In your opinion, what are the best student loan options?

Lots of info out there but would like to get real people perspectives.

If you can do a home equity loan, it is by far the best.  

A dependent, undergraduate student is only permitted to borrow, without a co-signer, $5,500 freshman year, $6,500 sophomore year, $7,500 junior year, and $7,500 senior year.

Parents can get a Parent Plus loan, which is easy to get unless you've ever defaulted on a loan previously.

Home equity line of credit (don't take a home equity LOAN) is a double-edged sword. The loan is low-cost because you're securing it with your house. But of course if you fail to pay it back you can lose your home.

Thanks all. He won't qualify for financial aid based on info to FAFSA. Not complaining but if you don't qualify for aid, what are the best options? My goal is to have him secure the loan on his own (we'd do paperwork w/him and go over all) and we'd pay on the loan, but based on schools he has applied to transfer into, $6500 isn't much on that bulk of tuition (sans a co-signer). My research has not given much for families who don't qualify for financial aid but wish to secure a loan without high interest rates or securing property. 

Going through the same thing with our senior.  Those loan limits are for the Federal loan programs obtained through FAFSA.  Govt financial aid(grants) is limited to the Pell Grant.  Household income of 60K gets you around 2k in a Pell Grant. It's a paltry sum. Institution aid is what you're really after.  Most schools make the determination based on the FAFSA, but your school may accept a separate financial aid application.  The CIS takes your home(personal) expenses into account, not just your taxable income.  Contact the schools financial aid office and try.  After that you'll need to take the private loan route, the student can borrow up to the cost of attendance.  Virtually every financial institution sells student loans.  It's big business.  Try your bank first.  Student will LIKELY need a co-signer to qualify.  The Parent Plus option may be cheaper, so check and compare.  Parent Plus is also up to the cost of attendance.  Hope this helps.

It won't help for the first year, but...

The student should get a job in the financial aid office. I would imagine that work study still doesn't pay much, but if there are any loopholes in the FAFSA system, the student can learn them and take advantage of them in subsequent years.

It worked out well for me 40+ years ago when the application was named, I think, GAPFAS.

If FAFSA has closed the loopholes, the student gets gets some work experience with very flexible hours. No down side from where I sit.

Good luck to both you, and the student.

TomR

It is my experience that Transfer students do not get much in merit aid.  So he would continue to qualify for the federal student loans noted above.  Of course this will not cover the total cost.  I recall that Citizens Bank has been recomended on other sites as offering competive rates in private student loans.  Please note that you will be co signing so they are your loans too!!!!! 

kibbegirl said:

Thanks all. He won't qualify for financial aid based on info to FAFSA. Not complaining but if you don't qualify for aid, what are the best options? My goal is to have him secure the loan on his own (we'd do paperwork w/him and go over all) and we'd pay on the loan, but based on schools he has applied to transfer into, $6500 isn't much on that bulk of tuition (sans a co-signer). My research has not given much for families who don't qualify for financial aid but wish to secure a loan without high interest rates or securing property. 

The Federal loans that I cited above are available to any student. They are not income-dependent. Those are the only loans that a student can obtain without a co-signer. The other options, as I stated, are the Parent Plus loans—which are loans to the parents and are easy to get—or private loans to the student with parents or other adults as co-signers. A student who has no or little income cannot get a loan on his/her own. What financial institution would give a loan to a person who has no job or just a minimum-wage part-time job? Sorry, but there's no way out of becoming a co-signer.

Tom_R said:

It won't help for the first year, but...

The student should get a job in the financial aid office. I would imagine that work study still doesn't pay much, but if there are any loopholes in the FAFSA system, the student can learn them and take advantage of them in subsequent years.

It worked out well for me 40+ years ago when the application was named, I think, GAPFAS.

If FAFSA has closed the loopholes, the student gets gets some work experience with very flexible hours. No down side from where I sit.

Good luck to both you, and the student.

TomR

There are no loopholes. Fafsa is the form the student fills out for federal grants and loans. Just follow the simple directions on the form. Federal student loans are available to anyone who wants them. As for federal grants, they are MINIMAL and are available to very low income students. Working in the FA office is irrelevant. You either qualify or you don't. Besides, work-study is a pay-as-you-work job, so the money is not available to pay the tuition bill at the beginning of the semester.

And, yes, it's true: Transfer students do not get much if any merit aid or institutional aid unless the first school (freshman/sophomore school) has an articulation agreement with the transfer school.

I don't know how true that is about transfer students. My eldest transferred and got a fairly substantial merit aid package from her new school.

shoshannah said:

shoshannah said:

Tom_R said:

It won't help for the first year, but...

The student should get a job in the financial aid office. I would imagine that work study still doesn't pay much, but if there are any loopholes in the FAFSA system, the student can learn them and take advantage of them in subsequent years.

It worked out well for me 40+ years ago when the application was named, I think, GAPFAS.

If FAFSA has closed the loopholes, the student gets gets some work experience with very flexible hours. No down side from where I sit.

Good luck to both you, and the student.

TomR

There are no loopholes. Fafsa is the form the student fills out for federal grants and loans. Just follow the simple directions on the form. Federal student loans are available to anyone who wants them. As for federal grants, they are MINIMAL and are available to very low income students. Working in the FA office is irrelevant. You either qualify or you don't. Besides, work-study is a pay-as-you-work job, so the money is not available to pay the tuition bill at the beginning of the semester.
And, yes, it's true: Transfer students do not get much if any merit aid or institutional aid unless the first school (freshman/sophomore school) has an articulation agreement with the transfer school.

If the genius girls and boys who wrote the FAFSA application have figured a way to close all the loopholes; perhaps, just perhaps, we should elect those good people to Congress. Then they can close the loopholes in our system of taxation.

In my experience; there ain't ever been a set of rules that didn't have loopholes.

As for a work-study position in the financial-aid office; I never said that it would help with the tuition for the first semester. In fact, I think I expressly wrote, that it wouldn't help the first year. As I also wrote, there's no downside. (The low pay is offset by the flexibility in hours; and, the student just may learn something useful).

TomR

shh said:

I don't know how true that is about transfer students. My eldest transferred and got a fairly substantial merit aid package from her new school.

Most colleges that offer merit awards do not give them to transfer students. The primary purpose of non-income-based merit aid is to entice high-scoring incoming freshmen to attend a school they might otherwise not have considered. Those high scores are then included in the overall academic profile of the incoming freshman class. The more high-scoring freshmen the school has, the greater the school's average SAT/ACT scores, and the more the school rises in the rankings. Transfer students' scores do not count in rankings. That's why, for MOST colleges that offer merit money, the merit incentive is a freshman-only offer. Obviously, there are exceptions for colleges looking to attract transfer students. But it's rare. 

shoshannah said:

shh said: I don't know how true that is about transfer students. My eldest transferred and got a fairly substantial merit aid package from her new school.

Most colleges that offer merit awards do not give them to transfer students. The primary purpose of non-income-based merit aid is to entice high-scoring incoming freshmen to attend a school they might otherwise not have considered. Those high scores are then included in the overall academic profile of the incoming freshman class. The more high-scoring freshmen the school has, the greater the school's average SAT/ACT scores, and the more the school rises in the rankings. Transfer students' scores do not count in rankings. That's why, for MOST colleges that offer merit money, the merit incentive is a freshman-only offer. Obviously, there are exceptions for colleges looking to attract transfer students. But it's rare. 

Freshman get the most $$ in merit aid. It seems private school kids get the most. As for FAFSA, a huge part of your calculation is your household number of people and your assets. Also, single parents get a much lower contribution number (thank GOD!) Finally, if you have assets (not your home or retirement) you will get hurt by that. 

I guess I was lucky then. I know my daughter did well with merit aid when she transferred. I guess every school/circumstance is different. I also asked for more $$$ because she had high  grades and was coming in from a well ranked feeder program. Typically students transferring from her first school (that we spoke with) got significant merit aid from the schools they transferred into. 

I have to say that I’m super surprised by other people’s accounts on what their kids received on merit aid, financial packages, FAFSA, etc. Some families got nothing, even with lower incomes or with periods of unemployment. It’s crazy. 

mammabear said:

shoshannah said:

shh said: I don't know how true that is about transfer students. My eldest transferred and got a fairly substantial merit aid package from her new school.

Most colleges that offer merit awards do not give them to transfer students. The primary purpose of non-income-based merit aid is to entice high-scoring incoming freshmen to attend a school they might otherwise not have considered. Those high scores are then included in the overall academic profile of the incoming freshman class. The more high-scoring freshmen the school has, the greater the school's average SAT/ACT scores, and the more the school rises in the rankings. Transfer students' scores do not count in rankings. That's why, for MOST colleges that offer merit money, the merit incentive is a freshman-only offer. Obviously, there are exceptions for colleges looking to attract transfer students. But it's rare. 

Freshman get the most $$ in merit aid. It seems private school kids get the most. As for FAFSA, a huge part of your calculation is your household number of people and your assets. Also, single parents get a much lower contribution number (thank GOD!) Finally, if you have assets (not your home or retirement) you will get hurt by that. 

When you say "private school kids" what do you mean? The type of HS you come from is irrelevant to the amount of merit money you get. Notwithstanding the anecdotes you hear.

Actually, your income counts the most, not your assets.  Retirement assets never count (except that whatever you contributed in that income year will be added back into your income for FA determination purposes). Parental assets are protected at a baseline amount of about $30-$60,000. Above that, assets are assessed at only 5.64% per year -- meaning you are only expected to spend 5.64% of your assets per year after the asset-protection allowance. That's not a lot. On the other hand STUDENT assets are assessed at 20%, and there is no asset-protection allowance for students. So get the money out of your student's name if they have a lot of money! One exception: 529 savings accounts are always treated as a parental asset (assessed at 5.64%) no matter whose name it is in.

Home equity in your PRIMARY home does not count at all for a Fafsa-only school -- which is almost every school in the country.

What gets some people in trouble is ownership of a non-primary residence, whether it's a vacation home or a rental property. If you have, say, $250,000 equity in a second home, 250,000 x .0564 = $14,00 PER YEAR that reduces your FA.

Applying to schools that require the CSS Profile, you will be asked about more assets than for the Fafsa-only schools. The biggest difference is that equity in your primary home will count for a certain percentage. But it still does not count more than your income.

Bottom line is, for most families in the country, assets do not affect FA because of the asset-protection allowance. Most families do not have a lot of assets outside of their primary home.

That's not a lot. On the other hand STUDENT assets are assessed at 20%, and there is no asset-protection allowance for students. So get the money out of your student's name if they have a lot of money! One exception: 529 savings accounts are always treated as a parental asset (assessed at 5.64%) no matter whose name it is in.

Are you sure? I've read the opposite about 529s, that they do count against the student ata higher rate than parental assets. 

shh said:

That's not a lot. On the other hand STUDENT assets are assessed at 20%, and there is no asset-protection allowance for students. So get the money out of your student's name if they have a lot of money! One exception: 529 savings accounts are always treated as a parental asset (assessed at 5.64%) no matter whose name it is in.

Are you sure? I've read the opposite about 529s, that they do count against the student ata higher rate than parental assets. 

 You may have old information. Regardless of whose name they are in, 529s count as a parental asset at 5.64%. This has been the rule since 2007.

https://www.savingforcollege.c...

"The good news continued in 2007 when the College Cost Reduction and Access Act was signed. This allowed all UGMA /UTMA 529 accounts to be considered parental assets on the Free Application for Federal Student Aid (FAFSA). Why is this a big deal? When determining your expected family contribution (EFC), 20 percent of a student’s assets may be considered in the calculation, but parents’ assets count for much less (up to 5.64%). That means students with savings held in a 529 account could potentially be eligible for more financial aid."

Be careful if the 529 is in the name of a non-nuclear family member, such as a grandparent or aunt/uncle. On the "pro" side, the asset does not have to be reported on financial aid applications. On the "con" side, the distribution will be counted as income for the student two years later. So, do not use the grandparent 529 until spring of junior year!

wow that is good to know. I just got that info last year so I'll double check my source.

Shoshannah, I really appreciate your input in these threads.  I've been following them for a few years.  My son is only 11, but you have given me some good info to ponder.  We have a healthy 529 we started when he was born, but the rental property problem I have not solved.

FilmCarp said:
Shoshannah, I really appreciate your input in these threads.  I've been following them for a few years.  My son is only 11, but you have given me some good info to ponder.  We have a healthy 529 we started when he was born, but the rental property problem I have not solved.

Me too Shoshanna. After the previous extensive Fafsa thread and how little the government offers in loans, I significantly upped my monthly 529 contributions. I’d rather save too much than take on loans in old age. I had my kid much later in life, I’ll 54 when she starts college. Gah! 

ElizMcCord said:

I had my kid much later in life, I’ll 54 when she starts college. Gah! 

 Gah! I just realized I’m a 54-year-old parent of a college freshman.

DaveSchmidt said:

ElizMcCord said:

I had my kid much later in life, I’ll 54 when she starts college. Gah! 

 Gah! I just realized I’m a 54-year-old parent of a college freshman.

 Hahahaha. Do you feel old? I need perspective lol. 

ElizMcCord said:

Hahahaha. Do you feel old? I need perspective lol. 

Let’s just say older. But that extra decade or so can be a blessing: Our household income rose, which may have dinged our Fafsa but helps with expenses like flights to and from school and next year’s apartment. And the passage of time only reinforced our belief that things tend to work out (though we’ve been fortunate in a lot of ways, too). 

One dose of perspective: Be careful what you wish for. Not wanting our son to feel pressure, we did such a fine job assuring him that there are plenty of good colleges out there and that, for better or worse, the essays should be a true, unreconstituted reflection of him rather than a test to be gamed — he almost shrugged off putting any effort into applications at all. 

Teens. Go figure.

FilmCarp said:
Shoshannah, I really appreciate your input in these threads.  I've been following them for a few years.  My son is only 11, but you have given me some good info to ponder.  We have a healthy 529 we started when he was born, but the rental property problem I have not solved.

Wow! That's great that you have a healthy 529. That's the best vehicle for college savings. Some good advice that I have heard is to pay for college 1/3 with past income/earnings (money you've saved), 1/3 with current income (directly from your annual income), and 1/3 with future income (loans to be paid off).

Rental property is a problem only if you would otherwise be eligible for financial aid without owning that property. With a healthy 529, the only thing you'll be eligible for from the Federal government are the Federal loans, and probably unsubsidized loans (meaning interest begins to accrue immediately, even though you don't have to pay on them until after graduation). The only other aid available is from the hyper-selective colleges, which use the CSS Profile to determine families' eligibility for institutional aid (the college's own money).

If you want to eliminate the rental property asset you can refinance it for cash out. That will reduce your equity in the property. But then you'd have to use the cash right away. Maybe to pay off other debt, like the mortgage on your primary home (primary home equity counts for very little or not at all in the FA formula.) Or pay off credit card debt, if any. Or maybe to accelerate spending you were planning on (want to remodel that kitchen?) My hunch though is that it likely won't make much of difference unless your income is under $150k AND your kid is going to a very well endowed school that gives a ton of aid. 529 is your friend.

ElizMcCord said:

FilmCarp said:
Shoshannah, I really appreciate your input in these threads.  I've been following them for a few years.  My son is only 11, but you have given me some good info to ponder.  We have a healthy 529 we started when he was born, but the rental property problem I have not solved.

Me too Shoshanna. After the previous extensive Fafsa thread and how little the government offers in loans, I significantly upped my monthly 529 contributions. I’d rather save too much than take on loans in old age. I had my kid much later in life, I’ll 54 when she starts college. Gah! 

Great that you upped the contribution! It's either pay now or pay later. Better to pay in and EARN interest now than to pay out on a loan and PAY interest later. 

Saving too much is a problem we all should have. If there's leftover, you can use it for the child's grad school or roll it over to another child -- your own child or a grandchild or niece or nephew. Or you can withdraw the funds for a nonqualified reason and be taxed on the earnings and pay a penalty. If you don't need the funds because your kid got a scholarship, you don't have to pay the penalty, just the taxes.  

ElizMcCord said:

DaveSchmidt said:

ElizMcCord said:

I had my kid much later in life, I’ll 54 when she starts college. Gah! 

 Gah! I just realized I’m a 54-year-old parent of a college freshman.

 Hahahaha. Do you feel old? I need perspective lol. 

 Wow, you guys made me consider, then realize, that I will be 53 this year and I have a 12 year old 6th grader.  Haha.  The best college planning ever is that I have a 37 y.o. stepson who is out of college and grad school, a 19 y.o. freshman in college and the aforementioned 6th grader.  One kid every decade.  Spread them out.

shoshannah - thank you for your input here.  I have been reading with anticipation since I've been saving for my youngest with a NJ 529.  I think I need to up the contributions there.

shoshannah said:...

Be careful if the 529 is in the name of a non-nuclear family member, such as a grandparent or aunt/uncle. On the "pro" side, the asset does not have to be reported on financial aid applications. On the "con" side, the distribution will be counted as income for the student two years later. So, do not use the grandparent 529 until spring of junior year!

Thanks for sharing that information.

Somebody above had told us that there were no loopholes.

TomR

Tom_R said:

shoshannah said:...

Be careful if the 529 is in the name of a non-nuclear family member, such as a grandparent or aunt/uncle. On the "pro" side, the asset does not have to be reported on financial aid applications. On the "con" side, the distribution will be counted as income for the student two years later. So, do not use the grandparent 529 until spring of junior year!

Thanks for sharing that information.


Somebody above had told us that there were no loopholes.


TomR

Not a loophole. It's an integral part of Fafsa. Student's income is the fundamental part of Fafsa. If you get money from grandma, that's income. Any money the student gets is income. So you want to avoid getting that additional income in Fafsa base years. That's good financial planning. 

A loophole is something you can get away with that was unintended by the rule-writers. They don't care that grandma is going to give you the proceeds of the 529 in a future year.  And you certainly don't have to work in the FA office to know this. Just read the rules.

Wow.  A real question, intelligently answered by someone offering real facts based on personal experience and knowledge!  If only every thread could be like this.

Kids are a still a long way off from college, but thanks for the excellent overview of the system @shoshannah!