anything that this isn’t a family making $50K a year who will never be able to dig out of debt? Perhaps there are extenuating circumstances, but is it not appropriate to consider high expenses that may be liquidated (a less expensive or one less car is not a huge sacrifice in my opinion) or skip the $10K family vacation, then add work study, summer job, maybe a small HELOC for emergencies (doesn’t entail the major expense of a refi, assuming house has some equity now), sell something that’s not needed (OP said this was an option). Food and gas and housing are expensive in HI but the income is good. Also, can you factor in savings like not having to pay lunch fees in high school, and other costs from the twins not living at home. A very personal decision, but I’m suggesting also to think about ways that you and your parents could make it work with a plan, and if you can’t, then you can’t, and there’s other good advice here.
There’s another option if OP is interested in WUE schools – most do offer WUE rates to transfers.
So she and her sister could start at UH in the fall term, and apply to WUE schools as transfers for the following year Since they already have enough accumulated credit for sophomore status, they might even be able to apply as transfers to be spring admits.
This would give them the ability to continue their education without breaks or gaps they aren’t enthused about.
And as I have noted before, the name on the degree (and on a student’s resume) is the college they graduate from, not the one that they started at.
Here’s a list of all WUE schools – all but a handful indicate that the exchange rate can be offered to transfers:
http://wue.wiche.edu/search_results.jsp?searchType=all
@sushiritto
“And the trend is, as we get older, we parents want to work longer”
We do? @-)
HI is an incredibly high COL. I realize that $190k may sound like an insane amount of money but buying a house @ HI prices, after military retirement plus COL, is going to leave a lot less than you might think. Add in a car payment, whatever other bills, alimony, insane HI utility and food prices etc…
Our AGI is higher, our EFC with 2 is 39K. A similar COL on the west coast, though slightly less. We have college savings but cannot cash/savings fund 39K annually. Our base budget is healthier than the OP’s but it’s not at our EFC and most certainly not at what that EFC looks like with only one kid.
If my kid wants a school at our EFC (and he’s really not allowed to look more than a tad above that), he will be taking his student loans. For a parent to “match” that amount in loans, at a higher income level…yeah I (personally) think that’s livable. $27,500 per twin total for undergrad, $55,000 total in parent loans is a very nice car loan and something they can likely manage even at that age. BUT that assumes they can cash or savings fund the rest and that doesn’t sound doable. But More? Grad school funding? That’s nuts. at just the $27,500 at the student interest rate you are looking at payments of $210 a month, upper $500’s if you want to pay it off in 5 instead of 10. Can they sustain a 1K payment a month for 5 years? Maybe. 1K for 10 or a larger payment for 10? that’s a totally different animal in my book. BUT, it’s their book.
It also isn’t wise for either twin to take undergrad loans knowing that they will have grad school to fund.
That said, I tend to agree with the OP that there is perhaps more to this story on Dad’s side.
People differ in their level of risk aversion and attitudes toward money. I don’t think it’s entirely crazy for your dad to borrow a limited amount, but life has a way of throwing up unanticipated twists.
My basic rule of thumb for parental borrowing was to limit the total to an amount that was under my net worth, considering assets that I didn’t want to cash out but could in an emergency. For example, I had cash value in a life insurance policy – I didn’t want to cash that out or borrow against it, because I preferred to keep that policy and continue to let it grow in value. But if took a parent PLUS loan that was less than the life insurance cash value, I would know where I could go for the money, if for any reason I lost my job.
I am age 63 and in good health, and like your dad I hope to continue to work until age 70. But my same-age ex-husband is disabled and getting worse by the day, and his social security is not enough to meet his expenses, so my adult kids are now shouldering the burden of filling the gap to support him. That isn’t something he planned – but if he had conserved money and saved up for retirement, he wouldn’t be relying on his kids for financial support.
Anyone can get sick and lose their primary source of income any time, but the odds are greater for individuals in their 60’s.
The problem with your dad’s plan to take a loan on the house in a few year is simply that he doesn’t appear to have enough equity in the house to qualify.
If your dad was forced to retire early for health reasons, would his retirement income be sufficient to pay the mortgage and other expenses?
Those are tough questions to ask – but especially with your education plans I think you need to ask them. I am saying that because MBA programs are pricey, so you aren’t going to be able to get that business master’s degree you want if you have exhausted funds and taken on a lot of debt in undergrad.
I also avoided taking home equity loans for college spending for several reasons, but one was that I preferred the 10-year payoff schedule with the PLUS loans (which I intended to pay off even earlier, and did). That’s because I wanted the balance of any loan I took to be paid off during my working / income-producing years. I knew that 10 years after my younger child graduated from college I would be age 66, just the point at which I would become eligible for full social security retirement benefits. So I could plan around that … but if I had been age 62 when my D. started college rather than age 52… I would have had a different view.
Ok, now there is alimony expense. This is going in the wrong direction!
Sushi, most of us are not novices to lending/leasing/investing/insurance, etc. We also know what we are talking about. As someone who spent most of 2008 and 9 trying to keep both my family and my company afloat, I am no longer a believer that real estate always goes up. Over the long haul, it does, but the parents are near retirement. There is no long haul here.
And yes, underwriting standards can include the age of the borrower and the likelihood of them working long enough or have that $11k a month coming in long enough to pay it back. While the value of the house securing the loan “should” cover it, NO bank wants your house. They want their money. Dealing with real estate forclosed upon costs a fortune. And they never get all their $ back from it.
I had large student debt too, and I am now debt free and have a great job. 2 differences though: my mom and dad were not on the hook for the loans and that was a very long time ago, so “large debt” was not even half of what we are talking about here!! (And of course there was only one of me!)
This OP needs to know what their budget is per year, and if the parents can afford the loans. It’s time for real number crunching.
^^^ and also an accurate number to what the dad can actually afford to pay for these girls month-to-month without taking on any risky loans.
I wish my dad tells me things. Maybe he doesn’t have to tell me everything about finances but it would’ve made it a lot easier
Parents of future applicants reading this please at least give your children an idea of the family’s finances…
My base budget (out of salary) annually may be higher than the $2500 estimate I made, may be not, I wouldn’t know.
Sushi, what makes sense to you is not what makes sense on this thread. We’re talking from years of experience, not speculation (who cares if Hawaiians live longer? This one’s not headed into a gentle retirement at 65.) The house hasn’t appreciated enough. Dad doesn’t have tappable resources beyond the income. And the income is not enough. If your own kids are yet to head to college, you might benefit from listening to the advice here. If your own financial circumstances are different, you might realize that doesn’t mean OP’s match yours.
The S is now hitting the fan. Not the time to toss out a few “Oh, well” or "Gosh, just have faith.’ There’s a point in any crisis management (oh, here’s a business lesson,) where the smart get down to problem solving, not problem minimizing.
Eyes wide open. No more dreaming.