Help me understand how to pay for my education.
August 12, 2007 8:44 PM   Subscribe

Please tell me, using layman's terms whenever possibly, everything you know about student loans. (backstory inside)

Two years ago I graduated from high school, and proceeded to go to a college at a small, out-of-state school. My parents (at that point) were paying for my education. Earlier this summer, I decided to transfer to a bigger, in-state school. My parents are 100% not okay with this decision, and have effectively cut me off financially (or at least will stop paying tuition, housing, books, etc in the fall). I am more or less okay with this. I am willing to accept the financial responsibilities of this decision.

However, of course I still have to file as a dependent on the FAFSA, the problem being that my dad makes too much money for me to qualify for any kind of federal aid at all. Okay, actually, in the interest of full disclosure, I haven't filed a FAFSA (ever), because my dad has promised me all along that if I do I won't qualify for jack squat. Furthermore, because I applied so late, I'm too late to qualify for any kind of merit-based scholarships through the school (I do have a strong academic record).

So, if federal aid is out, and scholarships are out, it seems to me that my only option is to take out a private loan. The problem is, I don't know the first thing in the world about taking out a loan, because I've never had to until recently. I've looked here, here, and here in an attempt to do some research, but I'm totally lost and mildly overwhelmed as to how to proceed. How does one begin to compare banks and interest rates and know which one is the best option? How do I know how much money to take out? If I take out too little, can I take out more later? How long will the process take after I apply for a loan? What other factors should I be taking into account?

I'm just really pretty clueless about all this, and would love to not get myself in massive debt, if possible. Any and all advice would be greatly appreciated. Thanks in advance. :)
posted by Quidam to Education (13 answers total) 10 users marked this as a favorite
Best answer: You should still be able to get Unsubsidized Stafford Loans, regardless of your family's income. Did you speak with your financial aid office? If you speak with the right person (not a student worker) then you can usually receive a ton of help.

I just graduated, and I needed a private loan to cover some classes while I completed my student teaching, and I used My Rich Uncle. 8.7% interest, which is decent. Received my check in two days, didn't need any other information other than my income, school, grad date, and SS#. Also, check out Bank to compare rates on some other private loans.

Best advice: Speak with the Financial Aid Office before you do anything!
posted by EduTek at 8:57 PM on August 12, 2007

I would really wait in your case. Taking out a private loan is be spending money on something you could get for much cheaper in a little while, right? And though you're likely excited to be under way, in terms of money, your lifetime earning potential is the thing to pit against your loan interest. So, say you take out private loans, get through school ASAP, and get that BA-required job, you wind up paying more interest, earning only slightly more, and being poorer in the end than if you waited for the better aid. Of course, money isn't everything, but neither is a BA by 22. Consider doing something else in the interim that would make you happy and avoid the possibility of hard debt. A private loan big enough to carry you issometimes too big a burden for a student. I would find a job that I could keep when returning to school that paid well. That is, in fact, what I did. Made my own hours doing bookkeeping.
posted by Ambrosia Voyeur at 8:57 PM on August 12, 2007

Best answer: Here's a guide I wrote before.

1. You don't have to apply as a dependent on your FAFSA. If you go to the financial aid office and talk to them about your family situation, they'll list you as an independent student. The cases where I knew this worked out include parents who are iincarcerated and another where a child was disowned because of her sexuality. Maybe your financial aid officer will let you become independent due to your situation. Honestly though, it doesn't sound so dire compared to these.

In the meantime, fill out your FAFSA on your own and submit it to the school. Call the financial aid office tomorrow. Ask about being listed as independent. Ask about what you can do - Stafford loans for example.

Private loans are expensive, but not the end of the world. But again CALL THE FINANCIAL AID OFFICE first this tomorrow.
posted by k8t at 9:19 PM on August 12, 2007

You should definitely submit a FAFSA application after speaking with your new school's financial aid advisor.

To help you manage your expectations you might want to go here to determine your family's expected contribution. (But even if the information here is discouraging speak with an advisor and fill out a FAFSA!)
posted by oddman at 9:20 PM on August 12, 2007

PS, unless your dad is a multi-millionaire, you're probably eligible for some sort of aid. My parents erroneously believed the same thing when I was in undergrad and I missed out on a huge chance to get all of those low interest loans. But that was before the internet was big and my parents could (maybe) plead their ignorance. Your dad is probably wrong.
posted by k8t at 9:21 PM on August 12, 2007

Nthing "get advice from your new college's financial aid office instead of a bunch of strangers on the internet."
posted by ilsa at 9:34 PM on August 12, 2007

EduTek, thanks for the MyRichUncle link - pretty great!
posted by k8t at 9:55 PM on August 12, 2007

Just want to say as someone who spent the last eight or so years in the student loan industry (as a programmer, but I still learned an awful lot), schools' financial aid offices will usually work with you if you talk to them and keep asking for help.

You really want to exhaust all of the government money before you go to private loans from banks. Stafford loans (both Subsidized and Unsubsidized) and Perkins loans can be consolidated after you are out of school, and often you can get a much lower interest rate that way.

Private loans usually have to be paid back right away (no grace period while you are looking for a job), sometimes while you are in school.

Stafford loans can be deferred if you are unemployed, and you can get forbearance for periods of time when you need it (if something comes up), which is often not the case with private loans. The interest is also a tax deduction until you make too much money.

Loan interest government backed loans are much nicer to have around than potentially higher rate private loans, so it's in your best interest to be 100% sure you have all you can get there first before going to private loans.

I'm sure your new school would rather have you got to it rather than to your old one, and if you explain your situation, even if you are filing your FAFSA late, you will likely do pretty well.
posted by ugf at 10:21 PM on August 12, 2007

I turned in my FAFSA late regularly, my dad had pretty high income, and I still got grants and loans. Don't despair yet. And kudos for doing what's right for you, and refusing to be controlled by your parents.
posted by croutonsupafreak at 10:36 PM on August 12, 2007

Here's a trick that I learned a long time ago in dealing w/ FAFSA timelines:

You have to submit it on time, but it does NOT have to be fully correct. Meaning, after it's in, you can correct it however you like. Often, the Financial Aid office won't be able to help you much until the Fed has received your FAFSA. Then they can edit it as they see fit, and it gets your app in on time.
posted by TomMelee at 5:29 AM on August 13, 2007

Do not take out a private loan... at least that's what Suze Ormen says on her show! I am having to take out student loans also, and feel quite lost with the whole process as well. However, what I do know is this: you must fill out the FAFSA and be rejected to get an unsubsidized loan. They have a question on the FAFSA that asks if you want to apply for work study and/or loans. Make sure you answer yes to that. And even though you didn't ask, I want to save you some trouble with the FAFSA form: you need to apply for a pin number before you do the FAFSA (the website should be somewhere on website, you just need to look). It saves you a lot of time, and a lot of pent up frustration, trust me.

Good luck, the FAFSA is annoying, but it isn't too difficult.
posted by slc228 at 7:44 AM on August 13, 2007

I never filed the FAFSA on time and always received everything I needed. You could also look into getting a job if nothing pans out for this/next semester.
posted by ml98tu at 7:55 AM on August 13, 2007

Response by poster: thanks everyone. :) i'm going to call the financial aid office and fill out the FAFSA tomorrow.
posted by Quidam at 8:34 PM on August 14, 2007

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