Advice for Families Facing College Cost, Loan Repayment Woes
A new year is upon us, but some things stay constant -- like concerns over covering the cost of college today and the confusing nature of student loans.
Luckily, the Student Loan Ranger is still here to help. Each week, we receive dozens of questions from readers at every stage of the borrowing process. Occasionally we share some of these -- because if one person has a question, it's likely others have the same.
The following questions are real but may have been edited for grammar or clarity. If you have a question for the Student Loan Ranger, please reach out to us at studentloanranger@usnews.com.
Q: Our oldest son will start college in fall 2017. We filled out the Free Application for Federal Student Aid last month and were shocked to see that the government expects us to pay more than $20,000 per year toward his education. We are a family of five, and while my wife and I make decent money, that amount is just not affordable. How in the world do families afford college at this rate?
A: I suspect the $20,000 amount you are referring to is the Estimated Family Contribution that is calculated when you filled out the FAFSA. The federal government calculates this number, which helps determine eligibility for need-based financial aid, such as Pell Grants and subsidized Stafford loans. Schools may also use this number to determine eligibility for some institutional and state aid programs.
The EFC is calculated based on the parents' and student's income -- both taxed and untaxed -- and assets as well as the size of the family and the number of children in college. Many families are as unpleasantly surprised as you were by the size of their expected contribution and worry that this means college won't be affordable.
[Learn what to expect when filling out the FAFSA for the first time.]
Under federal law, it is primarily the family's responsibility to pay for college. That message has become a little lost over the past few years, which is why so many families are surprised by the calculation.
The good news is that there are programs available to help families fill the gap if they cannot afford to pay that amount out of pocket. Federal unsubsidized Stafford and federal Parent PLUS loans can both be used to cover the EFC.
Private loans, used with caution, can also help fill the gap. If you do borrow, make sure that you consider the total amount you'll need to borrow for your son -- and his siblings -- to complete school. For every $20,000 borrowed, assume a $200-a-month payment for the next 10 years -- those are years that you will also want to focus on retirement.
Don't forget scholarships -- it's not to late to apply for awards for next year. Most schools will also allow families to break their balance into monthly payments to be paid over the school year.
Of course, the easiest way to reduce the amount you owe out of pocket is for your son to attend a lower-priced school. Many community colleges and state colleges can be covered by need-based aid alone.
[Weigh the pros, cons of using a private parent loan to pay for college.]
Q: My partner cosigned three student loans for his daughter. She made her last payment in August 2016, and this was only after constant text and phone messages from us. She now has stopped paying completely. We are not married, and I have been without income for the past year. Please help us understand what his options are, if any.
A: I'm sorry to hear about your partner's situation. Unfortunately, thi s is one of the risks of co-signing a student loan.
Co-signing a private student loan means your partner is equally liable for the loan; unless his daughter consolidates those loans, he can't do anything about that agreement. He will need to make the payments and hope that she either consolidates so they are no longer his responsibility or resumes making payments.
[Understand why parents should think hard before borrowing for or with their student.]
Note that the lender, if not paid, will go after both your partner and his daughter. This includes dings to their credit reports and possibly litigation and eventual wage garnishment.
However, this is for private loans and not Parent PLUS loans. If your partner co-signed Parent PLUS loans, legally his daughter isn't responsible -- only your partner. That said, there are lower payment and other options with Parent PLUS loans, so please let me know if that's actually the case and we can guide you further in that direction.
Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance, regularly advises consumers on planning and paying for college. Mayotte, who received a B.S. in business communications from Bentley College, responds to public inquiries via the advice resource "Just Ask" and is frequently quoted in traditional and social media on the topics of student loans and financial aid.
