Student Loan/Financial Aid questions....

traces7

DIS Veteran
Joined
May 19, 2005
Our DD starts college this fall. We have many questions on student loans. She has accepted some of her financial aid. She accepted the Pell Grant, another grant, Federal Subsidized loan, Federal Perkins loan. She also has a small scholarship and work study.

What we have questions on are 2 other loans in her financial aid award. The Federal Unsubsidized loan and the Federal Parents Plus loan.

We didn't want to do the Parents Plus loan, because than we are responsible for paying it back.
Is a Federal Unsubsidized loan ok to accept? We realize the interest starts accruing immediately on this one.
Or would we be better off not to accept these 2 loans and go to an outside student loan provider? We could get a really good rate through our credit union (DH and I have excellent credit scores). We realize we will have to co-sign for DD if we go to an outside source.

Can anyone offer any advice? This is all new for us! Thanks so much! :-)
 
I guess it all depends on the rate and if you're willing to be on the hook for for. The federal unsubsudized loan should have a number of benefits; mainly that payments can be deferred in many instances. The parent plus would be about the same as going to your own bank and consigning. How's the rate on that?
 
We chose not to accept the unsubsidized loan for our oldest. The interest starts accruing immediately, and student loans cannot be discharged in bankruptcy. Not that you're planning on that, of course. There are ways to get loans forgiven--working in underserved parts of the country, for example--our DD has looked into doing this (she has a teaching degree--for her, this would mean teaching in a poor, urban school district).

Since interest starts immediately, you have a minimum of 4 years interest tacked onto the loan, and you have to start paying it back soon after graduation.

OTOH, if you co-sign, you are on the hook if DD doesn't repay the loan (for whatever reason). I recognize that things like your DD defaulting or filing for bankruptcy are a bit extreme, I'm just trying to help you look at worst case scenarios. Nobody plans to to default, but it does happen.

Something else to consider is if your DD has plans for a post-graduate degree. While there are limits to what an undergraduate can borrow, there aren't limits on what a graduate can take on--or what parents can borrow. You really need to look at the whole picture. Also, consider if you have other children who will eventually go to college--if you borrow a lot for DD, will you be able to pay for other children? Are there expectations of you helping your DD with grad school? Does her career path include a good chance at a decent paying job? In our DD's case, most school districts will pay for her master's degree, and she can do it while working.

I wish your family luck in sorting this all out. You might want to read College Confidential or another college website/forum to get a variety of opinions from people wrestling with the same issues.
 
We went the Federal Parents Plus loan route for DS. He selected a private college. DD went to public colleges, her expenses were easily handled out of pocket. Easily, because we had paid off our house and that freed up $1,100 a month that went from going to the mortgage to going to pay DD's tuition.
But, before DW and I even got married, and before we had kids, we both agreed we would fit the entire bill for their college.
 


I guess it all depends on the rate and if you're willing to be on the hook for for. The federal unsubsudized loan should have a number of benefits; mainly that payments can be deferred in many instances. The parent plus would be about the same as going to your own bank and consigning. How's the rate on that?

The interest rate on the Parent Plus loan is 7% I believe. I think I saw where we could get 3.25% at our credit union. Still need to check it to it all though.
 
We chose not to accept the unsubsidized loan for our oldest. The interest starts accruing immediately, and student loans cannot be discharged in bankruptcy. Not that you're planning on that, of course. There are ways to get loans forgiven--working in underserved parts of the country, for example--our DD has looked into doing this (she has a teaching degree--for her, this would mean teaching in a poor, urban school district).

Since interest starts immediately, you have a minimum of 4 years interest tacked onto the loan, and you have to start paying it back soon after graduation.

OTOH, if you co-sign, you are on the hook if DD doesn't repay the loan (for whatever reason). I recognize that things like your DD defaulting or filing for bankruptcy are a bit extreme, I'm just trying to help you look at worst case scenarios. Nobody plans to to default, but it does happen.

Something else to consider is if your DD has plans for a post-graduate degree. While there are limits to what an undergraduate can borrow, there aren't limits on what a graduate can take on--or what parents can borrow. You really need to look at the whole picture. Also, consider if you have other children who will eventually go to college--if you borrow a lot for DD, will you be able to pay for other children? Are there expectations of you helping your DD with grad school? Does her career path include a good chance at a decent paying job? In our DD's case, most school districts will pay for her master's degree, and she can do it while working.

I wish your family luck in sorting this all out. You might want to read College Confidential or another college website/forum to get a variety of opinions from people wrestling with the same issues.

That's a good thing to consider-4 years of interest-didn't think of that! DD is going to school for nursing and I think there are ways to have her loans forgiven also. And she will hopefully be making a good salary. She may go on to further here education, but not sure at this point. She is our only child, so we only have to worry about her luckily! I will go to the College Confidential site and check it out, thanks!
 
We went the Federal Parents Plus loan route for DS. He selected a private college. DD went to public colleges, her expenses were easily handled out of pocket. Easily, because we had paid off our house and that freed up $1,100 a month that went from going to the mortgage to going to pay DD's tuition.
But, before DW and I even got married, and before we had kids, we both agreed we would fit the entire bill for their college.

Our house will be paid off in June 2018, so I told DD we should hopefully be able to help more after that. It's this first year that's going to be rough!
With the Parents Plus loan, were you able to defer payments or did you begin paying immediately? What is the interest rate on that loan?
 


That's a good thing to consider-4 years of interest-didn't think of that! DD is going to school for nursing and I think there are ways to have her loans forgiven also. And she will hopefully be making a good salary. She may go on to further here education, but not sure at this point. She is our only child, so we only have to worry about her luckily! I will go to the College Confidential site and check it out, thanks!

There may be, but there are a lot of things to keep in mind. She may not graduate. She may change majors. She may get through her nursing degree and decide that the work needed to do for loan forgiveness isn't what she wants to do (it may be rural nursing or VA nursing or inner city nursing - when what she wants to do is clinic nursing in the 'burbs.) Do what you can to encourage her to keep her own student loan debt low - she's young without the experience of knowing what a burden that will be.
 
There may be, but there are a lot of things to keep in mind. She may not graduate. She may change majors. She may get through her nursing degree and decide that the work needed to do for loan forgiveness isn't what she wants to do (it may be rural nursing or VA nursing or inner city nursing - when what she wants to do is clinic nursing in the 'burbs.) Do what you can to encourage her to keep her own student loan debt low - she's young without the experience of knowing what a burden that will be.

Yes, that is definitely what we are going to do! I'd like her to have as little loans as possible! Also, I have thought about the possibility of her changing majors, etc.
 
I'm not really seeing a huge benefit in taking an outside (or Parent Plus) loan instead of the Federal loan - even if they are unsubsidized.

1. The federal loan is the only kind that will be solely in your child's name - so as you said you won't be 'on the hook' for repayment. You can always choose to repay it for her if you'd like.

2. Any of these options will start accruing interest once it is disbursed.

3. The federal loan offers advantages like an income-based repayment plan and/or certain (limited) forgiveness programs that private loans do not.

4. The current rate on the unsubsidized loan is somewhere under 4.5% - so yes a small bit higher than your credit union, but not enough (at least to me) to make up for the other benefits.

Since the total max loan freshman year is $5500, and she already got some subsidized, we can't be talking about huge amounts here - unless there is unmet need that you are trying to cover? In that case you might need both the remaining federal loan AND something additional.
 
I'm not really seeing a huge benefit in taking an outside (or Parent Plus) loan instead of the Federal loan - even if they are unsubsidized.

1. The federal loan is the only kind that will be solely in your child's name - so as you said you won't be 'on the hook' for repayment. You can always choose to repay it for her if you'd like.

2. Any of these options will start accruing interest once it is disbursed.

3. The federal loan offers advantages like an income-based repayment plan and/or certain (limited) forgiveness programs that private loans do not.

4. The current rate on the unsubsidized loan is somewhere under 4.5% - so yes a small bit higher than your credit union, but not enough (at least to me) to make up for the other benefits.

Since the total max loan freshman year is $5500, and she already got some subsidized, we can't be talking about huge amounts here - unless there is unmet need that you are trying to cover? In that case you might need both the remaining federal loan AND something additional.

Thank you! This is the info I've been looking for! The unsubsidized loan is $2000 (so not much) and the parents plus they offered is $5000 (which I don't think we'd need all of that amount). So it isn't large amounts we're talking about.
 
With the unsubsidized, she has the option of paying off the interest as she goes. My friends daughter does this.
 
Our house will be paid off in June 2018, so I told DD we should hopefully be able to help more after that. It's this first year that's going to be rough!
With the Parents Plus loan, were you able to defer payments or did you begin paying immediately? What is the interest rate on that loan?
You can defer but we started payments immediately.
 
We took the unsubsidized loans the first couple of years and had the kids pay the interest monthly; it wasn't a lot, in fact I think maybe $36 for the whole semester. We qualified for the AOTC https://www.irs.gov/individuals/aotc. When I got that $2500 credit back on my taxes I paid off the $2k unsubsidized loan right then and there. I banked the other $500 for the next years bill.

Good Luck my 2nd DD is a nursing major and freshman year was a killer. We were sweating if she was going to make grades to get in the program, thankfully she did but it was tough!!
 
Most outside loan sources are sharks, and what I'm not quite following is this:

You don't want to to take out a parent's plus loan because you'd be on the hook- yet for her to get a loan from an outside, respectable source, you'd have to cosign and therefore you'd be on the hook.

I'm somewhat interested to know why your kid can get unsub and parents plus as a freshman. I couldn't get unsub unless my parents got refused for parent plus as long as I was under 24.
 
Most outside loan sources are sharks, and what I'm not quite following is this:

You don't want to to take out a parent's plus loan because you'd be on the hook- yet for her to get a loan from an outside, respectable source, you'd have to cosign and therefore you'd be on the hook.

I'm somewhat interested to know why your kid can get unsub and parents plus as a freshman. I couldn't get unsub unless my parents got refused for parent plus as long as I was under 24.
MY son got offered an unsubsidized loan. He will be a freshman.
 
We took the unsubsidized loans the first couple of years and had the kids pay the interest monthly; it wasn't a lot, in fact I think maybe $36 for the whole semester. We qualified for the AOTC https://www.irs.gov/individuals/aotc. When I got that $2500 credit back on my taxes I paid off the $2k unsubsidized loan right then and there. I banked the other $500 for the next years bill.

Good Luck my 2nd DD is a nursing major and freshman year was a killer. We were sweating if she was going to make grades to get in the program, thankfully she did but it was tough!!

Thanks, that helps to know the interest isn't too bad and I'm sure we'll qualify for the AOTC. I'm also a little nervous if she will make the grades to get into the nursing program. Congrats to your DD for making it! I know it's tough and my DD's school is very competitive.
 
Most outside loan sources are sharks, and what I'm not quite following is this:

You don't want to to take out a parent's plus loan because you'd be on the hook- yet for her to get a loan from an outside, respectable source, you'd have to cosign and therefore you'd be on the hook.

I'm somewhat interested to know why your kid can get unsub and parents plus as a freshman. I couldn't get unsub unless my parents got refused for parent plus as long as I was under 24.

I guess mostly because the outside loan would be in her name, not mine, I know that's dumb thinking. I know that she will pay it, I'm not worried about that.
Also the interest rate is cheaper for an outside loan for us anyway. I do realize I'd have to cosign and still be on the hook for the loan.

I'm not sure how we got the Unsubsidized Loan and Parents Plus loan, it's just what was in her package. It may depend on your income, ours is pretty low!
 
I'm somewhat interested to know why your kid can get unsub and parents plus as a freshman. I couldn't get unsub unless my parents got refused for parent plus as long as I was under 24.
Odd as that is not how it works. If a parent doesn't qualify, a student may receive ADDITIONAL unsubsidized loan but receiving an unsubidized loan isn't dependent on not getting a plus loan.
 
This may not be a popular opinion, but I'd look at options that don't require student loans. If she's receiving a Pell Grant, she could almost certainly attend a community college and pay nothing out of pocket. I fully understand that's probably not what she wants to do ... but when you're looking at borrowing, it's wise to consider all options.

You say she's going to school for nursing? My oldest just graduated with a BS-RN, and I can tell you a few things about nursing -- it's a tricky major in a couple ways, and one of those ways is money:

- She will do her first two years of general degree requirements -- some of the biggest requirements being Chemistry 1 & 2 and Anatomy-Phys 1 & 2 ... be sure to spread those out over 4 semesters. It's essential that she finishes ALL her general degree requirements in the first two years so that she's ready for Nursing School in her Junior & Senior years. This distinction makes it easy to do two years at community college.
- In her second semester Sophomore year, she'll need to apply to Nursing School. This is competitive; over 150 kids applied at my daughter's school ... 44 were accepted. My daughter had two Bs in her first two years, and she says she was dead-average for those accepted to Nursing School, so it is important that your daughter's grades are top-notch from Day 1. Why do they accept so few? Because they have to provide clinical experiences for the kids in Nursing School, and they will only accept the number of kids for whom they can provide those experiences. They only have so many hospitals, so many sick people, etc.
- Between sophomore and junior year she'll almost certainly be required to attend a summer school session. This is expensive, and no financial aid is available for summer school. At the same time, she'll be required to buy school nursing scrubs (my daughter's were ridiculously expensive -- $90/set plus a lab coat and a jacket). At the end of this summer school, she'll have a CNA-2 license (that's Certified Nursing Assistant, level 2).
- Junior year she'll spend a lot of time in the school's simulation lab ... but she'll also start some Clinicals, which means she'll need her own transportation.
- Senior year she'll spend most of her time in Clinicals, which she will probably like ... but it means a lot of driving for her (some of my daughter's assignments were over an hour away from the school, but that might've been because of her location). It also means a lot of nickel-and-diming for you: an ID card, paid parking sometimes, drug tests, finger printing. Really, it's something every time you turn around.
- Working at the college health center would be a good college job for any nursing major. It was very good for my daughter.

However, of the 44 kids who started Nursing School with my daughter, 40 finished. At graduation, 40 already had jobs promised. Not a bad ratio.
 

GET A DISNEY VACATION QUOTE

Dreams Unlimited Travel is committed to providing you with the very best vacation planning experience possible. Our Vacation Planners are experts and will share their honest advice to help you have a magical vacation.

Let us help you with your next Disney Vacation!





Latest posts

Top