The title is the question, but there is a backstory on why I ask. Next fall, I am planning on taking my car to college with me, but I don’t think my current car would make it. Plus, my youngest brother wants to drive it, since it is good for local driving, just not an hour long commute every day. Paying for college is not a problem, so I don’t need the to take out my own loans for that, however, I don’t know how much money I will be able to save up towards a new car over the summer, and don’t want to have to ask my grandparents to pay for the car. So, my father suggested that I take out a college loan for the car. His logic is that the bank doesn’t really care what you do with the money, and I will be able to afford a decent car that will last until well after I am out of college, and I do not have to begin payments on the loan for six monts after I graduate. I just don’t want to have the bank find out and have to go through college with a huge car payment. So, is it a good idea to take out a college loan to buy a car? Or should I try to save the money and see what I can get with that?
Here is a site on the ins and outs of college loans.
I’ve never taken out such a loan but my WAG is that the money for tuition, dorm rooms etc. is paid directly to the college and not to you. These are mostly federally guaranteed loans and the people who run then weren’t born yesterday.
I would guess that your father is mistaken when he says that the lender doesn’t care what you do with the money. Loans require some sort of assurance that they will be repaid and the assurance for a college loan is that you wind up with college training that will enable you to get employment that will allow repayment of the loan.
I certainly think playing fast and loose with the rules and intent of the college loan program is unwise, to say the least.
They are. But, the university that I go to pays back any extra money directly to the student. Someone I know got back several thousand dollars from the university because they took out too much in student loans. Since the tuition is already going to be paid for by my father, any extra money paid to the university is given back to me.
I’ve got a book called “2276 Bad Ideas”. That one is in Chapter 1.
Why not get your father to pay for the car, and the university to loan you money for your tuition?
Sorry, that should be 2201.
Reference to one of my favorite books growing up. “2201 Fascinating Facts”.
Do you know how many lines are on the edge of a dime?
It’s probabally the best loan you will get from a non-family member, so on that side it will be a attractive way to go. OTHO being able toget out a college without a large debt overhead is also a attractive way to go.
My real advice is to buy a used car that meets your needs and that you can afford.
However, more to the OP -
There are varieties of college loans. In general they are for your living expenses during college, which to some extent would include transportation. Some transportation (such as trips home for the summer) is actually included in the financial need calculations. You need to qualify based on financial need for the federal loans with the special repayment terms. Based on your description of the situation, I’m not sure you would qualify.
However, some banks also just generally market loans to students and parents, maybe with slightly better terms than usual. These are probably less restricted in terms of how you qualify & how the money is spent.
Look, you can bankrupt out of 99% of debts. Credit cards, car loans, mortgages… your spouse loses her job, you get sick, you wind up 9 months behind on your bills… you go bankrupt, make some payments, and you’re able to keep on living like a normal human being.
Student loans, alimony, child support and taxes will not get discharged in 99.999% of all bankruptcies. If circumstances beyond your control hose you up, you’re still paying up.
You don’t want to turn a low-interest loan (for a car) secured by a car into a low-interest loan secured by all of your future assets and 25% of your earnings from now until the day you die.
You’re probably young and have probably never been laid off or too sick to work, but take it from me, it can happy to anyone.
Remember, car loans generally have reasonable interest rates, even if your credit isn’t that good.
Considering there is a new bankruptcy law, I would take a long hard look before going down that road. From my meager readings, you cannot bankrupt out of 99 percent of your debts.
Yeah, and that cash is for commuting, food, etc. Trust me on this, it seems like a lot of money, til you’re actually living off it. Then, notsomuch.
Seems to me that if you have the cash at hand for all of your college expenses, then there’s no difference at all between these two things:
(1) Using cash reserves for a car, and taking an education loan for what you’re missing to pay for school.
(2) Paying for school and using the loan to buy a car.
In both cases, total expenditure and loan is identical.
Do you know that the acupressure point for appetite is the hollow channel behind the earlobe?
You can usually only get a set amount in student loan money however, it is around 3500 for sophomores and 5500 for juniors and seniors.
I personally don’t see the big deal on it, most student loans are of longer duration and lower interest than a car loan is going to be. And if this is all you’ll buy with loan money defaulting won’t really be a problem. Assuming you take out 6k for a car and get the 10 year payment plan that is $60-ish a month for 10 years, coming up with $60/month shouldn’t be hellishly hard. If you try to buy a car with 2,000 or so you save up yourself you could end up spending alot more on repairs than it is worth, its best to invest in a reasonable car for $6000 or more instead.
I’m fully aware of the new law, but my point stands.
You may be forced to repay a substantial portion of your standard commercial debts under the new law, but if you owe money to a student loan lender, you’ll still wind up repaying ALL of what you owe.
And if your income is sub-average, you will in fact still have old-timey bankruptcy protection available to you.