question about loans for grad school and options...

[shaselai]

Ok,
I am going into grad school this summer and i need loans - the loans i can get from school are ~7% standard with 10 year pay period. My parents said they can get loans at rate of ~3% up to 200k (which is more than enough of what i need...). I guess should I take my parents' offer to get the loan from them or be "independent" and go for the 7%?

[Hector]

I would take from parents.

IMO some parents are going to pass everything to their kids. I think of it as different accounts under different names which belong to same family. Why take loan and pay 7% when money is there in the family?

[skydivingchic]

What kind of loan can your parents get for ~3%? Reading between the lines I'm guessing this is a HELOC using equity in their house as collateral. If that is the case, then my answer is absolutely not. First, the interest is likely variable and has nowhere to go but up. Also, unlike student loans, payments will be due throughout your schooling, so someone has to come up with that money. Second and more importantly, your parents would be putting their house and credit at risk. I've no doubt you have every intention of repaying the loan, but what happens if a few years out of grad school you become unemployed or disabled and can no longer make payments? In order to keep their house, they would then have to come up with the payments. What if they can't for whatever reason? They lose their house and their credit is wrecked. If I've misintrepreted what they are offering, please provide more details about they type of loan and terms available to them. Whose name would the ~3% loan be under?

[Hector]

Originally Posted by Little House

One more word of caution, only take out what you really need.

I agree. Make sure you dont increase your expenses while you are in school just because you keep getting regular loan money. Dont consider it as an income, its gonna be loan and you have to pay it back.

[Frugal]

I would also take the parent's offer, if it were me. However, generally doing business with family can be difficult at best, and sometimes is not the best idea (in my opinion).

[shaselai]

thanks for the response. My mom did say it is supposed to be fixed and i think it is related to house so mortgage on the house?

Also, with the advice "take ouy what you really need" - if i am offered a loan amount do I get the option of take X amount and can't come back and take more? Like if i am offered 70k, can I take 40k now and if expenses come up take out more or the "surplus" is gone and i only get one chance to take it?

I guess i kinda feel bad for parents to pay the loan for 2 years before i can start repaying...

[shaselai]

double post.

[Hector]

Originally Posted by shaselai

thanks for the response. My mom did say it is supposed to be fixed and i think it is related to house so mortgage on the house?

Also, with the advice "take ouy what you really need" - if i am offered a loan amount do I get the option of take X amount and can't come back and take more? Like if i am offered 70k, can I take 40k now and if expenses come up take out more or the "surplus" is gone and i only get one chance to take it?

I guess i kinda feel bad for parents to pay the loan for 2 years before i can start repaying...

I wont take it from parents in this situation. We dont know whats gonna happen tomorrow. Though you want to, what if you wont able to pay it back and your parents wont have resource to pay it back as well? I wont gamble on my parents house for my education.

Also they have to start paying it back as soon as they take it out. It will take at least a couple of years for you to complete your education, but loan installments cant wait.

[shaselai]

Originally Posted by Hector

I wont take it from parents in this situation. We dont know whats gonna happen tomorrow. Though you want to, what if you wont able to pay it back and your parents wont have resource to pay it back as well? I wont gamble on my parents house for my education.

Also they have to start paying it back as soon as they take it out. It will take at least a couple of years for you to complete your education, but loan installments cant wait.

what about my brother in law? i am pretty sure he doesnt need loan to lend me the money... he offered to pay for my car a while back but that's different but still should I try asking him to borrow from him and pay at a lesser rate or i should wait for the offer while maybe dropping hints?

[KTP]

This might be worth a read:

Avoid the heavy burden of student loan debt with these tips | www.clarkhoward.com


How soon will you be making the equivalent per year of what you borrowed? IE, if you need 100K to finish school, how soon will your job pay 100K/year?

[jerrycates]

I agree on not taking it on parents. Too many things may happen to me and I would not want my parents to shoulder the burden I did. Well... just my thoughts.

[snshijuptr]

Work through graduate school. You should only need minimal loans in graduate school because you should be working. If it is a PhD look for research, teaching, or fellowships. If it is a Masters, research may be hard to find, but ask your department about teaching or fellowships/scholarships.

You should not have to take out large loans for graduate school. Live in on campus housing. Ask about student discounts. Fill out the FAFSA every year.

I work as a graduate researcher while I get my PhD. My husband continues his job while he gets his Masters. We took out loans for him with the understanding that we would pay them off the moment they came due. We live in my graduate housing and are saving money.

[shaselai]

i am going for MBA and there is no job assistance from school (they dont reccomend it either) and most alums dont reccomend it either. it does cost ~50k/yr including rent which is estimated to be ~600/month. There is a state discount for residents but i would need to prove i will be staying there post school after my 1st year there... And with the job outlook... who knows what will happen 2 years from now - the avg. salary for the occupations i am looking to get into is ~90k but there are highs and lows but i guess it is not too bad...

Baco to my other question - if my brother in law could pay it off should i ask him for help with minimal apr or i should also avoid like i shouldnt borrow from my parents? thanks!

[skydivingchic]

Personally I wouldn't feel comfortable asking family for money. If your BIL has money he wanted to lend you, I would think he would have offered it on his own. Regardless of whether he would agree or not or whether he has cash money as opposed to needing to take a loan, I would still not be enthused about this plan. Again, what happens if you become unemployed or disabled and can no longer afford the payments agreed to? This is not a small sum of money we are talking about here and even if he has it to spare, I can't imagine that not being repaid tens of thousands of dollars would have a positive effect on your relationship with him. Again, I have no doubt that you have every intention of paying back the money, but these are the things you need to be considering. I've seen plenty of stories, many on this forum, of people lending money to family and friends only to not be paid back in the long run. It ruins relationships. You have to decide - is it worth the risk to your relationship to save the money on interest. Maybe yes, maybe no, but you need to consider all possible outcomes before deciding, not just the favorable ones.

[shaselai]

Originally Posted by skydivingchic

Personally I wouldn't feel comfortable asking family for money. If your BIL has money he wanted to lend you, I would think he would have offered it on his own. Regardless of whether he would agree or not or whether he has cash money as opposed to needing to take a loan, I would still not be enthused about this plan. Again, what happens if you become unemployed or disabled and can no longer afford the payments agreed to? This is not a small sum of money we are talking about here and even if he has it to spare, I can't imagine that not being repaid tens of thousands of dollars would have a positive effect on your relationship with him. Again, I have no doubt that you have every intention of paying back the money, but these are the things you need to be considering. I've seen plenty of stories, many on this forum, of people lending money to family and friends only to not be paid back in the long run. It ruins relationships. You have to decide - is it worth the risk to your relationship to save the money on interest. Maybe yes, maybe no, but you need to consider all possible outcomes before deciding, not just the favorable ones.

yeah i hear ya. I am pretty embarrased asking for it so i am planning on waiting for offer. I know my parents would gladly try to shoulder it and they could care less about unfavorable outcomes but i will try to shoulder the debt and see where it goes..

if i borrow less money than offered loan can I reborrow more (at least the leftover) or i would need to reapply all over again?

[couchrobt]

With most people, it will be awkward to ask money from others especially family so you can spend it on yourself for your own personal gain. It's not that they would decline to help, in fact they would. Thing is, if you can find another way on your own, take that turn.

[BuckyBadger]

Originally Posted by shaselai

what about my brother in law? i am pretty sure he doesnt need loan to lend me the money... he offered to pay for my car a while back but that's different but still should I try asking him to borrow from him and pay at a lesser rate or i should wait for the offer while maybe dropping hints?

Offering to help with a car is quite a bit different from loaning you $50k a year.

[shaselai]

ok. my sister calculated the loans and here's what the numbers show:
if borrow 120k (60k per year)
loan interest: 7.9 for 10 years repayment. ~1450 per month payment total 174k

if borrow from parents:
loan interest: 2.7 for 10 years (they have longer period than 10 but lets say that for now) ~1100 per month total 137k

The difference between the 2 loans is ~37k . My sister said if I am worried about accidents to myself why not have me get a life insurance ~120ish k for 10ish years so that if something were to happen to me my parents wont be facing the debt? It does sound bit depressing but it seems to cover the "what if..." scenario..

I am still bit towards paving my own way but my sister say it is a bit foolish especially this is 37kish difference we are talking about...

[snafu]

Yet another option is to take the 7% traditional loan with the expectation of changing it to a family loan [HELOC] at a lower interest rate when you graduate and get a job. The best thing you can do for yourself is to create as little debt as possible. Have you considered working to save enough for at least one year of the program?

Have you exhausted all applications for grants/scholarship? It's a lot of paperwork but the less you owe the smoother your next transition. You may not be able to work PT your 1st semester but when you feel more confident, you can try short term work to help with day-to-day expenses. Depending on location, it is often cheaper to share an apt. and prepare meals for yourself than live in residence.

[SteveBlissLaw]

The biggest thing is not to treat your loan like a new source of income. That is how people get in trouble