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Post by heckofagal on Feb 5, 2015 22:12:04 GMT
My DD is a freshman at a university a couple hours away from home. She has taken out student loans and was given enough to cover tuition, room & board plus incidentals. We've got it set up for her to make a small repayment of the loan each month instead of waiting until after graduation.
When she is home we have a 3rd car that she can drive to summer job, etc. She's been told this is NOT her car that she is borrowing it for now. Our youngest will be 16 soon and has plans of getting a job this summer too. I'm currently unemployed but hope to be back to work ASAP and unable to tote either to/from a summer job.
Here's the question. After paying tuition, room & board she has a bit of money left over because her father and I have helped pay for everything else. I know ideally it would be best to use the leftover funds to turn around and repay the loan. However, we are contemplating letting her use that money to put towards buying a used car. She has a bit of money in savings from graduation and working last summer and Christmas break, so I think this extra bit would be very helpful in getting a car. I don't think she really needs a car on campus yet next year (she might think differently) however she will probably live off campus junior year and having a car would help with that as well as traveling to/from school when she needs to come home occasionally.
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gsquaredmom
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Jun 26, 2014 17:43:22 GMT
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Post by gsquaredmom on Feb 5, 2015 22:27:56 GMT
Put it in savings and think about it. people have used loan money for transportation needs. If she does not need one now wait and look for a deal.
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Kerri W
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Location: Kentucky
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Post by Kerri W on Feb 5, 2015 22:28:24 GMT
My short answer is yes I would "allow" her to purchase a car.
My longer answer is what does your DD want to do? Would her having a car allow her to get a part-time job to pay for incidentals so she wouldn't be paying interest on them? Our DDs did take out student loans and we tried hard to minimize the amount they borrowed so they wouldn't be saddled with a huge payment after college. It wouldn't have worked for *us* to finance "living expenses" if at all possible.
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 5, 2015 22:37:59 GMT
If she (and you) are ok with the fact that she will be paying off that cheap used car for probably at least 10 years, then go for it. I, personally, would not want to do that.
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Kerri W
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Posts: 3,836
Location: Kentucky
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Post by Kerri W on Feb 5, 2015 22:40:50 GMT
If she (and you) are ok with the fact that she will be paying off that cheap used car for probably at least 10 years, then go for it. I, personally, would not want to do that. My reading comprehension is off today. I didn't catch that the bulk of the money for the car came from the student loan. I agree with Busypea. In that case, no. I would put the money back on the loan. I would not pay interest on an old used car OR incidentals if there was any possible way to do otherwise. |
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Post by heckofagal on Feb 5, 2015 23:29:57 GMT
She was thinking she would go get a used car and make payments, but I'm pretty sure nobody would give her a loan without a cosigner and we have already cosigned for college loan so we don't want to do that. I think half would be from the loans and half what she has saved. It would enable her to work off campus to pay for incidentals and get her to work this summer and to the class she plans to take this summer, and then get her to work the first few years after graduation and hopefully let her pay down some loans before having to get a new car.
I know it is not the ideal situation. Ideally I would not have lost my job and we would have bought a 4th car and let her have the car she has been driving. Obviously that did not pan out.
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Post by freecharlie on Feb 5, 2015 23:53:11 GMT
I'm not a perfect money person. I have a car loan, student loans, and a small amount of cc debt, so don't take me as an expert.
I would let her do it. The interest on the loan currently is nothing because she is still in school. If she takes a loan to buy a car, she will be making payments and interests right now.
Have her continue to make the payment to the loan each month. If she starts making money at a job or something, have her make a "car payment" toward it.
Finally, unless it is your name on the loan, I think she gets to do what she wants with the money. It may not always be the smartest move, but she is resposible for it.
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melissa
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Post by melissa on Feb 6, 2015 0:00:46 GMT
Unless having a car is a necessity, I say absolutely not.
Many people have the experience of getting smaller and smaller financial aid packages as they progress through college. I would not count on getting the same amount aid, even in loans, the next two years, especially senior year. You are also currently unemployed and if you aren't back to work, won't that affect the bottom line going forward? Will your car insurance payments go up if she brings a car to campus?
Either put the money where it will earn more interest than the amount on the loan or put it back towards the loan.
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 0:01:08 GMT
another car means a monthly budget for insurance, gas, registration, repairs, campus parking fees ... buying a car isn't a one time expense. So, no, I wouldn't just let her buy a car with the excess right now. I'd have her bank it and buy that car with it when she is in her last semester and ready for some serious job hunting so that the expense of car ownership doesn't overwhelm her.
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Post by cmpeter on Feb 6, 2015 0:15:37 GMT
If she banks the money wouldn't that affect her ability to get a loan or other aid next year?
What is the interest rate on the loan? If it's less than a conventional loan, then I would be ok with her putting it towards a car. But, if it's a higher rate, I would co-sign (again) for the car loan. Work transportation is pretty important in my opinion.
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 0:29:32 GMT
Unless she can afford the payments, insurance and upkeep on it by having a current job, I wouldn't have her roll the car into student loans. That car probably won't even last the life of the student loan payments! And she will still be paying for a car she no longer has -- especially if she uses further student loans to pay the monthly costs of insurance upkeep/repairs/parking.
But we try not to have loans on things that won't be around for the whole life of the loan. I personally don't love student loans and would strongly suggest paying back anything she can early and having a local job to pay day to day spending money/living expenses.
I've interviewed kids right out of college with 6 figure student loan debts. Unfortunately they've had to turn down a "good" first job because they can't afford to live on the salary and payoff their student loans (much less save or buy anything else). Many I know have taken a first job but need their parents to subsidize them after college because their loan payments are as large as a monthly rent payment.
I've counseled my girls about taking loans and so far we have been blessed enough to not have had to do so. So our stance is take as little possible and earn as much as you can to pay your current expenses so you don't end up so far behind that it takes decades to catch up.
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freebird
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Post by freebird on Feb 6, 2015 0:38:00 GMT
I think whoever pays the loan back at the end gets to decide.
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Post by eebud on Feb 6, 2015 2:22:47 GMT
I would not do it. There are a lot more expenses that go along with owning a car than just the purchase price. Who is going to pay for all of those expenses? Insurance, gas, maintenance. Also, I am constantly hearing about the massive debt that students are leaving college with. How much of that debt is for things like cars, incidentals, etc rather than books, tuition and school fees. It sounds like there is one car for the siblings to share for work. I would work with that.
Eta. What about getting a bike? Maybe the siblings can get by with one car and one bike.
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 3:19:28 GMT
I would bank the extra and when she graduates, out a big chunk down on the loan.
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 4:18:06 GMT
I would bank the extra and when she graduates, out a big chunk down on the loan. Why? You're just accruing interest in the meantime. If it's going to go to paying down the loan, it makes a lot more sense to do it now. |
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 4:22:42 GMT
I would have her save it for whatever little emergencies might come up.
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scrappinghappy
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Post by scrappinghappy on Feb 6, 2015 4:46:18 GMT
No, we wouldn't advocate for the used car.
There is so much more to owning a car than the expense of purchasing it. Gas, insurance,maintenance.
Our kids would share the 3rd car we had and figure out a way to get themselves and each other to and from work. Leave earlier or wait to so they can carpool even if far apart.
ETA eebud said it better - lol
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 5:55:42 GMT
I would bank the extra and when she graduates, out a big chunk down on the loan. Why? You're just accruing interest in the meantime. If it's going to go to paying down the loan, it makes a lot more sense to do it now. My loans did not start accruing interest until I graduated. |
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Deleted
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Aug 18, 2025 20:17:42 GMT
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Post by Deleted on Feb 6, 2015 12:59:16 GMT
Subsidized loans do not accrue interest until six months after graduation. Unsubsidized loans start accruing interest immediately. Most students end up with a mix of loan types by the time they graduate.
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