Q: My daughter's acceptance into her college of choice is wonderful, but I'm concerned about paying the hefty tuition. We've pretty much exhausted federal loan options because of my husband's and my income, and financial lenders aren't as numerous these days. She's held a job for the past three years and is an "A" student so might she be better off trying to get a loan under her own name? -- Mindy Mom
A Dear Mom: I went to www.bankrate.com and discovered some interesting information about student borrowing for college (obviously with a co-signer). Because she holds a job, your daughter's chance of getting a loan for herself is much higher if her credit report score exceeds 650. So far as co-signers are concerned, whether a family member or friend, they need at least a 680 score and several years worth of established spending history. (Different lenders may add other criteria.)
Your child's bank is the logical first choice for a loan application. It knows her customer and repayment history. (Note: When trying for a student-centered loan, the earlier the better. A record of the student's repayment account as well as savings verification can mean the difference in both getting the loan approved and the amount provided.)
Unfortunately, even with this established relationship, sometimes the lender says no deal. Bankrate.com tells us a number of factors determine a denial, including colleges/universities with low graduation rates, community colleges, and institutions that have a historically high default rate, especially for-profit schools. In such a situation, try a compromise: for example, talk with the bank about a lower amount for the first semester.
While this might mean the student has to work while also attending classes, if he or she maintains a specific grade point average, then perhaps the bank will up the amount for the second semester.
Too, conventional private loans aren't necessarily the only or even the best way. Check with those lenders like www.GreenNote.com. A so-called peer-to-peer site devoted exclusively to student loans, it provides an infrastructure where friends, family, and even very nice strangers can fund low-interest loans for needy students.
Tax Tip: Also, to help pay for college, the government has revised the former Hope Credit. Now, instead of paying $2,000 for the first two years only, the American Opportunity Credit rebates up to $2,500 for all four years, assuming the student qualifies. The income cut-off is $80,000 or less for individuals filers or $160,000 or less for married couples who file jointly.
Editor's Note: Ellen Phillips is a retired English teacher who has written two consumer-oriented books. Her Consumer Watch column appears on Saturdays in the Business section of the paper. An expanded version is at www.timesfreepress.com under Local Business. E-mail her at email@example.com.