Today’s post is kindly contributed by Michele of Michelesfindinghappiness.com. She’s a wise, Christian woman and has shared this based on her personal experience. Please show her some love as she shares real inspirational stuff and useful freebies to go with them! At the bottom of this post, I’ll share the link to one of my favourite posts from her.
My step-daughter called me the other day, and she was very excited. “I got my financial aid award; they are giving me $11,000 to go to school!” Great, I thought, but doubt crept into brain “Awesome, is all of that grants? No loans?” She affirmed that “yes, yes, yes it’s all grants.” I congratulated her, and we went on to talk about more important things like decorating her room in her new school colors, but the doubt still niggled in the back of my brain.
Horror stories of student loans and over-inflated college costs filled my nightmares that evening. I called her back, “hey bring that paperwork with you when I see you this weekend” She agreed and brought the award summary with her. The first thing I noticed was this paper was itemized. The second thing I noticed was 2 of those items were in fact, loans. I called my step-daughter over and pointed to the two lines. One said ‘subsidized loans $3,500 per semester’ the other said ‘unsubsidized loans $1,000 per semester’.
She looked at me sadly, “I guess it’s not all grants huh” SMH! It says loans right on the piece of paper!
In my step-daughters excitement, she did not read the fine print. She only looked at that big fat bottom line number. In fact, the two loans were not the only two sketchy things on the award letter. There was also a line that read “work study program $2,300”. Huh, “what’s a work study program?” I asked.
I got the standard teenage blank stare. I was sucking all of the air out of her excitement.
A quick trip to the school website revealed that the work study program listed on the award sheet was not guaranteed. Students could work at various jobs on campus, and then they were required to pay the money out of their paychecks. ‘Sign up early!’ the page read ‘Jobs are not guaranteed.’ So that $2300 on the “award”, wasn’t a guarantee, it was just as viable as getting a getting any part-time job.
Unsubsidized and Subsidized Loans
Once we deciphered the work study, the next part was to figure out the difference between subsidized and unsubsidized loans and what exactly in meant for my step-daughters future.
Subsidized loans are loans from the government where the government pays the interest on the loan while the student is in college. This means if you take out a subsidized $3,500 loan in your first semester when you graduate from college you will owe $3,500.
Unsubsidized loans are a little bit different. If you take out an unsubsidized loan, the interest will add to it every quarter. So if you take out an unsubsidized $3,500 in your first semester, when you graduate from college you would owe $5,346. As you add money for each semester, your bill rises and your interest payments go up. This is how people get into trouble with student loans.
In the end, after we did the math, my step daughter would owe around $35,000 in student loans.
“That’s a car!” my daughter exclaimed! She dreams of buying her own brand new car and this thought was devastating to her.
A Few Options
I couldn’t stand the pathetic look on my step daughter’s face. She had bound into the house on springs and now looked ready to cry. Out of the $11,000 per semester my step-daughter thought was free money, only $4,200 per semester was actually in grant money.
“Okay, ” I said, “Now we know what we are up against, let’s make a plan”
- Scholarships – Turns out there is are a ton of scholarships out there, so the first part of the plan was to apply for every scholarship we could find.
- Part-Time Work – After some research, we discovered part-time work outside of the college paid much better than working for the college. 20 hours a week during school and 30 during the summer.
- Budgeting – To make all of this work out, keeping my step-daughter on a strict budget is a must. This is the part that worries me the most. No one will be there to keep her on budget, and 18-year-olds aren’t the best at this sort of thing, but we put the Everydollar app on her phone and at least for now, she is on board.
Cut Through the Red Tape
The best thing you can do with a child getting ready to go to school is to go through each piece of paper carefully. There is a lot of red tape, a lot of false promises and a lot of confusion. If something doesn’t meet the smell test, do your research and ask a lot of questions. If you can’t get your answers, walk away. Don’t let you or your child get trapped into a huge loan before they even have their first real job.
These are wise words from a wise lady. Click here to read another of her posts on how you can take some time away and organise yourself so that you are ready to face the challenges of life.
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