How do you pay for college?

Discussion in 'General Distance Learning Discussions' started by Laser100, Dec 12, 2003.

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  1. Laser100

    Laser100 New Member

    I’m considering taking an early withdrawal on my Roth IRA account and applying it towards college. I believe it will be worth paying the government the penalty because I could potentially make several thousand dollars more with an employer by having a degree.

    Is this a smart way of financing education or is it not recommended?
     
  2. airtorn

    airtorn Moderator

    Why not just take out a conventional student loan? If you are going to be making more money, you can afford to pay it back.

    I'm not big on touching retirement money for anything but retirement.
     
  3. Randell1234

    Randell1234 Moderator

    I have 4K per year tuition assistance. My wife and I are paying cash for her education. If we did not have the cash, it would be students loans. NEVER retirment money.
     
  4. Laser100

    Laser100 New Member

    Coventional Loan Verses Roth Raid

    A conventional loan will be subject to interest. The stock market is volatile and the investment in myself is a sure thing. I'm sure that the money will not gain more ground in the market as compared to my potential salary increase with a degree.
     
  5. unixman

    unixman New Member

    I agree with airtorn. Don't touch your IRA. Bad joojoo there. Go with a conventional student loan.

    I earned money to pay for my college through the Army GI Bill. However, I was a gimp and let the damn thing expire after 10 years. Now I'm footing the bill myself. My tip o' the day ... don't be a gimp like me if you have the GI Bill - use it. :)

    Cheers.
     
  6. airtorn

    airtorn Moderator

    The Stafford Loan is available to students who attend school at least half time. It has the lowest interest rate of any type of student loan. The interest rate is set by the government and will never exceed 8.25%
    Subsidized Stafford loans do not acrue interest during your education. After graduation, the interest kicks in and is tax deductible. Stafford Loans are based on need.
    Un-Subsidized stafford loans acrue interest from the start of the loan. Again, the interest is tax deductible.
    If you qualify for a subsidized loan, it is a great deal. Either way, the interest is tax deductible.

    I'm sure that the money will not gain more ground in the market as compared to my potential salary increase with a degree.

    If you know that much about where the market will go in the time that it takes you to finish your degree, maybe you should move into financial management and run my mutual funds.
     
  7. Ian Anderson

    Ian Anderson Active Member

    Do not touch your 401K (you pay penalties plus taxes on amount withdrawn - also do not take loan against your 401K).

    Have you considered getting a job where your employer pays tuition costs or moving to a state where tuition costs are low?

    What career field are you contemplating? Your answer might bring forth suggestions from forum members.
     
  8. Han

    Han New Member

    DON'T TAKE A PENALTY.

    There are a few options:

    Convert your traditional IRA (not sure about Roth IRA's) to a Educational IRA. You can use that towards tuition for any public or private university in the US (but check to make sure your school is on the list).

    Apply for a NO interesxzt loan. If you have an IRA, you may not be eligable - but they give you the interest option then, and 2 years ago it was at 2.75%.

    Go to the scholarship databases - there are MANY loans out there, interest free, not based on need. There are lots of people out there with lots of money and want to help people finance their education (though you have to pay it back).

    I wouldn't recommend applying for a bunch of scholarships were you write essays and spend a great deal of time - especially the smaller ones, where only one award is given. I went that route, with no luck (and I don't know anybody who has received an award that way).

    Good luck!
     
  9. menger

    menger New Member

    The previous replies are giving good advise

    It has been a while since my last finance and investment course but the others that have posted replies are giving you some good advise...in my opinion.

    For instance, ceterus paribus. if you invest $2k each year for 30 years ($60k) at 5% interest compounded monthly you will have $142,493 but if you take out $10k in year 10, for instance, for tuition and do the same in year 11, at the end of the 30 years you will only have $87,085. In other words, that $20k in tuition will cost you $55,410.

    But if you get a student loan of $20k at 8.25% interest for 10 years (a monthly payment of $245) it will cost $29.5k...a savings of approx $26k.

    I would reference your old finance books and/or some of the financial calculators on the net to check the numbers.
     
  10. incacity

    incacity New Member

    Or, take one class at a time (like I did) so the financial burden won't be that significant. I would stay away from loans and others if I could manage with my monthly income, but that all depends on the individual and his/her financial situation.
     
  11. mark5022

    mark5022 New Member

    Borrow from your 401K

    If you have a 401K borrow from it instead.

    My 401K allows me to borrow from it at a cool 4% .
     
  12. rnattorney

    rnattorney New Member

    I was in your situation. I have a good job, good income, decent retirement, but I do not have thousands laying around to pay for school.

    So I had 2 choices. I looked at accredited DL graduate programs that were Title IV who offered federal aid. I did not qualify for the Stafford loan that paid your interest while in school, but the current interest rate is only about 3.25%, and I can pay interest only payments while in school to help keep the payments down upon graduation, or wait until I graduate and pay the accumulated interest. With the cap at 8.25% it was a fairly good deal, lots of repayment options, forbearance, etc. The only problem is that most of the quality DL graduate programs are about $35000 to $40000. That makes my payments at the standard repayment at about $450 a month at the 3.25% level. Yikes! I just got done paying off my law school loans. Took me 13 years.

    The other option was an accredited DL graduate programs that do not have Title IV. Often, their tuition is cheaper, because they do not have the huge administrative expense of servicing the Federal Title IV programs. Also, the Title IV schools know that most graduate students can get Federal loans for the total amount, and I think that is why they are often higher in tuition. (just my observation, not some definite fact). Often they allow 50% down, and the rest of the class paid in 2 other installments. Or they offer private loans that many people who are working do qualify for. I qualified for a 8.25% private loan, I only pay interest during my tiime at school, and because the school's tuition is about $25000, my payments will be $250 a month. That is the direction I chose.

    Hope that helps.

    rnattorney
     
    Last edited by a moderator: Dec 13, 2003
  13. decimon

    decimon Well-Known Member

    Re: Borrow from your 401K

    Last I knew, you would have to repay the balance of the loan should you leave your job or your job leave you.
     
  14. Han

    Han New Member

    Re: Re: Borrow from your 401K

    Not true in our case. We borrowed for a remodel against our 401k, no penalty.
     
  15. decimon

    decimon Well-Known Member

    Re: Re: Re: Borrow from your 401K

    I'm not referring to a penalty but when the loan must be repaid.
     
  16. Han

    Han New Member

    Re: Re: Re: Re: Borrow from your 401K

    Yes, that is right then, sorry, I misread!

    Our 401k actually had us pay back the interet to... us. So our money only made 4%, but in the type of ecomony we are in, it was a good deal.
     
  17. decimon

    decimon Well-Known Member

    Re: Re: Re: Re: Re: Borrow from your 401K

    I don't know if this was a matter of law or of plan policy but, IIRC, our plan required that any 401K loan money be repaid within four years. Again, if you left the company for any reason, the loan had to be repaid asap. Good deal only for a short-term loan.
     
  18. RKanarek

    RKanarek Member

    Re: Coventional Loan Verses Roth Raid

    Dear Laser100,

    I do not like your plan. Investing in yourself is NOT a "sure thing." There is a reason why the vicissitudes of life are called vicissitudes.

    You have frequently displayed an interest in electrical engineering. EE is a dead field unless the idea of moving to China, working for $10 a month, and living under a communist dictatorship appeals to you. (Remember the "Cultural Revolution": you could find yourself in the middle of a field at oh-dark-thirty chasing song birds with pots & pans, if you're lucky!)

    I do not mean to deter you from pursuing your goals, whatever they might be. Indeed, I myself am pursuing an EE/EET'ish degree. But betting large sums of money on the assumption that you will accomplish your goal, and that wealth and success will automatically follow, represents a level of optimism that I find repugnant. <g>

    If you can't afford college, first consider a cheaper college! (I think TSA (www.tsa.ac.za) can accommodate one more person. <g>) While UND is obscenely expensive depending upon where you live, it is also quite reasonably priced depending upon where you live. Consider moving! Consider all your options!

    If you still can't afford college, carefully search for the cheapest loan available!

    I work around many people who have wasted away their lives hording scraps of money, so I'm not as opposed to the idea of tapping into your retirement savings as some. Everyone must die, but it would be nice to live first. Before you start making omelets with your nest egg, make sure you really are that hungry, and that there's nothing else in the fridge!


    Best wishes,
    Richard Kanarek
     
  19. Han

    Han New Member

    Re: Re: Coventional Loan Verses Roth Raid

    Though not a sure thing, you know yourself and it is a good investment, one that is in yourself.

    There are plenty of electrical engineering jobs out there, most are in the development and design phase, but our average EE makes about $100k, coming out of school about 60k.

    Yes, I agree make sure this is that you want, but use your 401k, money is money, and why borrow from others hen you have planned properly to invest in yourself.
     
  20. Ian Anderson

    Ian Anderson Active Member

    Re: Re: Re: Coventional Loan Verses Roth Raid

     

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