Advice Needed: Taking out Student Loans to Help Parents?

[TexanGirl]

I've never taken a loan out before, but I'm considering the possibility of doing it now, upon the insistence of my parents. They're currently in serious debt and I hope to help relieve them of that economic burden.

I was offered $2500 in subsidized loans in the beginning of this year, but declined, since it wasn't imperative for me to take out loans at this stage. Is there any way I can be offered back that loan and possibly more (maybe around $8000)?

My parents can take out loans for themselves, but student loans are a more attractive option, since there are generally lower interest rates (the interest rates are what are killing my parents) and they can be paid back after my graduation, which will give them ample time to find the money to pay it back.

Now, I know this probably sounds shady and whatnot, but I really only want to help my family get debt-free. So, can anyone tell where to look to find such a loan?

Muchas gracias.

---

Members don't see this ad.

 

[jbrice1639]

taking out the loan and using it for tuition so your parents don't have to pay your tuition is fine. i have no idea what the limit on subsidized loans is for undergrad, but it's a need-based loan, and there is a cap on what you can take that is subsidized - and then another larger amount in unsubsidized, but still low interest.

if you're talking about taking the loan and giving the money to your parents, that's definitely a little on the shady side (may or may not be legal - i am not a lawyer by any means). you would also have to look at how the loan is distributed - stafford loans are often paid directly to the school, so there would be no check for you to give your parents.

 

[Aynsl156]

I would do it to help my parents out, provided that they could get their finances back on track and not rack up more debt. As well as help me pay off the money I borrowed to help them out. Just make sure that they're not in debt because of unsound spending practices or something difficult-to-fix like that. Not that I'm implying that your parents are irresponsible with money....oh, you know what I mean.

 

[erica31]

Wow. Tread verrrrrrrrry carefully. Good luck -- it must be a difficult position you parents are placing you in (and I'm only saying that because you say they are "insisting" you take out a loan for them).

I'm all for helping out the 'rents after I've been a doc for awhile and they are elderly...... but definitely not capable of financially caring for them currently.

 

[NoUse4aName1286]

Money above and beyond your cost of tuition (ie, checks directly to you) have to be taken out through alternative loans (private banks. NO GOVERNMENT LOAN [school related] WILL COME TO YOU, unless its a cash back check because you paid some tuition up front). The interest rates on these alternative loans are rarely too attractive, I would guess 7% as a low, and i have seen 14%+

 

[TexanGirl]

taking out the loan and using it for tuition so your parents don't have to pay your tuition is fine. i have no idea what the limit on subsidized loans is for undergrad, but it's a need-based loan, and there is a cap on what you can take that is subsidized - and then another larger amount in unsubsidized, but still low interest.

if you're talking about taking the loan and giving the money to your parents, that's definitely a little on the shady side (may or may not be legal - i am not a lawyer by any means). you would also have to look at how the loan is distributed - stafford loans are often paid directly to the school, so there would be no check for you to give your parents.

Yeah, I was worried about the shadiness factor. You say often? As in always? Gah, I suppose it's just determined by the individual school.

I would do it to help my parents out, provided that they could get their finances back on track and not rack up more debt. As well as help me pay off the money I borrowed to help them out. Just make sure that they're not in debt because of unsound spending practices or something difficult-to-fix like that. Not that I'm implying that your parents are irresponsible with money....oh, you know what I mean.

No, not at all. We've always lived frugally. We're planning to sell our house soon, so I know as soon as that happens, we'll have the money to pay back the debt. It's just now...we're in dire financial straits...

Wow. Tread verrrrrrrrry carefully. Good luck -- it must be a difficult position you parents are placing you in (and I'm only saying that because you say they are "insisting" you take out a loan for them).

I'm all for helping out the 'rents after I've been a doc for awhile and they are elderly...... but definitely not capable of financially caring for them currently.

Yeah, they sort of were. I had a long talk with them, looked at all the finances, our budget, and concluded on my own that we needed it though. I'm still a bit wary of taking out loans for technically someone else, but it might just be the novelty of the situation (I'm only 18) that scares me.

 

[nonesuchgirl]

While you probably can't get a government loan this way, you might be able to get a private loan through your bank as a student loan.

 

[TexanGirl]

Money above and beyond your cost of tuition (ie, checks directly to you) have to be taken out through alternative loans (private banks. NO GOVERNMENT LOAN [school related] WILL COME TO YOU, unless its a cash back check because you paid some tuition up front). The interest rates on these alternative loans are rarely too attractive, I would guess 7% as a low, and i have seen 14%+

Haha, I can read. You don't need to use your caps-lock wrath on me. Well, I was hoping for government loans since I qualify for them, but when you say no government loan will come to me, do you mean that I won't be able to take out a loan (since my tuition is already covered), or that I won't have access to the money borrowed (since a government loan is usually paid directly to the school)? Just a tad confused.

From what my parents tell me, they're paying 31% interest on their loans, so I suppose even 14% looks like a blessing, in comparison...

 

[nonesuchgirl]

Haha, I can read. You don't need to use your caps-lock wrath on me. Well, I was hoping for government loans since I qualify for them, but when you say no government loan will come to me, do you mean that I won't be able to take out a loan (since my tuition is already covered), or that I won't have access to the money borrowed (since a government loan is usually paid directly to the school)? Just a tad confused.

From what my parents tell me, they're paying 31% interest on their loans, so I suppose even 14% looks like a blessing, in comparison...

Actually, come to think of it, depending on how much you're looking for, you might qualify for a gov't loan (or any kind) for "non-billable costs". usually these mean books, transportation, etc. Anything that's not tuition, fees, and room&board. Whatever is over the billable gets refunded to your checking acct.

Have your parents tried getting the interest rate reduced?

 

[TexanGirl]

Actually, come to think of it, depending on how much you're looking for, you might qualify for a gov't loan (or any kind) for "non-billable costs". usually these mean books, transportation, etc. Anything that's not tuition, fees, and room&board. Whatever is over the billable gets refunded to your checking acct.

Have your parents tried getting the interest rate reduced?

Ahhh, I sure hope so! How much would these extraneous costs be in total? $2000-3000 tops?

Hmm, I believe they have, but neither of my parents has a spectacular credit rating (putting it lightly), so I don't know if negotiating like that would be possible.

 

[nonesuchgirl]

Ahhh, I sure hope so! How much would these extraneous costs be in total? $2000-3000 tops?

Hmm, I believe they have, but neither of my parents has a spectacular credit rating (putting it lightly), so I don't know if negotiating like that would be possible.

What you do with a private loan is figure what you need- after Staffords, I needed ~19,800 or something for the year- tuition, fees, r&b, and non-billables, so I asked for 20,000 to keep an even #. I think the billables were 17000 for the year. Some banks will add the origination fee onto the loan, others take it out of the loan (so if the fee is 20000, and the fee is 800, you're getting either 20800 or 19200.)

The other question is, how is your credit? Do you have any? Very few banks will give anyone with no credit a big loan.

 

[NoUse4aName1286]

Haha, I can read. You don't need to use your caps-lock wrath on me. Well, I was hoping for government loans since I qualify for them, but when you say no government loan will come to me, do you mean that I won't be able to take out a loan (since my tuition is already covered), or that I won't have access to the money borrowed (since a government loan is usually paid directly to the school)? Just a tad confused.

From what my parents tell me, they're paying 31% interest on their loans, so I suppose even 14% looks like a blessing, in comparison...

Was not meant to be rude. Apologies if taken as such (its a habit when i emphasize something). You can take out the gov't loan even though your tuition is already paid to the best of my knowledge, and it will therefore come back to you. So if you paid 8k upfront and wish you had it back, you can take the gov't loan for 8k and you will get a check (less certain fees i think) for that much.

 

[TexanGirl]

The other question is, how is your credit? Do you have any? Very few banks will give anyone with no credit a big loan.

Even if it's just a government loan? Or do you mean just alternative loans? (Sorry, I really don't know much about the subject)

Was not meant to be rude. Apologies if taken as such (its a habit when i emphasize something). You can take out the gov't loan even though your tuition is already paid to the best of my knowledge, and it will therefore come back to you. So if you paid 8k upfront and wish you had it back, you can take the gov't loan for 8k and you will get a check (less certain fees i think) for that much.

It's no big deal. Ahh, okay, I understand. So, I'll try to tap first at government loans. I've looked it up and it says I can take out $3500 in staffords as a freshman (I'm one right now) and $4500 as a sophomore, which totals $8000, exactly how much I'm looking for.

 

[BluePhoenix]

Hmm, I believe they have, but neither of my parents has a spectacular credit rating (putting it lightly), so I don't know if negotiating like that would be possible.

You don't have to have spectacular credit to negotiate with lenders/credit card companies/banks/etc. They really don't want you to default or go bankrupt and most will work with you to set up a plan for payments or reduce rates if you agree to certain things (paying on time, closing an account, etc.). If you're really in trouble financially, one of the best things you can do is call them up and try and discuss a plan that will work for you to get your debt paid off. I imagine in the current state of lending and such, most places are going to be more willing than ever to try and help make things work because of the number of people and banks having trouble. Rather than taking out more loans and putting a burden on you, your parents should first try to negotiate with their lenders? and also check out reputable credit counselors who have experience working with these sort of problems and can work out a solution without dragging you into the mix and creating even more bills.

 

[jochi1543]

Just make sure your parents don't screw you over. Why don't they ask their own parents or other adult family members for help instead of trying to run their college-aged child into debt? It seems kind of strange to me, at least based on what you've described here. I can't fathom my mother or father asking me for money, even if they really needed it.

 

[Bartelby]

Just make sure your parents don't screw you over. Why don't they ask their own parents or other adult family members for help instead of trying to run their college-aged child into debt? It seems kind of strange to me, at least based on what you've described here. I can't fathom my mother or father asking me for money, even if they really needed it.

Wise words. I am always extremely hesitant to loan friends money when they are in need because people who put themselves in that kind of situation in the first place tend to be unable to pay you back later. When I do loan that kind of money, I consider it gone and am pleasantly surprised if it turns out otherwise. Having someone owe you money really strains the relationship.

Now in your situation, it is not just a friend but a parent who is asking. If I were you I would probably go ahead and do it (if you actually can), but realize this situation might very well come back to haunt you in five years.

 

[LizzyM]

Let me try to put a different spin on this... your parents were going to pay your school-related expenses. Perhaps they paid those bills when they came and you turned down the loans offered to you to cover those costs. Now, your parents say, "we need that money we spent on your school expenses to cover our living expenses, can you get those loans that were offered to you?"

In essence they are saying, "you are going to have to borrow money & put yourself through school (with loans) rather than having us pay for your education."

OP, are you cool with that? If so, contact the financial aid office at your school and ask what they can do for you to help you meet the cost of your education since your parents are in a tight spot.

Then, after you take a loan that you will pay back some day, you pay back your parents for having paid your school expenses at the start of the academic year.

Have I got that right?

 

[Bacchus]

I think, if I'm reading correctly, that you'll only be able to get a private loan or a combination of Stafford and Private. Stafford for your first year is capped at something less than $3k I believe. By your junior year it will reach $5.5k. This is not going to cover your total amount needed. That said, if you use the loan from our government for non-educational expenses you could be committing what is considered fraud because those funds are written for educational expenses only.

That being said, if your parents are selling the house soon (good luck with the market) why can't they get a loan even if it is high interest? I feel a private lender would oblige as long as the selling of the house looks promising.

 

[BrokenGlass]

Just make sure your parents don't screw you over. Why don't they ask their own parents or other adult family members for help instead of trying to run their college-aged child into debt? It seems kind of strange to me, at least based on what you've described here. I can't fathom my mother or father asking me for money, even if they really needed it.

They should not have to ask you for money. If they are in need and you can help out, you give them as much as you can even if you are college-aged.

 

[Depakote]

this is more of a question for the financial aid forum...

moving.

 

[TMP-SMX]

Hold on. Are they paying for your education now? If so, then you should get student loans. You should definitely get the subsidized loans as you don't have to pay interest and the interest does not accrue.

Now the problem is if they are not paying your tuition and you need to take out large amounts of private loans. Your parents have terrible credit and many times you need a cosigner. I'm assuming your credit isn't great because you don't know much about the financial aspect of paying for school either.

Subsidized loans? Maybe, but just know it will go towards your tuition and fees then after that you get a refund check with what is left over. (Probably not much).

 

[Doctor Bagel]

I'm still a bit wary of taking out loans for technically someone else, but it might just be the novelty of the situation (I'm only 18) that scares me.

This should always make you nervous, so it's not just because you're 18. Cosigning loans is also something that you should think very seriously about. I'm not saying you shouldn't do it, but yeah, be careful. Whenever your name is on a loan, there's always a possibility you'll be on the hook for it, and you have to be OK with that.

As for the staffords, since you were offered a subsidized loan, your school thinks you have that need. You should be able to get at least half of that amount to cover the spring semester and at least an equal offering for next year. To get more money, you'll have to work with your financial aid office and let them know that there's been a significant change in your family finances.

I know you mentioned above that your parents don't have great credit, but have they applied for a Plus loan. The Plus program is a government-sponsored program that allows credit-worthy parents to borrow up the full cost of attendance for a child who is attending college. You do have to be credit-worthy, but it's easier to qualify for than lots of private loans. The interest rate for Plus loans is fixed at 8%.

 

[Doctor Bagel]

Subsidized loans? Maybe, but just know it will go towards your tuition and fees then after that you get a refund check with what is left over. (Probably not much).

This is true -- the school always takes their cut first, so if your tuition bill is greater than the staffords you're offered, you won't see any of that money. Now it will save your parents money on tuition, but it won't give them any cash.