A recent post in the Paying for College 101 Facebook Group mentioned a student who was admitted to her dream college, but her parents were denied the Sallie Mae loans they were counting on. They were looking for options to bridge a $40,000-per-year gap between the amount their child could take on with a Stafford Loan and the cost of the dream school.
Being that it was already summer, they were unwilling to consider choosing other colleges, especially so late in the season.
This is why I say, “Inflexibility is expensive.”
Refusing to be flexible closes the door to any other options that might be more affordable. It also means you have zero competing offers to leverage and possibly persuade your dream school into giving you more money.
Having a top choice or dream school isn’t necessarily a bad thing, but I encourage everyone to accept in advance that the idea of a dream school is unlikely to result in you paying less for a degree than you would have otherwise.
My advice to anybody in a similar situation is that it may be easier to qualify for a federal Plus Loan than through a private lender like Sallie Mae. Even though the origination fee will be 4.226% off the top and the interest rate will be around 9.08% after that, the reality is that most parents who apply for a Plus Loan qualify.
The standard 10-year repayment plan on about $20,000 borrowed per semester for eight semesters = a monthly payment of $2,200 per month. If you stretch repayments out to 20 years, payments would be a little under $1,600 a month.
One bright spot, as I understand it, is that if you work in public service, the balance owed on Plus Loans may potentially be forgiven someday — and/or you may be able to qualify for an income-based repayment option that could very well have you making payments for the rest of your life.
Denied Loans? Here Are Some Options
That said, if a more affordable school isn’t something to consider, and you’re denied the loans you were counting on, then short of significantly increasing your income, these are your likely options:
- Appeal for more aid from the school. You never know, they might give it.
- Check if the school accepts CLEP or AP credits. Depending on how many credits they earn, this can shave as much as a year off of college payments and borrowing loans. (CLEP exams can be taken for free through Modern States over the summer and thousands of colleges award credits for passing CLEP exams.)
- The student can plan to be a Resident Assistant (RA) as an upperclassman. These on-campus jobs are hard to get, but they can reduce your term bill by as much as $18,000 per year at some schools, just by providing room and board for free. That’s more money than most kids can make by working part-time during school and by saving up during the summer.
But there’s no sugarcoating it, a $40,000-per-year gap between what you must pay and what you can afford is indeed huge. Even a parental side hustle is unlikely to net that much extra money. And if loan companies are unwilling to lend the money, it’s a good indicator that borrowing this much might mean decades of financial hardship and regret.
If you’re still unwilling to consider other college options, consider what will happen if you’re not approved for the loans you need to afford the dream. The dream school isn’t likely to let the student register for classes or move into a dorm without payment. And even if it somehow works out this year, what’s the plan for next year, or the year after, assuming you won’t be approved again?
The system is broken. It shouldn’t be like this, but it is. College is already expensive. Inflexibility makes it more so.
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Other Articles You Might Like:
Don’t Let College Dreams Shatter: Tips to Avoid Loan Denials
Dear Roadie: Should I Tell My Daughter Not to Bother Applying to Unaffordable Dream Schools?
Understanding College Costs: The Role of the Net Price Calculator
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