Paying for college

Parents Forum
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Good day, this would be my first post here as I am sort of in the dark. I graduated college in 1995 and my family struggled to pay as you go scenario to make my way through it.

My son is graduating high school this year and just found out that he has been accepted to the University of Delaware starting class this fall.

I’m totally in the dark in terms of financing the next 4 years. As I am sure we won’t qualify for any financial aid programs, I was wondering if some of you could help answer a couple of questions.

Does anyone pay tuition out of pocket monthly/quarterly/yearly?

Is a student loan is taken out, does the student apply themselves or is it through a parent?

If my child takes out a student loan, is it possible to start repaying the loan immediately instead of waiting for the completion of the educational program?

Is the student loan a government process or should I be looking at banks?

I’m sure I’ll have other questions but looking for guidance to get started as I’ve never done this before.

Appreciate any feedback you can provide.

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@kelsmom
@thumper1
@Mjkacmom

I’m sure there are others who will have excellent input, but hopefully this is a start.

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I am against any loans (except for house).
Pick only school that family can afford.
We are paying as we go for 3 students simultaneously out of family savings. It is close to one annual salary after taxes. We have paid house and cut corners everywhere all the time. That means no lunches out, no restaurants (for students too), no shopping etc.

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Every YS student is eligible for federal student loans up to $27,000 over 4 years, subsidized or unsubsidized, based of parent finances. Then there is the parent plus federal loan in the parent’s name, or private loans in the student’s name co-signed by a parent. Student subsidized loans don’t accrue interest until the student leaves school, interest for the rest starts right away. You can pay off the interest as you go, private loans will most likely give a lower interest rate if you go that route. I think most have payment plans, probably not monthly, but several payments each semester. One of mine is a UD graduate, they were pretty chill about not immediately charging late fees. Some aren’t as generous.

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Just out of curiosity, is your son an OOS student at the University of Delaware (and paying OOS tuition rates)? If so, is there a less expensive in-state option available?

Do you have any money saved in a 529 plan that could be used?

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I have 2 kids in private universities - both full pay. Both schools offer tuition payment plans, so (while it is still a lot of money) you can pay the tuition bills over 8 or 9 months.

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My first question is … has your S completed a FAFSA? If not, he should do that. You won’t know about any possible need based aid if you don’t complete it. Plus, it’s needed for federal loans.

If borrowing is needed, federal loans for the student are best. Freshmen may only borrow $5,500 for the year.

We paid for our student on the school’s payment plan. We had to pay a certain amount monthly, which made it easier for us to budget.

It would be helpful for us if you could tell us whether your S will be in state or OOS. How much can you pay for him annually without borrowing?

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As @kelsmom said…make sure your son has completed any financial aid application forms required by U Del.

Does anyone pay tuition out of pocket monthly/quarterly/yearly?

we did this. We were a two income professional parent family and we paid for college out of current earnings. My entire income funded college costs, and DHs paid the rest of our living expenses. This worked for us, and we knew it would because we knew our incomes would likely support this scenerio. Did it for seven years. (One year overlap). We called it my mystery money. It went into my account direct deposit, and went out auto withdrawal to some college payment plan every month. We chose the monthly plan.

Is a student loan is taken out, does the student apply themselves or is it through a parent?

for the federally funded direct loan ($5500 for freshmen) the student can apply themselves. They are eligible for this loan if you all have completed the FAFSA.

any loans the student takes above the Direct loan will need to be either taken by the parent or cosigned.

If my child takes out a student loan, is it possible to start repaying the loan immediately instead of waiting for the completion of the educational program?

yes. And if your loans are unsubsidized, you can also just pay off the interest annually

Is the student loan a government process or should I be looking at banks?

The Direct Loan is a federally funded loan. Your student is eligible for this by completing the FAFSA. Parents can take the Parent Plus Loan…which is also a government form of loan, but I have to say, I would not recommend doing this.

Now my opinion. First, how much in loans will your student need? If a lot, you might want to consider whether this college is affordable.

The federally funded direct loan is these amounts:

Freshman $5500
Sophomore $6500
Junior $7500
Senior $7500.

How much in parent loans would you need? You don’t have to answer that here, but you do want to think about that in terms of repayment down the road.

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Thanks for all the feedback so far, he will be attending in state and haven’t completed anything yet, hence the reason for me asking. We’re a two income household and just trying to consider all the options without just paying cash and living broke.

We haven’t done the FAFSA yet, I guess that is our first step. We just learned of his acceptance yesterday.

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Yes, we cashflow DD’s college. We personally don’t “do” loans; I can’t handle the stress of them. That meant creating a very detailed and tight budget and sticking to it. Good thing I love excel spreadsheets; I update our budget weekly to ensure we stay on track. We put a set amount every month into a HYSA to save for the next semester. We pay tuition in a lump sum each semester. We don’t pay for books or personal expenses like groceries, toiletries, eating out, gas or fun money. She pays for those items with her summer jobs.

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Do this ASAP. You are lucky because they are late sending out the FAFSA data this year. It could go out any day now though and the earlier you apply the better it is for you most generally. They are sending out all FAFSAs submitted before the initial send out at the same time though if I understand correctly, so you still have time! Good luck.

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I would try to get that done. Your student will need an FSA ID number. Get that first. If you parents file a joint tax return, one of you will need a FSA ID number also. If you file separately, both of you will need to get a number.

The processing of the FAFSA is late this year, but I would suggest getting that done ASAP.

And congratulations on that acceptance (which sounds like where this student wants to go to college!)!

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This is a personal question.

If you don’t qualify for aid and you are in-state at UDEL, your COA is about $34K per the school.

So - if you FAFSA, your student can get a loan of $5500 the first year. You can take others - but then it’s a question of, if you plan to pay it off early or don’t need it, why pay such a high interest rate?

Do you have a 529? Can you cash flow?

Depending on stats, you can get cheaper cost at other schools - both regional (W Carolina is about $20K full price) and other schools can be high teens and up - depending on stats with merit.

It’s really - what you want to do?

So that’s another option for paying cash and not living broke.

Also, are there merit possibilities at U Del? Maybe they come later. Here’s what their website says:

“we are able to release merit aid earlier. Students will be informed about merit aid in mid-March. Once finalized, merit scholarship letters and offer notices are mailed to students and are available on their My Blue Hen Home student portal.”

I’m not a fan of loans personally - they have fees beyond the principal and interest - so a lot will depend on does the student want to be close to home or was Delaware chosen because it’s in state and the assumption was it’d be cheapest.

If the student is open to other schools (let’s say South), what is the GPA, test score, etc.

Congrats on Delaware - and hopefully you get it worked out.

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To pay the tuition, fees, room & board in installments, UD has an installment plan: https://catalog.udel.edu/content.php?catoid=87&navoid=26949#paying-student-account. That’s one way to manage costs if you will be paying (some or all) costs from savings & cash flow. It’s very important to figure out what you can pay so that you can figure out whether it’s financially feasible, and if so, how you’ll make it work.

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We have seen some students start at community college while living at home , save $, then transfer. If you’re not sure about finances, check if there are scholarships and automatic paths from community college.

Scholarship at this community college
https://www.dtcc.edu/admissions-financial-aid/financial-aid-scholarships/types-aid/seed/

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Remember to utilize education tax credits if eligible.

The AOTC is up to $2500/yr “The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student.”

If you are cash flowing and your state offers income tax deduction for 529 contributions you might want to consider that as well.

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Congrats on UD!!

We are using a 529 to fund college. That said, we got on a strict budget some years back and use the free EveryDollar app that Dave Ramsey puts out. I’m sure there are other ones, but this is what works for us. We don’t connect it to bank accounts however. In using a budget, like my parents did, it became apparent of the bleed on ghost items - that subscription you forgot about, the clothes no one needed, etc. I suggest using a detailed budget to get you through the college cost process, and for your student to get in the habit of using one if they unfortunately have to take out loans. I have friends in their 50s still paying off their own college loans. You and your kids should be scared of loans enough to pay them off with intention as soon as you can. HTHs a bit.

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If you didn’t plan WAY ahead for this, and it looks like you didn’t, there are not going to be any options available to you that aren’t going to sting in some way.

You expressed concerns about “living broke.” You likely should consider Community College for 2 years. Your child won’t like this, and I don’t blame them, but this is what happens when you don’t plan ahead in life.

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We are doing this. We are both primary care physicians (CC thinks that makes us “low earning doctors”, which is an oxymoron) who finished paying off our own med school loans less than 10 yrs ago, and with that process learned to be budget savvy geniuses.
We started putting extra into our designated tuition savings account a year before our first one went to college: we set aside a specific amount each month from our paychecks and have done this all through k-12 costs (we adjust it yearly), and we are very disciplined with other spending to make it work . For private k-12 we paid from that tuition account to the school in two installments per year because the private school added monthly fees to do a payment plan, which added 2k per year, so we got ourselves ahead to avoid the ridiculous fees. The two kids together for private HS was about 60k total not counting non-school based 5-10k athletic/dance fees that went away in college. I made a strict budget early in HS to plan for the college increase so they could pick the best college for them and not worry about $. We came from FG/LI backgrounds and our parents found a way to pay for undergrad for us, so it was very important we do the same. For college (Duke and Penn), it has been 79-84k each year for each, not counting extra food or clothes because we paid for food and clothes when they lived at home, so the smallish amount $ we give for extra food/spending/clothes in college has not resulted in additional spending for us.
Their colleges both have a one time small fee($75) to pay the semester over several months, so that is a good option that helps. I do not know if all colleges do this.

The key is a very detailed understanding of your budget and to have a backup plan.
We do have some 529 money that will probably be used during the second of their two "overlap " years, but the total of that money is far less than one yr COA for one institution. If we needed to, we could take out a loan, and for those that know they have the means to pay it off relatively quickly, I do not think small loans for college are necessarily a bad thing. We would take it ourselves and not make our students do it for undergrad, because it is too risky that they will not have the earnings to cover large undergrad loans. However, I do think that a small amount of student loans when absolutely necessary can make sense in some cases for some families.

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If financial situation is really bad, you may consider:

  1. GAP year - student works any job. Should be able to earn $20k in a year even with minimum wage.
  2. Work every summer while in college.
  3. Work part time in college. Even 10 hours a week will help to cover food.
  4. Check if UD has coop programs. That is more like one or two semesters study and then one semester work in major related industry.
  5. Enroll part time and work.
  6. Consider GAP (working and keeping Delaware spot and apply to different private colleges if merit is possible.)This one is iffy but you never know.
  7. Like other people suggested 2 years of CC and guaranteed transfer to U of Del.
  8. Consider your student being RA on campus in years 2+ to cut on housing cost. RA positions are very competitive.
    Any of the above are better than loans.
    Yep, it may look unattractive but you have to do what you have to do…
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