Posted: 6/15/2006 2:46:06 PM EDT
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My son is enrolled at Georgetown and will be a Freshman in September. Last night the wife and I visited an investment company that specialized in making the arrangements in order to pay for college. He basically asked us to invest $25,000 with him and pay approximately $1200 a month starting in August. Using this scenario he said that i would take us between 6.5 and 8 years to pay off the student loans....Money would be invested in mutual funds. Has anyone heard of this? I know I left out the amount borrowed etc...just wondering if anyone heard of or did this type of financing before. |
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The tuition and to board at Georgetown is not at $48,000...My son was accepted to the school of business. We received some aid but not much....The wife works as well. NoVa...as you know, Georgetown has great name recognition and it will give the kid a leg up once he hits the working world....I don't care what anyone else has to say. If they want to attend Podunk Community College I wish them well... |
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I would recommend you do you own investing and avoid 3rd party potential scams. I I would also make my son work every other semester as a "co-op" student to help pay for his education, and he would be going to an in-state school to start with. Too many kids are going to expensive out-of-state schools, graduating with a liberal arts degree (business major is much better) that they cant get a job with other than a waiter, and they and / or their parents end up with a six figure debt to deal with for 20-30 years. While the actual school can be important, most people in hiring positions are looking for the type of degree earned, the GPA, any relevant work experience, and written and verbal communication skills. The reputation of the school you go to could make a difference when getting your first job, but after about 5 years it doesnt make a hill of beans. Save your $. There are great schools in PA. I would look seriously at Penn State, that is a great school with in state tuition. Back to your original question, I would run some numbers to see if that financing deal makes sense. As I am sure you are aware, no one can guarantee a rate of return on a mutual fund. I would invest the money myself. |
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Not knowing what contractual commitments he's willing to give, I'd say this is iffy. I doubt his contract with you says he can guarantee that he'll make enough $ on your investments that you will be able to pay of the student debt within X years. I'm willing to bet it has all sorts of disclaimers saying no return on investment is guaranteed, etc. So I say pass. There are better ways of financing student debt, including letting your son (who is legally an adult now) take out some student loans to help. Some of the Stafford loans are subsidized by the .gov such that interest does not start accruing until your son graduates from Georgetown. Furthermore, interest on student loan debt (assuming you make less than a certain amount) is tax-deductible. I'm not saying dump everything onto your son. My parents didn't dump college costs on me or my sister; they paid a lot of money (for me, over $100k total) but they still had me take out some Stafford loans in the interim. It can be crippling for a new college grad to pay tons of student loans ... but a little bit of debt won't hurt him and will also provide him with the proper incentive to make the most of his college education! Best of luck to your son. |
Going to a private university that charges a lot of money I say that sounds weird too. I also agree with some of the posts on here that it is best to avoid 3rd parties. Also, try calling up the school and appealing scholarship. They'll look up how much you make and try to make adjustments accordingly. This helped at my school and they are so stubborn with money. Good luck! |
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How much will 4 years of tuition cost? $1200/month x 48 months + $25k = $82,600. Ought to make a hell of a dent in the tuition bill if you pay as you go. Does your son qualify for student aid? Make him pay at least part of the bill.  OTOH, business school or something like that might be worth the extra cash.I would be very wary of a plan like the one pitched to you. What is the expected rate of return, what are the fees involved, etc? Make sure they are being realistic about both. |
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Better solution: take out interest-free student loans (assuming you qualified for subsidized Stafford), pay yourself the money every month, invest it in something decent but stable, then take that chunk of change and pay it towards the loans when the kid graduates. If that can't work due to not having the Stafford loans available or whatever the case, I'd just do some research yourself on mutual funds and go with a reputable firm like Vanguard, Fidelity, or T. Rowe Price. |