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Financing College

By Terry Savage on July 28, 2020 | College Savings / Student Loans

My daughter is about to start her fist year of college. We got the bill for the first semester and are trying to figure out the best way to finance it. After scholarships and Stafford loans she will owe approximately $16k for the first semester. She has about $9,500 in her Brightstart account and we intend for her to take out a private loan in her name that we will co-sign.

Should we use the money from her Brightstart account now? It is in an age-based account and it made over 5% last year and only 2% year to date but made over 6% in the last quarter ending June 30th. Do we keep this account open and keep investing in it? Also, when applying for loans do you generally apply per semester, year, or for all four years? Are there any lenders you recommend?

Sorry this is a lot of questions but you give such great advice! It will give me some peace of mind to hear your opinions!

Terry Says

OMG — you waited a LONG time to start figuring out finances! That BrightStart account is nice — but $9,000 won’t go a long way if she needs $16,000 per semester!!! That’s $32,000 per year (assuming she gets the same scholarships every year) and my goodness that’s about $125,000 total — ON TOP of her Federal student loans.

What are you thinking? She won’t qualify for any more loans. YOU will have to borrow that money — likely by taking it out of your home equity. I hope this is your ONLY child– because you will be paying for this loan the rest of your lives! And DON’T take out a Parent Plus loan — because with the 4%+ origination fee, they are the most expensive way to borrow. Go to www.Finaid.org to learn more about financing college.

But here’s my best suggestion:
You should be talking to her high school guidance counselor about this issue. Maybe there is another –less expensive — school she could attend for the first two years, and live at home. That would save enough to pay for two years for her to attend — and graduate from — a prestige, expensive school! Given the uncertain nature of college attendance this fall, it would not be a surprising decision. Or your uncertainty about financing could result in even more aid from the college she is planning to attend.

And keep this in mind: Social Security has docked the monthly payments of thousands of retirees who still owe money on student loans — mostly for their CHILDREN’s education! Don’t be one of them!

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