Paying for College via Loans & Work - Advice Greatly Appreciated

Paying for College
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<p>I’m requesting advice to pass along to a friend who’ll be sending her DD to college in Fall 2015. The DD & my DS are in the same class, but I’m completely out of my depth here because my friend’s situation is quite different than mine. The friend knows I’ve been researching college funding, but my search for DS has been merit-related. My friend’s DD would probably not qualify for merit-aid, but might qualify for financial aid, or at least gov’t loans.</p>

<p>My friend has said that her DD will have to pay for college via working and loans - no parental support is going to be available - but I’m not sure this would even be possible except in a community college scenario, w/the DD living at home. The DD does not want to attend a CC, but it seems (to me) that this may be her only viable option. However, I want to point my friend in the right direction so that she and her DD can start to gather the facts asap.</p>

<p>Based on my reading thus far, is this good “directional advice” for my friend? (who will obviously need to start her own research):</p>

<p>Read up on the FAFSA:
<a href=“http://studentaid.ed.gov/sites/default/files/2013-14-completing-fafsa.pdf”>http://studentaid.ed.gov/sites/default/files/2013-14-completing-fafsa.pdf&lt;/a&gt;&lt;/p&gt;

<p>Complete the FAFSA4caster, using tax info from 2013:
<a href=“Redirect Notice”>Redirect Notice;

<p>FAFSA4caster will indicate estimated EFC for my friend/her DD (?) And I will remind my friend that this is <em>only</em> an estimate.</p>

<p>Now, this is where my questions <em>really</em> start…</p>

<p>When my friend/her DD complete the actual FAFSA in January 2015, is there “a chance” that the DD could qualify for gov’t assistance via grants & work-study? (Up until I started this research, I thought the only gov’t assistance was via loans or work-study. I truthfully had no idea that the gov’t provided college grants based on need.)</p>

<p>The DD will automatically qualify for Stafford loans, subsidized, unsubsidized…(or both?)</p>

<p>My friend and her DH have an unfortunate financial situation, including bankruptcy, so my assumption is that they would not qualify for ParentPLUS loans. This might make the DD “independent” and she would thus qualify for more gov’t loans (perhaps)?</p>

<p>Stafford loans available to the DD will increase every year, but basically never exceed $12K/year for undergrad:
<a href=“http://studentaid.ed.gov/types/loans/subsidized-unsubsidized”>http://studentaid.ed.gov/types/loans/subsidized-unsubsidized&lt;/a&gt;&lt;/p&gt;

<p>My friend and her DD would not really know any of this “for sure” until after January 2015…after the FAFSA is complete - correct? (To me, this seems very late-in-the-game, but I don’t see how they would have final loan (or grant or workstudy) info any earlier than this.)</p>

<p>Once the DD is sure of what loans (and/or grants/workstudy) she will receive, then she needs to compare that amount to the cost of her chosen college - and she will have to fill in the gap somehow. This would be via working…but if she has a “work-study” then is an additional job practical? And then there’s the cost of room/board/etc. </p>

<p>The DD wants to attend our state flagship, The University of Kansas, which looks to be about $20K annually with no institutional discounts based on GPA/ACT/SAT (and I don’t think the DD would qualify for any): <a href=“http://admissions.ku.edu/cs”>http://admissions.ku.edu/cs&lt;/a&gt;&lt;/p&gt;

<p>Based on all of this, if the DD is deemed “Independent” via her FAFSA reporting, then she might qualify for annual loans just slightly under the cost of tuition at KU. The DD would then have to cover approx $10K for room/board/books by working summers and during the school year.</p>

<p>And she graduates w/over $40K in debt (with a degree that does not have much earning potential IMHO, so I am just sick about all of this. However, my friend is not asking for general financial advice from me - and she knows how I feel about debt - so I’m going to help her gather the info and then she & her DD will at least have the facts.)</p>

<p>So does the list above look to be generally correct? What other advice/suggestions would you give? </p>

<p>Thank you to anyone who has taken the time to read this and to respond to my questions. I do appreciate it.</p>

<p>GoAskDad</p>

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<p>I should have also called out to @mom2collegekids, who always provides good, frank advice. @mom2collegekids, I would appreciate your perspective here.</p>

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<p>I can’t think of any way this daughter would be considered independent for financial aid purposes. To be independent, she would need to be married, over age 24, have a dependent child she supports, be a veteran of the armed forces, have been a ward of the state. Does she meet these criteria? Probably not. So let’s put that idea aside.</p>

<p>The family can run the Net Price Calculator on the University of Kansas website. It is set up now for students enrolling fall of 2014, but it will give her a ballpark anyway.</p>

<p>In terms of federal aid, if her FAFSA EFC is $0 (she would have to be very low income for that to be the case), she would be entitled to the $5600 Pell Grant, and she would also get $5500 in Direct Loans for her freshman year. </p>

<p>So start by doing that NPC. But be honest. This student is likely NOT independent for financial aid purposes. She will be required to use her parent’s information on the FAFSA.</p>

<p>What makes them think she can be “deemed independent”?</p>

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<p>She will not be independent just because her parent have bad credit. It only means she MAY be allowed to borrow an extra $4000 as stafford loans, so up to $9500 her freshman year.</p>

<p>She may get up to ~$6000 in pell grants depending on her EFC. Just because her parents have bad credit doesn’t mean her EFC will be $0, especially if they are employed. EFC is based on income and assets, not credit history or score.</p>

<p>So she can borrow about $10k/yr, she MIGHT get a pell grant, and that still leaves her $5-10k short. Can she earn that?</p>

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<p>@thumper1, thank you very much for your reply. </p>

<p>I made my assumption about the DD possibly being “independent” based on this link below. However, I realize it’s only an assumption:
<a href=“http://studentaid.ed.gov/types/loans/subsidized-unsubsidized”>http://studentaid.ed.gov/types/loans/subsidized-unsubsidized&lt;/a&gt;&lt;/p&gt;

<p>And, in re-reading the link, I should have clarified that the DD would potentially be classified as a “dependent w/parents unable to qualify for PLUS loans.” The only reason I think this is a possibility is that my friend wanted to have her house refinanced but knew she would not qualify based on the fact that her DH’s business went bankrupt (maybe 2009-ish) and he is long-term unemployed. I’m guessing that my friend might gross $55K at her job, but that’s just a guess and her job is tenuous at the moment. They have gone through all their savings, and I fear they have dipped into retirement significantly, so there’s probably no collateral upon which to borrow. They are paying on their house but I’m sure it’s underwater. </p>

<p>I should add that my friend would have no idea what “independent” vs “dependent” is - in the context of college financing. I’m trying to do some research for her, gather some links, and send them on - with an offer to sit down over coffee and discuss how much debt would be required for the DD’s choice. My offer may or may not be taken up, but my friend asked for some general direction so I’m trying to be helpful. She has a lot going on in her life. She’s the sole provider for her family of 5 and the DH is dealing w/long-term unemployment, depression, and other health issues. The thing is, I’m not sure the DD would even have the “choice” of attending KU. I don’t see how she could borrow enough unless she qualifies for additional loans and/or is able to work a boatload of hours during the school year and over the summers.</p>

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<p>I don’t think bankruptcy affects Plus Loan eligibility. Almost everyone qualifies for a Plus. Those that don’t have delinquent payments on their credit record recently. </p>

<p>Getting that extra Direct Loan money is NOT the same as being independent for financial aid purposes. This student lives with her family, and would not be considered independent for financial aid purposes…unless there is some missing info!</p>

<p>their family income for 2014 will be the primary determining factor in calculating her FAFSA EFC. KU only uses the FAFSA. </p>

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<p>@twoinanddone, thank you for your post and you are correct - I should not have used the term “independent.” The better term would be “dependent but parents unable to qualify for PLUS loans.” So that’s where you’re getting $9,500 - correct? That would be the max the DD could borrow - independent of her parents - for Freshman year…assuming her parents do not qualify for PLUS loans. And then the DD would need to work enough to earn approx $10K more, using her summers and school year to do so. And she would graduate w/a debt in the ballpark of $40K, assuming 4 years of college w/these gov’t loans accessed every year.</p>

<p>Does that sound about right?</p>

<p>Thanks for your time.</p>

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<p>It might be about right. She will need to assume a cost increase of between 3-5% annually for college costs. In addition, her parents will need to apply annually, and be turned down, in order for her to access the additional Direct Loan money. </p>

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<p>@thumper1, thank you. My suspicion is that the family has delinquent payments on various items recently, but I have no way of knowing for sure. They have had a significant financial upheaval over the past several years, but I’m not privy to the full extent of it. I know it’s not a good situation.</p>

<p>Regardless, does it sound like I’m on the right track - providing the above info and links to my friend and then advising her that she needs to start researching the matter immediately? For one thing, I’m not sure how much the DD works - though I do believe she earns her own spending money now via babysitting and she’s a very nice young lady, so I’m sure she’d be willing to work more. To my mind, she needs to start increasing her income immediately. Would that be correct? I realize that student assets are considered for financial aid purposes, but the DD is going to need money. And she will have to continue to work on her grades and test scores. That’s an entirely different matter and my friend does have her eye on that ball because I’ve already given her advice/reading material. But the financial aid matter is completely new to me (we will be full pay and DS will need merit), so I don’t want to send my friend in the wrong direction.</p>

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<p>Personally, I’d start with a couple of colleges they think are doable. Run the net price calculators for those schools. See what the family gets for net cost.</p>

<p>There is an OLD thread by a poster momfromtexas. It talks about how she found very fine merit awards for both of her sons…neither were outstanding students. I would suggest you search for, and read that thread. It’s called something like “what I learned about full ride scholarships”. While some of the awards in that thread no longer exist, the METHOD she used is timeless.</p>

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<p>Working too many hours puts negative pressure on grades and could even have the effect of raising total college costs as student may need to take summer classes or graduate in more than 8 semesters to make up deficiencies, caused by say dropping to lower course load because can’t keep up with studies. It’s important for kids to work and contribute to paying for their schooling, especially when there are financial difficulties. At a minimum during summer and school breaks. But balance is important and the need to have enough money to scrape by and pay the rent can induce the student to work more hours during school term than is healthy for the GPA. It all depends on the particular student and their mental/physical energy level, but the general point is valid and should be given thought. If the student can get a higher paying job so needs to work fewer hours to meet the bottom line, that is helpful.</p>

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<p>@celesteroberts, thank you and I agree w/your point completely. I’m going to add your comments to the list of tips to share w/my friend, because I think it’s possible that she’s banking too much on the DD being able to fill a $10K gap entirely via working during summers and the school year - without GPA/health impacts. But that’s an assumption on my part, just based on her comments thus far. My friend is a very loving mom and I give her credit for realizing that she needs to help her DD chart a course now that Jr year is almost over. However, I hope she considers the long-term impact of such debt. I just don’t think she has thought that through as much as she needs to. </p>

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<p><a href=“How does it work? - Financial Aid and Scholarships - College Confidential Forums”>How does it work? - Financial Aid and Scholarships - College Confidential Forums;

<p>Read what I just wrote this kid asking about the same. So, it’s doubtful this kid will qualify for independence for FAFSA (college funding) purposes. Your friend can run his expected income and assets through the EFC estimator which will give the Expected Family Contribution. That is LEAST amount of money he will have to pay before seeing any government aid like subsidized loans, federal grants, work study, as a rule. If the student gets a large enough merit award, that is a whole other story, as you probably know.</p>

<p>So the EFC is a good starting point. IF there are specific schools in mind, their NPCs will give you some idea what kind of packages they will give. I can tell you that most states have reasonably priced local options. But few will pay room and board, discretional costs. A sleepaway college is not a right, you know. Not something that a tax payer is supposed to support, though we do, to a degree. In my state, any student can go to a local public college with state aid on top of federal to take care of defined need. Those without need can borrow, as most students can in their own name $550/6500/7500/7500 from Direct Loans, but that’s about it without parents getting involved further. Yes, if the parents try to borrow through PLUS and are turned down an additional $4-5K is added to those amounts. </p>

<p>If she and her parents have no savings. She isn’t working herself (which she should be summers and after school if she wants to go away to school) If parents aren’t putting some away from current income and continue to do so through college, and parents can’t borrow, then, she isn’t likely to come up with the $20K that KU is going cost.She can borrow about half of that. The rest has to come from somewhere. The thing is KU, as most schools, do not guarantee to meet need , so even if the family does have defined need with a low EFC, doesn’t mean they will get the money.</p>

<p>Frankly, the fail safe option is a local public school, like a community college. Some local privates also offer nice tuition remissions to locals. With a part time job, low tuition costs and those Direct loans to help out that’s how most kids do college, unless they have the stats (test scores and grades) that make colleges want to pay for them.</p>

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<p>What your friend also needs to realize that working to much will have an adverse effect on their need based aid. The student threshold is $6000. Once a student passes this amount 50% of the earning will be contributed to the EFC. In this case if student makes 10k, the EFC will increase by $2000 (essentially taking 2k away from their need based aid). this could be the difference in the family being eligible or not eligible for Federal aid/state aid.</p>

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<p>The way I see it, is that the kid stays at home. Staying at home is like getting a $7-15K contribution from the parents–look at what room and board costs are. She bums rides from parents and scrapes up what food is in the frig and she has a roof over her head. Our country has done a reasonable job in providing low cost community and other local state options that are available to most of us. If she’s considered worth subsidizing in living expenses so that a school or other organization will pay them for her, well and good That’s really what fin aid and scholarships boil down to. Unless she meets that bar, then she commutes and works here way through local college.</p>

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<p>On top of the financial direction, I would also be advising her to widen her college search. You say her stats won’t likely get her merit which might make a “100 percent need” school too far a reach but doesn’t hurt to look at them. Some private schools have special programs for low-income residents of their own state. That might be something to explore as well. Is there not a commuter school outside the CC for her to attend while living at home? Obviously, the CC is a great option but I know how pig-headed kids can be about them. </p>

<p>With work-study, keep in mind that schools generally pay out to the student like a regular job throughout the year. It’s helpful for paying for second semester books, travel and some general living expenses but when making her plans, she may not want to include it as a way to cover the tuition, room and board gap. </p>

<p>She should run the fafsa estimator for the first year but also run it based on how much money she plans to earn for subsequent years. She may work to fill the gap the first year but then get less aid the following year due to earnings. </p>

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<p>The only thing I know about loans is that just thinking about them makes me feel something like your avatar looks. Ha!</p>

<p>They need to think about living arrangements. Does KU allow freshmen to live off campus? It’s generally cheaper, but more organization and time needed because of cooking meals, straightening up appt., negotiating cleaning jobs with roommates. Dorming freshman year at least is a great experience, but could potentially save a couple thousand by going off-campus. Do they envision her coming home for the summer to a local job and having a different school year job on campus? Do landlords there make the kids sign 12-month leases and is subletting during summers feasible, that is, is there a market or do you have to sublet at bargain prices to do it at all? Would she have furnishings to take with, or need to buy those? Are jobs easy to come by where her family lives, so that there will be a guaranteed job waiting a home come summer? Would it be better to stay and work at school during summer, or is it a college town that empties out and not so many summer jobs/hours there? She needs to have assured employment throughout for the plan to work. </p>

<p>I sure hope her major isn’t performance-related with the long and sometimes irregular grueling hours of practice and rehearsals and etc. that makes keeping an outside job difficult.</p>

<p>How far away from home is it? Are there plan providers in university area so health insurance will cover her? If not, does university require her to buy insurance? Some do.</p>

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<p>Thank you, everyone. I really appreciate all the good information and suggestions. </p>

<p>Step One will be to pass along links like FAFSA4caster to my friend and explain to her that students are capped on the amount of loans they can take each year. Once my friend takes time to examine this in-depth, she will probably see what I’m seeing…that a CC is the most viable option for the DD unless their financial situation changes significantly. However, I want her to reach her own conclusions, working through the numbers herself, so she can come to this realization on her own. Once I learned the EFC realities for our own family - when my DS was a Freshman in HS - it was startling and sobering, and I needed time to process the information and formulate a plan-of-action. For my own kids, our plan will be colleges offering merit aid for stats because we will be full-pay. For my friend, she would need to help her DD research merit options for her particular stats, but I don’t know if that would work out for the DD. </p>

<p>This all started w/my friend asking me just a few general questions because our HS does almost nothing to ensure families are educated about college funding, apps, etc. I’m not saying the HS “absolutely should” take on this responsibility - I know those folks already have a lot going on - but it would be “nice” to do. My friend cannot be the only parent who doesn’t understand what’s coming.</p>

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<p>Goaskdad, many HS counselors are specifically told they can NOT ask about family finances. Simply put, it’s not something that all families want to share, and in addition, those counselors can NOT be expected to know the financial aid policies of the 3000 colleges in this country. They have enough on their plates helping kids find schools where they have a likelihood of being accepted. </p>

<p>Our guidance office offers a financial aid workshop for parents beginning in 8th grade. The guidance office actually contracts with someone who comes in to do these presentations. They do not address specifics, but do cover the main points.</p>

<p>For students applying now, there are those Net Price Calculators. They are a relatively recent addition. They did not exist when my kids were applying in 2002 and 2005. And there are also tons more financial aid resources online. Finaid.org is a good one.</p>

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<p>@thumper1, I should have been clearer in my prior post. I’d like to see our HS offer informational sessions that address the college application process, including FA, in general terms. For example, defining FAFSA, EFC, student loan caps, etc. I do realize that the HS could not work w/individual families on FA, but what your school provides sounds like a great service. Espc the point about offering it early - beginning in 8th grade - because that’s truly when families need to get a handle on these matters, if not before. Contracting-out the programming also sounds like a good idea, since a paid professional might be more apt to have the most current information and strategies. </p>

<p>In fairness, our HS does offer a college night that’s promoted as something for Seniors and parents to attend. I went when DS was a Freshman, and there were a few Juniors & parents there - but most in the audience came from the Senior class constituency. Since I had been on CC a while, I already knew most of what was presented…and FA/merit was only touched-upon…but you should have seen the looks on the faces of parents who were hearing all this info for the first time! It was November or December of Senior year and most of these people were clueless. A lady sitting next to me said she wished she’d attended when her student was a Freshman, because the info was reaching her far too late in the game. By that time, I already assumed our family would be full-pay, so I’ve never paid much attention to the FA aspect of college apps. Our plan is to ID merit schools for DS, based on his stats.</p>

<p>I appreciate the advice and I know it will be helpful to my friend…perhaps also to others who are reading this thread. Shoot, I’ve learned a lot!</p>