As a soon to be new college parent, my son is graduating high school this year, how do you estimate how much debt is reasonable for them to take on? I know there are many variables but a student graduating with $30K in debt would approximately be paying how much in payments each month? I’m just throwing out a number. Hoping for less! (: Again I know there are many variables but if you are estimating and trying to determine for yourself how much debt is manageable and convince said child of the same thing, are there websites that help you factor this? And is there a normal amount of time that most student loans give you to pay off? Sorry this is probably a very rookie question but I know car loans average 3 or 5 year repayment plans, mortgages 15 or 30. Is there a “norm” for student loans? If I’m in the wrong arena please point me in the right direction.
The norm payoff is 10 years. You should be able to google a student loan payment calculator.
Fabulous! Thank you!
With $30,000 in loans…the repayment will be approximately over $350 a month for 10 years. Or so.
But yes…there are calculators out there that can help you.
Good to know. I’m hoping my son doesn’t commit to more than $15-20K in loans for his undergrad. Sounds reasonable. I keep telling him that many people meet their future spouses in college. So if both have big student loans it adds up to a hefty amount for a young couple starting out. I have family members that have said “it’s part of life, just let them take on the debt.” But I’d prefer he have a realistic idea of what that debt will look like every month with real numbers so thank you guys for the help.
@Artsy16 There was an article in Washington Post yesterday about a couple moving in together who had $120k in student loans and how that was impacting their life decisions like getting married, having kids, etc. A very real world example of what you mentioned above. In this case the debt was heavily skewed - hers is $100k and he only has $20k. Salaries < $50k each. An underlying but not really explored question was how the debt imbalance might affect their relationship as time goes on…
Your son can only borrow ~$5500/year. Unless you borrow the rest (cosign every year), his total debt can only be ~$27k.
^^ but there is interest that has accrued, some kids also have (had) Perkins loans, some go an extra semester or year. It is quite possible for a student to get above $30k without a parent co-signing.
I thought I had read that about the students only being able to borrow $5500 a year. So if we as the parents decide not to take on any loans, he is only able to borrow $5500 yearly? I guess I’m more of a rookie than I thought. If we cosign tho he can take on a little more? He may not need to. He has some solid scholarships already and will be getting more after some scholarship weekends he is attending. His two favorite schools aren’t too pricey but they aren’t public universities either where he could live at home. We said that was fine but he has to bear more of the financial weight as we just can’t give him that much. And like you mentioned @JustGraduate, a heavy amount of debt on a young couple could really impact the course of life. I’m not sending him to college to pick up a wife but that is something to consider as it frequently happens. I feel like we still have so much we have to learn about college debt.
$5.5k freshman year, $6.5k sophomore year, $7.5k junior and senior.
Direct loan amounts…
Freshman. $5500
Sophomore. $6500
Junior $7500
Senior $7500
Some students do have Perkins Loans in addition.
Some students are independent for financial aid purposes and can borrow more per year in Direct Loan money.
But for the typical college undergrad, who takes only the max Direct Loan…for four years…$27,000 is the total.
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His two favorite schools aren't too pricey but they aren't public universities either where he could live at home. <<<
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Just room and board is going to be more than 10K/yr, he has full tuition at a private college? R&B alone will eat his staffords and any money from a job. What are his actual options?
My basic rough personal rule of thumb is this: the student shouldn’t borrow more than 10% of the annual salary that would be reasonably earned if the student were working full time, as of the time that the loans are taken. (Not what the student thinks can be earned post-graduation – because sometimes things happen and the student doesn’t end up graduating with the anticipated degree – but the debt remains). I think the federal limits on direct loans easily fall within that amount - after 4 years of college, most are going to find jobs that pay above $27K. If the student drops out after only two years - with $12K of debt – even a minimum wage job is going to pay more than $12K a year.
Obviously the less debt the better. My kids took only subsidized loans for undergrad-- I didn’t want them accruing interest while in school.
But even on the Stafford loans there is going to be accrued interest on the unsubsidized amounts. Plus some students whose parents couldn’t qualify for the Plus loans have addition Stafford amounts of $4k-5k per year (unsubsidized, so with accrued interest).
When the student goes to consolidate 4-5 years of loans, plus interest, the amount can be over $30k. The OP was just asking what the payment could be on $30k and what the term is. Ten years for repayment of that amount is standard. There are currently a lot of Income based repayment (IBR) plans too, but no one knows if those will be around, or be the same, when those currently headed to college graduate.
Your son can also get a campus job and work as much as possible during summers to help.
@Sybylla All of the remaining debt that he has uncovered at this point is room and board. He has his tuition basically covered at both schools. During his scholarship weekends he will earn more toward chipping away at the room and board. Now at the public university he doesn’t have full tuition covered but he could live at home. However he really doesn’t like that school at all. I’m hoping after these upcoming weekends he could get himself either the remainder at one particular college or very close to it and at the other school, well we’ll just have to see. It’s essentially going to come down to which ends up being the more affordable option. I wonder if many of you would recommend taking his final offers and meeting with a financial advisor to compare and explain some of these different loans.
My son definitely plans on working on campus during the school year. And as an Eagle Scout he is thinking about taking a job at Philmont in NM. The plus to that would be there is really no where to spend any of that income!
His tuition is actually covered by scholarships or potentially by FA? That is all confirmed? You need to take out loans to pay R&B? Even if he takes the staffords? How much is the tuition at the local uni?
Yes at this point with all of his merit scholarships and grants, his tuition is covered. Room and board and any extras leave about $12K at each school. Both are private universities. One takes government loans, the other does not. The tuition at the public university that he would have left to pay would be about $5-6K. But again, after the remaining scholarships, he may be close or less than that at one of the private schools maybe both. We should know more in March. After everything kicks in then I’m thinking the offers may wind up being very similar. The plus to the two private colleges is that they are pretty well connected in his desired field. He could have an easier time lining up internships or even jobs so in the long run even if he winds up owing a little more it could be worth it.
@artsy18 what four year college does NOT participate in the Direct Loan program?
@thumper1 There are actually quite a few: Hillsdale College, Grove City College, Patrick Henry just to name a few They have their own loan programs.