Hi, I’m interested in a top school but estimated net calculator say it would mean a total of $50k in student loans to pay off starting 6 months after grad. Is that too much or is that fairly common? I can look at other schools but my school seems to give the biggest ED1 boost. I don’t have personal family wealth. I’d pay this personally after graduating. The $50k is a combo of the projected student and parent loans. I’d pay my parents for the parent loans after grad, over 10 years.
You can take $27,000 in federally funded Direct Loans in your name only. $5500 freshman, $6500 sophomore, and $7500 junior and senior.
Above that, your parents would need to be totally on board with additional loans.
You will be paying back BOTH the direct loans and loans to your parents…so about $650 a month for those 10 years, maybe more (there will be interest in these loans as well as the principal).
Will your parents be qualified borrowers for all four years of your undergrad education? Hard to predict.
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$50,000 is way too much, especially if you have graduate school plans. Try to find another school where your estimated undergraduate debt would be <= $25K. I would avoid taking out parent loans.
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Thank you! If they continue to be qualified borrowers, do you think this is reasonable or excessive? Other than something major like job loss or not paying other debt, what could lead parents to stop being qualified as borrowers?
Health issues, major house repairs (roof, driveways, heating systems…all are pricey). A new car?
Any loans they take out will be viewed when they apply for new loans.
Do you have siblings who also will be attending college?
Thank you! Parents are going to try to take out a $100,000 personal loan next year to pay for some critical home repairs. But I thought that debt to loan income ratio is not looked at when parents apply for parent plus loans? I thought they only disqualifier is debt in collections or something like that?
So….you are expecting your parent to be responsible for repaying a $100,000 personal loan…plus being responsible for your Parent Plus amount?
Here…read this:
https://studentaid.gov/understand-aid/types/loans/plus/parent
Thank you. The amount parents would borrow for college would be $11,000 per year for a total of $44,000 over 4 years. That’s below the limit of what parents are allowed to borrow. If I get outside scholarships, the school allows me to reduce my student loan but not my parents’ portion.
Also, they’d pay off their personal loan over 5 years and the parent plus loan payments would not begin until 6 months after I graduate which would be about 5 years.
It doesn’t leave a huge amount of wiggle room but it would involve the school giving us a lot of grants because the sticker price is way more. And I think my chances of admission are good. I’m just trying to determine whether it’s sensible because it would be ED.
A few thoughts. Understanding the financial impact of college starts with how to fund college, and the consequences of those decisions. There is a loan payment calculator linked below so you can run scenarios.
I’ll start you off. Current federal student loan rate is 6.52%. If you take the max undergrad $27K, that’s a $306 payment every month for 10 years. Current parent plus interest rate is 9.07%. If your parents take out $23K, that’s a $292 payment for 120 months in a row.
Please note that interest starts accruing on parent plus and unsubsidized student loans upon disbursement (when you get the money.) You can wait to start making payments until six months after you graduate, but your loans will have increased if you don’t at least make interest payments during college.
So, to recap that’s $598 in loan payments for 120 months. You will be paying that in after tax dollars, and you still have to pay for rent, food, etc etc.
https://studentaid.gov/understand-aid/types/loans/interest-rates
True. But these loans will impact your parents’ credit rating, reduce their ability to take other debt.
Other things to consider:
-what major/career are you considering?
-Is graduate school in your future?
-Having a $600 month loan payment may limit your ability to take certain jobs (like a lowish paying but great career opportunity, or a job in a very expensive city.)
Higher ED acceptance rates are primarily due to hooked applicants: Questbridge/Posse/other CBO applicants, recruited athletes, donor and prof kids, etc. What school are you considering for ED1?
What school on your list is highly likely for admission, but more affordable? You must have at least one of those.
Big picture, the $27K in federal loans is manageable for many. But for most people taking more debt than that doesn’t make sense for many reasons.
Take time to research and understand everything I have just said. If you are accepted ED, you are bound to go, provided the FA package is close to the NPC.
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Why? I thought the total loan amount you need over 4 years is $50K? If they take $44K, that’s a payment of $559 per month for 120 months in a row. (which is $67K in total, for $44K in loans)
It would be helpful if you told us the ED school.
Thank you! The total cost (for family and me) would be about $18k per year. To pay it, we can do a combo of things (student loan, student work, parent plus loan). The school allows me to use external scholarships (if i get any) to offset my student loan ($5,500/year) and my work ($3,600/year).
The $50k number I shared had been what I assumed I’d have left to pay (parent and student loans) after graduation, if I work and get some external scholarships.
I would not apply ED to a school where you need to get external scholarships to make it affordable.
Most scholarship money comes from the colleges. Getting external scholarships in any significant amount is highly unlikely. And most external scholarships are not renewable beyond the first year. Then what?
We have no idea your stats, course rigor, ECS, so I don’t know if you would be competitive for the big national scholarships like Gates, Coca Cola, etc.
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Thank you. My stats are strong but I don’t think they’re enough for the national scholarships. I don’t need external scholarships to make it possible. They would just reduce my loan burden. My primary question is whether a $72k total family expectation (through student/parent loans and my work) is reasonable for a top school and the benefits it can provide or excessive. We are middle income. That’s $72k total for 4 years. If I earn $3,600/year, I can bring the loan total that I’d need to repay down to $57,600 or maybe a little less if I get some small local community scholarships (which I think I’d be a strong candidate for).
Why is it going to take you five years? And who is paying for the 5th year.
@kelsmom will know if you are eligible for any additional Direct Loans for a fifth year.
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IMO not if you finance $50k+ of that. All the other questions I asked early matter when making this decision too. It doesn’t seem you have worked out the consequences of this level of debt. And if you are thinking ED because of a higher admit rate, don’t. It’s possibly not a higher admit rate for you. Wait until RD so you can compare financial aid offers.
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If I’m understanding correctly, your family will be responsible for $18k per year (and it could go up as college costs go up every year). Do you have anything saved or will you be relying entirely on a combination of loans to foot the bill?
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I tend to think the federal limits are pretty well-calculated to be around the most any student should be thinking of taking on for undergrad.
I’d emphasize the following point. If you have a lot of loans coming out of undergrad, it can restrict your choices about what to do next. Like, sometimes there are great next-step opportunities that don’t pay much, but can lead to great opportunities in a few years. Sometimes there are additional graduate programs you might want to do. Sometimes some of both. And so on.
Having extra debt can prevent you from taking such opportunities. Indeed, it can reach back into your college years and constrain what majors, summer programs, and so on you do, because you know you have these debt repayments coming after college. It can also reach forward and prevent you from buying a house earlier, starting retirement or college savings for your own kids earlier, and so on.
OK, so what is the point of going to a selective college in the first place? Well, for the education and the experience, but also to give you more options for what you can do in life. But if your choice of college means a lot of extra debt that actually in practice limits your options, that is going in the wrong direction.
Again, I understand sometimes a four-year degree in general is going to require some borrowing, so I am not entirely against undergrad debt (although if you can avoid it, that’s not a bad thing). But that is why I would personally avoid going beyond the federal limits unless it was absolutely necessary.
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