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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Considering a college loan

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: My daughter goes to a state school where the tuition is only about $5000. I know this is not much compared to other schools, but I do not want her to take out a loan for the full amount. Should I take out money from my IRA to pay for it?

A: You relayed separately that you are a 55 year old single parent with a modest income and modest savings for retirement. I am much more concerned about your future financial security than your daughters. You should not take money from your IRA for college expenses. Instead, have her (or both of you) meet with her school's financial aid officer as soon as possible to explore alternate financial aid. You probably qualify for some aid that you do not even know about. Even in the worst case, a $5000 per year loan for undergraduate education is tolerable for a college graduate. The financial aid office can provide all information about the student loan options and procedures. Also, you should be aware that the maximum required student loan repayment is 25% of the graduates income that is excess of the poverty level. This is set as a protection for students who take college loans. For example, if the graduate's income is $2500 per month and the poverty level income is $1500 per month, then the maximum required loan payment under current rules is 25% of $1000 or $250 per month. That amount might crimp the budget for a car or other expense, but this alone would not financially cripple a young graduate.


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