Loan for college
Hi Terry my daughter will be gong to college next yr. I have 50.000 in bright directions and I’m thinking over the 4 yrs it will cost roughly 100.000 for 4 yrs of college I applied for fasas and they said I make to much money which I don’t so they won’t give me any money. So what is best way to borrow for the remainder of the money ? Can I get a loan in her name or do I do a home equity loan ?
Thanks for your time
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Terry Says
UGH — first thing you do is see how the money is invested now inside Bright Directions. As I write, the stock market is at all-time highs. Since college is on the horizon, this is the moment to switch to the most conservative option for all this money. Yes, you may miss out on some upside, but a downdraft in the market could wipe out a third of the account — just before the money is needed. Time is no longer on your side, so deal with this immediately.
Second, have you reviewed your daughter’s options. You could probably pay for college without borrowing — IF she would life at home and go to community college for two years! I’m sure that would be painful for her — but not as painful as repaying loans for the rest of her life!
If that’s not an option, let me give you some thoughts. You do NOT want to take out a Parent PLUS loan — these have the highest rates, horrible fees and are truly a bad deal. A home equity loan would expose you to higher interest rates — and payments — IF rates move higher in the future. So you’d probably want to pay for the first two years of school out of the 529 plan — and try again for Federal Student Loans in two years, when the money runs out. Meanwhile you can try to save some money each year, toward the third year of school.
Also, contact the school financial aid office. Yes, they look at the expected family contribution on the FAFSA, but if you explain that she can’t afford to go, no matter what FAFSA says, they might offer a work/study program, or a grant. Alxo register at Scholarships.com — It’s a lot of work to apply, but this is the time to start writing those essays, etc. Every bit of free money from scholarships will help.
You need to do some homework on student loans. There is no way to ge4t a loan “in her name” as she is a minor with no income, no real credit history. Go to www.Finaid.org and spend some time there leaning about the options. And then reconsider the school she chooses (based on costs) or the idea of transferring from community college to a university for the last two years.
