[Whitebread]

Hey guys,
I'm about to start my second year at Cornell and I'm in need of a loan to pay for it. For the first year of my education, my father took out a 40K loan from American Education Services. Since he co-signed the loan, we (he) are responsible for making monthly payments towards the interest on the loan. This would be all well and good if my father was a person with proper money management skills. He has a horrible habit on paying bills 2 and 3 months late. I've gotten numerous letters stating that defaulting on the load is imminent if the bills are not paid. I've also gotten notifications from credit companies and repossession services about our house and family cars because my father refuses to pay anything on time. He keeps a negative balance on many of his bills and in many of his bank accounts. Consequently, his credit is absolutely horrible. And that horrible credit has produced an abhorrent 13% interest rate on my loan. And you would think a financier would manage his money in a more responsible manner............

I have a strong desire to pay all my bills in a timely fashion and maintain a good credit score. I don't want his delinquent habits bringing me down before I'm even emancipated. My mother strongly suggested I take out loans under my own name in order to save myself; and I agree with her.
Borrowing 40,000 dollars a year is quite a scary thing for a person who barely makes 10 dollars an hour. I'm quite ignorant and unexperienced when it comes to utilizing credit. I don't even have a credit card! So, how does credit work (the particulars, I already understand the general principal as its a simple concept) and how much is it going to cost me in the future?

I'm also wondering how declaring independency will affect my finances and health care. I'm currently under my parents health care plan provided by my mothers employer. Should I declare independency, I'd have to utilize Cornell's health care plan. Other than that, I really don't understand what I would be getting into.

For those of you taking out loans and/or living independently, how do (did) you do it? What is involved? What extra expenses are you now responsible for? Whats a good resource I can use to learn more about what I might be getting into? Where is a good place to start shopping for a loan?


I do plan on talking to both my mother and father about this, as well as American Education Services and Cornell's financial and medical offices. I also wanted to get consensus from a larger, more diverse and experienced audience such as my fellow head-fiers.

Thanks for your help guys!

 

[Elec]

If you're at least 18, you can take out a loan in your own name without needing to be independent from your parents. You probably had to co-sign with your dad for the first loan because you don't have enough of a credit history or collateral to qualify for a 40k loan yourself. You may be unlikely to get that kind of a loan from anyone other than the gov't, because your ability to repay is completely based on you finishing school and getting a good job a few years from now.

If you become independent from them, they can no longer claim you on their taxes and get a tax break. You probably don't make enough money for that situation to help you, however. If you were at a state school, it'd be necessary to become independent to establish residency in that state for the purpose of getting in-state tuition. You also can't use their health insurance or car insurance, which is probably a bad deal for you.

Honestly...I don't know what you're studying or what made you choose Cornell, but if paying for it is a big concern to you, you may want to think about transferring someplace more affordable. Unless you simply love being at Cornell, are studying something there you can't study anywhere else, or expect it will get you a high-paying job immediately after graduation, 160k+ in debt is a huge burden to take on. It's possible to get a quality education at places that cost half (or less) of what you're paying now.

 

[Jeff E]

Quote:

Originally Posted by Elec /img/forum/go_quote.gif Honestly...I don't know what you're studying or what made you choose Cornell, but if paying for it is a big concern to you, you may want to think about transferring someplace more affordable. Unless you simply love being at Cornell, are studying something there you can't study anywhere else, or expect it will get you a high-paying job immediately after graduation, 160k+ in debt is a huge burden to take on. It's possible to get a quality education at places that cost half (or less) of what you're paying now.

I agree wholeheartedly with Elec. For what it's worth I am a college prof and a Cornell alumnus.

 

[Whitebread]

Quote:

Originally Posted by Elec /img/forum/go_quote.gif If you're at least 18, you can take out a loan in your own name without needing to be independent from your parents. You probably had to co-sign with your dad for the first loan because you don't have enough of a credit history or collateral to qualify for a 40k loan yourself. You may be unlikely to get that kind of a loan from anyone other than the gov't, because your ability to repay is completely based on you finishing school and getting a good job a few years from now. If you become independent from them, they can no longer claim you on their taxes and get a tax break. You probably don't make enough money for that situation to help you, however. If you were at a state school, it'd be necessary to become independent to establish residency in that state for the purpose of getting in-state tuition. You also can't use their health insurance or car insurance, which is probably a bad deal for you. Honestly...I don't know what you're studying or what made you choose Cornell, but if paying for it is a big concern to you, you may want to think about transferring someplace more affordable. Unless you simply love being at Cornell, are studying something there you can't study anywhere else, or expect it will get you a high-paying job immediately after graduation, 160k+ in debt is a huge burden to take on. It's possible to get a quality education at places that cost half (or less) of what you're paying now.

I am treating becoming independent and getting the loan as two different, exclusive items. I'm studying engineering, which is a fully private school at Cornell. Some of the colleges reside on land granted to the school by NY state. If I was in the CALs, vet or ILR school and declared independency, I'd get a tuition break.

Paying for Cornell itself isn't really the problem so much as my fathers delinquency. I knew how much it would cost when I got accepted and decided to go, but I did not know my father would be late on so many payments. He makes over half a million dollars a year so I would expect him to keep his promise and foot a 400 dollar monthly bill without problem. This problem isn't really an issue of tuition, but more a problem of not being able to rely on my father to do what he promised. Had I known he would have been so lackadaisical with is fiscal responsibilities, I probably would have gone to one of the two schools that offered me 21,000+ dollars a year. Transferring now won't really help the financial situation really. 40,000 dollars a year is the norm for an engineering education unless you're in state and/or get aid, neither of which will happen for me because I don't want to go to Rutgers (I live in NJ, although Rutgers instate tuition isn't that much better than Cornell's fully private) and my parents gross income is way to high to get anything based on need alone. I'm not positive on this but I do believe its harder to get merit based aid as a transfer so thats probably out of the question as well.

I do enjoy Cornell and there are opportunities here that I can't get at any other school. I'd really like to stay here so for the time being, I'd like to just explore the possibility of getting a loan by myself in order to pay Cornell's tuition. If worse comes to worse, then I'll consider another school and thats only if I can find something cheap enough to entice me to leave all my friends and everything that I enjoy at Cornell now.

 

[Whitebread]

Quote:

Originally Posted by Jeff E /img/forum/go_quote.gif I agree wholeheartedly with Elec. For what it's worth I am a college prof and a Cornell alumnus.

What was your major?

 

[Whitebread]

I stand corrected, Rutgers is quite a bit cheaper for an instate on campus student.

 

[Elec]

Quote:

Originally Posted by Whitebread /img/forum/go_quote.gif I am treating becoming independent and getting the loan as two different, exclusive items. I'm studying engineering, which is a fully private school at Cornell. Some of the colleges reside on land granted to the school by NY state. If I was in the CALs, vet or ILR school and declared independency, I'd get a tuition break. Paying for Cornell itself isn't really the problem so much as my fathers delinquency. I knew how much it would cost when I got accepted and decided to go, but I did not know my father would be late on so many payments. He makes over half a million dollars a year so I would expect him to keep his promise and foot a 400 dollar monthly bill without problem. This problem isn't really an issue of tuition, but more a problem of not being able to rely on my father to do what he promised. Had I known he would have been so lackadaisical with is fiscal responsibilities, I probably would have gone to one of the two schools that offered me 21,000+ dollars a year. Transferring now won't really help the financial situation really. 40,000 dollars a year is the norm for an engineering education unless you're in state and/or get aid, neither of which will happen for me because I don't want to go to Rutgers (I live in NJ, although Rutgers instate tuition isn't that much better than Cornell's fully private) and my parents gross income is way to high to get anything based on need alone. I'm not positive on this but I do believe its harder to get merit based aid as a transfer so thats probably out of the question as well. I do enjoy Cornell and there are opportunities here that I can't get at any other school. I'd really like to stay here so for the time being, I'd like to just explore the possibility of getting a loan by myself in order to pay Cornell's tuition. If worse comes to worse, then I'll consider another school and thats only if I can find something cheap enough to entice me to leave all my friends and everything that I enjoy at Cornell now.

Well...in that case, you may be stuck either way. If you've co-signed on a loan with your dad and he's not paying on time, it can hurt your credit. But if you take out the loan yourself, you will be responsible for paying all of it. Maybe your father would help you pay it, but if he's not paying the loan company, what's to say he'll get you the money on time either? I figured the issue was coming up with the money, not getting pops to write the darn check on time

Maybe there's a way for him to set up an auto-payment so that he doesn't have to think about it? Or maybe in spite of his income and promise, he really IS having a hard time paying it and is just too proud to tell you.

It sounds like you enjoy being at Cornell, have made some good friends, and feel that you're getting a top-notch education, so you might as well try to stay there if you can work out the financials. But be careful if it means you personally will have to take on a large burden of debt - you could easily end up paying $1000 a month for the next 20 or 30 years once interest comes into play and for me at least, it wouldn't be worth it.

 

[MetalManCPA]

I am on the other side of your equation Whitebread. My daughter is going into her 2nd senior year (just one semester) at Boston College which is $46,000 a year. I've co-signed on all of her loans, as well as my sons loans (he's graduated last year), and thus have over $100,000 of co-signed and responsible for loans.

Your choice to go independent is admirable under the circumstance. Yet, I caution you about the potential ramifications of taking on such a financial burden during your studies. One word - distraction, and a major one. Finances are a stress to most everybody in one form or another. I chose to co-sign all of my kids school loans to lessen the financial worries. They knew that the plan is to have them take the loans over when they are financially stable enough to do so. And I told them I am at least responsible for 100% of the ineterst on the loans.

As you stated, you should definately talk to your parents and voice your concerns. Any choice you make is the correct one because you made it. Just take all the advice you can, then weigh it out for yourself and decide. Welcome to life (or at least another stage), where the decisions get harder.

 

[Icarium]

He makes half a million a year and still needs to take out a loan for 40k a year? Craziness. At least his example will instill in you good financial habbits.

 

[Whitebread]

Quote:

Originally Posted by Elec /img/forum/go_quote.gif Well...in that case, you may be stuck either way. If you've co-signed on a loan with your dad and he's not paying on time, it can hurt your credit. But if you take out the loan yourself, you will be responsible for paying all of it. Maybe your father would help you pay it, but if he's not paying the loan company, what's to say he'll get you the money on time either? I figured the issue was coming up with the money, not getting pops to write the darn check on time Maybe there's a way for him to set up an auto-payment so that he doesn't have to think about it? Or maybe in spite of his income and promise, he really IS having a hard time paying it and is just too proud to tell you. It sounds like you enjoy being at Cornell, have made some good friends, and feel that you're getting a top-notch education, so you might as well try to stay there if you can work out the financials. But be careful if it means you personally will have to take on a large burden of debt - you could easily end up paying $1000 a month for the next 20 or 30 years once interest comes into play and for me at least, it wouldn't be worth it.

Yeah I know it can hurt my credit! I checked it today and it turns out hes made 5 payments around 30 days late and 1 60 days late! When I told my mom about it she said (verbatim) "Hes ruined me, get out before he ruins you too!"
If I were to get he loan under my name only, I was under the impression that no payments would need to be made for at least 6 months after I've graduated and started working. This would put off any payments for a while and might give me more time to build up some cash and get my father in line before anything is due. These words are all conjecture at this point though, I'll have to think it over a little more.

As for my fathers financial situation, I'm really not fully aware of his affairs. Although, I do know that my parents have quite a few hefty bills to keep track of. My brother is soaking up 30 grand a year to go to high school at Lawrenceville Prep, a school that reeks of arrogance and condescension, A 600K house to pay down, some business my father has on the side, and New Jerseys legendary high taxes. My fathers horrible credit isn't making that any easier. It is possible my father just doesn't have nearly as much money as he is alluding to. Although, if he really can't afford a 400 dollar monthly bill then I have some problems far more serious than college and school induced debt.......

Before I really try to get a new loan under my name, I think I'm really going to have to sit down with him and ask him why he can't ever seem to pay anything on time. I'm also going to suggest that he have the tuition bills deducted from his gross pay every time he gets paid. I also may consider just calling AES every other week or so to make sure their is no balance on my account. It is possible that constant nagging on my part may get these bills paid. I just left it in his hands last year and he got it right half the time.

 

[Whitebread]

Quote:

Originally Posted by MetalManCPA /img/forum/go_quote.gif I am on the other side of your equation Whitebread. My daughter is going into her 2nd senior year (just one semester) at Boston College which is $46,000 a year. I've co-signed on all of her loans, as well as my sons loans (he's graduated last year), and thus have over $100,000 of co-signed and responsible for loans. Your choice to go independent is admirable under the circumstance. Yet, I caution you about the potential ramifications of taking on such a financial burden during your studies. One word - distraction, and a major one. Finances are a stress to most everybody in one form or another. I chose to co-sign all of my kids school loans to lessen the financial worries. They knew that the plan is to have them take the loans over when they are financially stable enough to do so. And I told them I am at least responsible for 100% of the ineterst on the loans. As you stated, you should definately talk to your parents and voice your concerns. Any choice you make is the correct one because you made it. Just take all the advice you can, then weigh it out for yourself and decide. Welcome to life (or at least another stage), where the decisions get harder.

O Boston College, eh? I have a good friend that goes there and she is also starting her second year! Small world!

I've been contemplating the burdens of increased fiscal responsibility for the last few hours or so. I'd have to pay for quite a few things that I didn't think about. And unfortunately, I can't afford any of them. Liability coverage alone would be too expensive for me to pay by myself. Between classes, work and Formula SAE I have no time for anything else, let alone work. Declaring independency at this point is a little premature because I just can't pay for it. I still haven't decided on the loan situation but as you said, I'm just going to get as much advice as I can and make a decision on my own.

I have to say that becoming responsible for yourself when higher education is practically required for success in the secular world is not easy whatsoever. For some people (and some majors) I'd dare say that its cost prohibitive.


Thanks for your help guys.

 

[Jeff E]

Quote:

Originally Posted by Whitebread /img/forum/go_quote.gif What was your major?

psychology

 

[Canman]

Quote:

And that horrible credit has produced an abhorrent 13% interest rate on my loan.

Whatever you do, you need to work on reducing this 13% interest rate. That is going to make things difficult down the road. Even if you can afford to make the higher interest payments, wouldn't you rather spend it on something tangible?

For comparison's sake:
A $40,000 loan over 10 years at 13% interest will cost you $597 per month. The same loan at a still high but more reasonable 8% will cost you $485 per month. $113 per month, $1,350 per year, it makes a big difference when you see that you can borrow money at a cheaper rate. At $150,000+ the difference will be much greater.

I would try to go over this with your father. Take care to discuss it calmly and carefully. Money matters in family situations can be very sensitive.

My brother graduated from Cornell Engineering this year. He loved it and I loved going up to Ithaca to visit. Cornell is a great place. Keep in mind that with Engineering you will probably need to continue your education to get a masters degree or PhD.

 

[ken36]

You are to be commended. Great instincts. Great sense of personal responsibility. I would hire you in a minute.

 

[pne]

not only have a talk with your father but the banks too. If youget a student loan then you should have until you graduate or longer to start paying it off. The student loans I checked out only required payment of monthly interest. However the banks won't loan you 40k a year. They wouldn't lend me 4K a year when I was working and making $14 an hour.