Helping finance college for a much younger sibling, would you?

I’m back on College Confidential in the 8 years since I graduated high school to ask a bit of a challenging question regarding education financing.

I have a brother who is a senior in high school who wants to study a business or STEM discipline. He was an athlete in high school and an above average student academically, though he didn’t fare well on the SAT. He got into all of the schools he applied to, which were a mix of in-state public colleges, and out of state public historically black colleges. Kicker: he got close to no merit aid from any of them, and between growing up low income and my parents retiring soon (which is probably not adjustable), college savings and parental financing are not options on the list. Pennsylvania (where he is a resident) has some of the most expensive flagship universities. For now, he’s resigned himself to go to community college and figure it out from there.

Here’s where altruistic big brother comes in: I was one of the first men in my family to go to college, and only the second one to leave the state. Merit aid covered the vast majority of my education and I have little education debt (total balance is less than 15% of my salary/monthly payments are ~3% after tax, and I could pay it off in under a year if I wanted). I’m childless and (because of lifestyle choices) don’t expect to become a parent in the next 10 years.

For the above reasons, and because I recognize the tremendous impact access to traditional higher ed has on low income students lives if done the right way, I want to help fund the remainder of the balance. Presuming he lives on campus every year (he might not after sophomore year) - we’re talking ~15k annually. I’ve spent my career in financial technology, so I get all of the credit risks: I’d have to pay it back even if he doesn’t finish or find a job, it can’t be discharged in bankruptcy, regardless of whether his name is on the loan or not if my name is on it not paying will affect my credit.

My why: community colleges are notoriously bad at promoting students to bachelor’s degree attainment - especially students of color. I work in Silicon Valley and know very few people who started at community college who had access to the kind of opportunities I had either immediately at graduation or the years after. Doing the first half at community college, where my understanding is that internships especially in the private sector are at best very limited, would hamper him as he hunts for the coveted junior summer internship. I recognize I have a lot of biases about community college that have been formed by my professional experience, so would love to hear people weigh in on whether it is truly a viable option even for a year or two,

Anything else you think I should be thinking about, or if this is a really bad idea? Thoughts on whether to have him co-sign or not (my calculated repayment for the 60k over 10 years is only a few hundred dollars a month)?

EDIT: we aren’t talking about say, a middle of the road university and community college. He gained admission to his state’s best flagships - Pitt, Penn State, and Temple and wants to study STEM - I’m not sure there’s a cheaper way to get to a 4 year degree.

If you are gifting him funds for an education, then no he shouldn’t be a co-signer since that implies you are helping him get loans that he would need to repay.

If gifting, can you afford to gift him that money? Do you have a means to continue to gift him that money if you lost your job?

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What state do you live in, and when does he turn 18?

The OP lives in Pennsylvania.

To the OP…could you fund his community college studies? That would be a huge gift to him and would get him started. Encourage him to do a two year course of study that could lead to a four year degree OR job potential right out of the CC.

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The high school senior lives in PA. But where does older brother live? Older brother may be able to take guardianship of younger brother, and younger brother may be able to quickly qualify for residency in older brother’s state, which may have good, much cheaper flagship state U.

In any event, older brother, you are correct. Starting out at community college may not be the best choice for younger brother. But living at home with your parents and only paying tuition might be the way to go. He could very quickly get through his first two years in one year plus two summers with a combination of community college at a blistering pace, and CLEP exams via modernstates.org. He could enter as a junior in fall 2022, and stretch his federal loan farther. You could lend him the rest, and make it a gift if you are able. Your parents could continue to support him, maybe help some. If he chooses a community college that has a transfer agreement to the nearest 4 yr college, he has an automatic admit, assuming he does well.

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Gifting him what you are comfortable with seems like a very generous idea. I doubt you’ll regret it from what you’ve described. His financial aid from Pitt, Penn State , or Temple should be based on his and your parents’ finances, not yours. You are a good big brother!

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I’m in CA, which both has really stringent resident requirements (he would have to live here for a year and not enroll in school to be eligible for instate) and also notoriously difficult to get into UC system, which is only slightly less expensive instate as PA schools, does not include Pell Grant matching which PA does, and much higher housing costs than Philly, Pittsburgh, or State College. I’m not really considering it as an option for those reasons, but if my brother expressed in doing it I’d consider endorsing it.

I suppose my biggest hesitation on the community college front is job recruiting and internships come senior year. I was fortunate to have a job lined up at graduation, but that was the product of me being really aggressive and proactive about having things to put on my resume starting freshman year. I interned for a local congressman the summer after my freshman year of college, which parlayed into an internship in Washington, where I was in school and could intern during the semester.

My biggest hesitation is that I take on this burden - which candidly, I expect to pay back the lions share of if not entirely, regardless of whether he co-signs or not (I’m largely weighing that as a way to ensure he has some skin in the game because I’ve heard horror stories about being saddled with debt from children who don’t have degrees) - it won’t increase his earnings. I watched a lot of people I knew try to do college the cheapest way possible and it really hurt them when it came to prioritizing internships over minimum wage work to pay their immediate bills, then not having the necessary experience to secure the kind of competitive post-grad job to meet their needs.

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California has better in-state financial aid than Pennsylvania, but that does not really help, since he is unlikely to be able to get California residency for tuition and financial aid purposes.

What kind of STEM is he interested in? Biology and computer science are both STEM, but have greatly different post-graduation and internship job prospects.

After any applicable financial aid* and scholarships, what are the net prices of the colleges he got into?

*Even though Pennsylvania in-state financial aid is not very good, it shouldn’t be zero if your parents have low income. Pell grant may also be available for him.

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You sound like you can make the payments. I would do anything to help my family members to improve their life if I could.

So… Depending on what his life goal is why can’t you have a legal agreement with your brother. You draft it up. Not saying to get a lawyer but something that sets terms etc and ability to pay. You only know your brother. Would this be expected since your now successful or would he really be appreciative of this and use this as an incentive to succeed? There is not a greater gift you can give to someone then an education and a chance at a better life. Especially a brother.

So, make him realize it’s NOT a gift even though yes you are gifting this to him. Hopefully he is responsible enough. If it’s like CS many get good paying internships starting first /second year. Make sure he knows that most of that goes back to pay the loans down. Also many schools have co-op programs. Instead of going to community College, maybe he does a semester or two of a paid co-op. He gets experience and a way to generate money to help pay for his education. This is why a contract between both of you is needed so he has the understanding. Whether you uphold it, is up to you. I think it’s great that you have a chance to shape and mold his future. Living at home if feasible might be a good compromise…

Normally I say no in these situations but this just feels different and you already stated you know the consequences. I would rather bet on success then failure. Your a good person and that will come back to you a thousand times over.

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My concern might be the student will struggle with freshman year weed out courses at Penn State, Pitt, or Temple.
What are average class sizes at Penn State vs community college?
Have you looked at articulation agreements?

https://catalog.ccac.edu/content.php?catoid=9&navoid=2214

For the colleges the student was admitted, is the student in middle percentile of incoming frosh for class rank or GPA/SAT? Top 25%? Lower 25%?

See questions C9, C10, C11on “Common Data Set “ for each college.
For example Penn State
https://■■■■■■■■■■■■■■■■/drive/mobile/folders/1gZK8PGQgsvL8RFb78_0f8pmrMdChnyVE?usp=sharing

Yes, I agree, it’s not going to fly, moving him out to California.

The gen eds that he has to take for his degree - those he can get out of the way quickly at community college. He can also take the intro level classes for his major, at a community college that has a transfer agreement with the nearby public 4 yr school. He’d probably be able to get these done at half the price at the community college, plus no living expenses, since he’d live with your parents.

He’d be at the 4 yr school for junior year. He could apply for internships for the summer between jr and sr years, from the 4 yr college.

I hate to say it, but if he’s not motivated enough to zoom through two years of community college in two summers and a school year, plus maybe some CLEP, and keep his eye on the prize of transferring into the 4 yr college, get his degree, and get a job, then is he motivated enough for you to pay his tuition? He wouldn’t need to be doing low wage work while he’s in school, because he’d be able to pay for it with your help, loans, and your parents’ help with living expenses. Plus I bet he’d qualify for some financial aid, too.

In any event, I do think that it is the right thing for you to help him financially. He’s your brother, he needs your financial help and probably also your guidance.

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For example, Penn State has entrance to major requirements. Pre business majors must have at least a C in certain courses, and also a B or B+ overall GPA for certain majors.

https://ugstudents.smeal.psu.edu/academics-advising/get-into-a-smeal-major/entrance-to-major-requirements-for-students-entering-penn-state-starting-su-20-fa-20-and-sp-21

If the younger brother had been the OP as a student that had been gapped $15k and asked if it was a good idea to take on $60k additional debt to the standard $27k+ federal student loans, how many would encourage him to come out of undergrad with approx. $100k of debt?

If the parents had been the OP, had no feasible plan to pay off Parent Plus loans, who would encourage them to take on that $60k debt?

Btw, the younger brother has more skin in the game than anyone else, even if big brother wrote him a check for $60k today, it would still be his future and his hard work. If the student wanted to use that $60k to come out of undergrad without taking out $27k in loans, a lot of people who’ve struggled with debt would think he was very wise.

OP, you are nearing 30 years old? In the old days there was a saying $50,000 saved by 30. I don’t know what the modern equivalent of that dollar figure is today. Perhaps it’s a year’s worth of living expenses or the equivalent of your annual salary. Are you on track to meet that goal? If so, and you still have extra to commit $60k to your brother’s education great. But, don’t be surprised if you structure your offer as a loan, he may very well turn you down.

If his name is on the loan and something happens to you, how will he pay that debt? If something happens to you, will your parents be willing to take out parent plus loans so he can finish?

If you proceed with your plan, please review your life insurance policies and beneficiaries so that your brother doesn’t get stuck halfway through his education with thousands of dollars in debt and no way to finish his degree.

How you finance this debt may be an issue. I don’t think a sibling is eligible to take a Parent Plus loan (parents, grandparents, step parents are), so you may be talking about a private loan (which could be a better deal interest rate wise anyway). What does your brother want to do? Does he want that much debt?

If you set it up as his debt with you co-signing, I think there are a lot of opportunities for him to disappoint you. He could drop out of school, he could be unable to find a job and thus unable to pay the loan in 4-10 years, he could take a low paying job and be unable to make payments. The government would give him some options (income based repayment, debt forgiveness for public service, suspend the payments while returning to school) but will you as the loan holder/co-signer?

If you want to give this as a gift, where you always plan to pay for it as you go along, do that.

I commend you. As someone who was low SES, I can say the impact on income long term for someone with a STEM education is profound.
You could also look into gifting him the $ and that way, it would reduce taxes for you. Most importantly, you and your brother need to come to an understanding around how/if it will be paid back, over what time, GPA expectations and all the rest.
It’s common for low income students to have scary gaps where they are unsure if they can finish school ( housing, Summers etc). You should also plan for this as well as possible economic factors like recession.
I’d make sure he’s willing to work hard jobs in the Summer and save $ there.
You can do it. Giving someone $ for education is a great thing. If I could meet the folks who gifted me my college and grad school education I would tell them.

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@dc2013 , I think it’s great to pay/co-sign loans for your younger brother to attend college.

While I think it is possible for students to begin at CC, then migrate to a 4yr and have a successful career, my preference would be that going straight to 4yr would be best if possible. It seems you have considered all the financial implications and you feel you can easily accommodate the expense.

If you do this via loans, I think it is okay to ask your brother to co-sign part or all of it. Whether you plan to pay it all back or only a portion, it will help him feel he has some skin in the game if he co-signs. I think it’s also fine if you decide not to have him co-sign. Either way, you know your name is on the line and you know you’re ultimately responsible, so we’re just talking about how it might affect your brother not you. However, you should prepare as if you will end up repaying 100% of the loan, to keep your financial-planning state of mind comfortable. If brother helps repay the loan, all the better.

You know your brother better than any of us. Only you can decide if you think he will make the most of this opportunity. If you decide he will, I say go for it.

Best of luck to your and your brother. Your brother is already lucky to have big brother as caring as you!

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Buckeye, normally I side with your line of thinking. In this case, with the OP already out of college in a good paying career, able to repay the loan and save for retirement, young enough to alter expensive COL decisions (children, relocation to expensive cities, luxury cars, etc) and employed in finance, I feel comfortable advising OP to take the loans if the OP decides it is affordable.

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How?

You can gift someone up to 14k per year. That would come off taxes. I’d check with a CPA. But it can be given to anyone. Depending on his tax rate that could be ~30% or 5 k (15k /30%) So he’d be giving him 10k ish.
All gift donations are tax deductible ( with IRS caveats of course).

Definitely check with a tax expert before deciding on this plan. Often, the standard deduction will be greater than any itemized deductions. If the gift deduction works like other deductions (being 1/4 or less, not $ for $) it is very possible the gift will result in no additional deduction at all.

Again, definitely ask a tax professional.