Of course they can be, but my point was that people are borrowing money and yet their kids aren’t going all in. My own aren’t working as much as they could be, but they aren’t borrowing either. They know if they don’t work hard in the summer, they will run out of money before next May. They can either work now or work later, but work they will. One is almost out of money, with a week of school and a week of finals left. She has a place to sleep and a place to eat so it’s just the fun that will be missing from the last 2 weeks.
120K of loans over 4 years makes sense if and only if:
- the parents or grandparents contribute if the child needs help paying off their loans
- and the child has complete knowledge of how long it would take them to pay off the loan, based on an average income in their field and 2% raise per year
Otherwise, it is ridiculous.
I’m just wondering - has anyone been turned down for a student loan? If you don’t have a career yet, do they just accept everyone?
Lots of people are turned down for private loans. For federal loans, income and ability to repay doesn’t matter. For students as long as they meet the requirements of being enrolled in the qualifying school, making academic progress, etc. For parents (Plus) loan, income and credit score also doesn’t matter, as long as they haven’t defaulted on other federal debts, are current on payments, and haven’t declared bankruptcy.
Gotta love that! So people who don’t save for college, then borrow to send their kids to their “dream” schools, should get bailed out by…ME? Or worse, my KIDS? My kids who chose the affordable state school, worked in paying jobs since they were 15 and mowed lawns since they were big enough to start a mower, never got a fancy family vacation or a car because we were saving for college, then got degrees in difficult majors so that they could be self-supporting and pay taxes? That’s who should bail them out? How on God’s Green Earth can anyone possibly think this makes sense? Gag.
We have a financial literacy requirement, but as far as I can tell it is about as effective as our metric system education requirement. Even really smart kids who can calculate compound interest don’t understand what the impact of repayments will have on their futures – in large part because they mostly are under the magical thinking umbrella that everyone who graduates from a “great” college immediately steps into a great job with great pay and benefits. We know life has a messy way of intervening, but students are pretty good at assuming that it will never happen to them.
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I'm just wondering - has anyone been turned down for a student loan? If you don't have a career yet, do they just accept everyone?
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If you’re talking about the student private loans…yes, that’s why there’s cosigners required.
For Stafford Direct loans, they’re easy to get.
What are parents thinking? Well just try and tell someone whose little star is in the performing arts to avoid loans. You will immediately be accused of stomping on precious darlings “dreams”. I know of one very talented opera singer with a masters degree and $125000 in debt who is basically working as a short order cook. I can’t blame him. He was 17 when this roller coaster started. Needless to say his mother is the most starry eyed fool I have ever met. And she is now angry at “banks”.
I can interject a situation described by a caller to Dave Ramsey last week. The gal and her H both are lawyers, and have combined $500,000 in school loans. I believe she said they are in Connecticut. He is in a small firm and working hard, but currently making around $60K. She had to scramble to get a job/insurance as she had a pregnancy, so she is working doing Probate work for a court system, making $40K. However she called in as she believes she can get known and do Probate work herself with the demand and getting referrals - court referrals with other systems that don’t have attorneys for the work pay $50/hour. They have to get their income up to pay off the loans in a reasonable time frame. I think she is sharp enough and hard working to get her expertise in probate to pay off. I know a lot of lawyers avoid probate work due to family drama. I guess it is just like being a divorce attorney - if you can tolerate the emotions of the work.
Talking about opera singer working as a short order cook - we had a great male opera singer as our waiter while on vacation, and he had a great voice singing ‘happy birthday’. One does what one has to do.
It sounds like some people have a big enough hole that they give up on ever paying off the debt (poster of #3 and #8 comments is a very good example). I guess they believe that they will die and then the loans are ‘done’ - and they have to keep working until their health keeps them from working - then they will be on public care, or they die.
People can change their financial direction by seeing ways to make more money and how to spend much less by being on a ‘beans and rice’ budget. If they don’t make the sacrifices, they limit themselves and also have no safety for emergencies. The mom who is angry at the “banks” - post 26, well maybe she can see how she can work or supplement her work, and also build up some money to help pay down principle on these loans for her son.
^$500K in student loans, with a family, will be very difficult to pay off. It is the equivalent of 2 pretty nice suburban houses in many parts of the country.
So what did Dave Ramsey suggest? $50 per hour is nothing for an attorney in CT. Ten years ago my friend was doing court appointed probate work in Texas for $200/hr.
One thing Uncle Dave should have advised is for both of them to get public service jobs for 10 years and IBR and at least get the federal portion of the loans dismissed after 10 years. That’s still going to leave them with a very high debt but it’s a start and at least their tax refunds, bank accounts, and social security.
Lots of people hate banks. They propose no alternatives, but they hate banks. My brother does. He’d rather pay a check cashing service than have a bank account.
I know a woman who had a messy divorce. Her ex owes her over $70K for their younger S’s college expenses. He wanted to go to local flagship but she said he “earned” the private U and sent him therer because he “deserved it.” He got quite a few scholarships to help, but she spent all of her divorce settlement–her share of the condo she owned with her ex, her share of the house they raised the family in on his college. Now, she’s in her late 50s and working 7 days/week, 12 hours/day running a food truck. Sometimes she even has to hire part time workers to help her. It’s unlikely her ex-spouse will ever pay the $70K he owes, as he also owes the IRS and state tax office, and they have priority. Her older son has been diagnosed as ADHD and bipolar and lives with her, and has only taken a few courses at CC. Her friends worry about her as she has no cushion and probably also took out loans to help her S get his “dream degree” in finance. He graduated a term early and is taking some time off to travel before getting a job. I don’t understand how people willing dig themselves into these deep pits (or fall into them). It seems pretty hopeless to me, but I just heard about it from a mutual friend who is also worried. She’s barely keeping her head above water and I don’t see that she did the younger S any favors by him attending his “dream U” that he honestly couldn’t really afford and having her at this point in her life working so hard at a physically demanding job with no reserve.
That’s nuts. If he had earned it, why didn’t he pay for it? And he wanted to go to the flagship, not the private school? (And they say kids are unrealistic…)
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He wanted to go to local flagship but she said he “earned” the private U and sent him there because he “deserved it.” …Now, she’s in her late 50s and working 7 days/week, 12 hours/day running a food truck. … Her older son has been diagnosed as ADHD and bipolar and lives with her,
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It’s not a stretch to think that the entitlement-impulsive-thinking mom is also mentally unhealthy.
There is a lesson in all of this. Teach your kids how to save, give, delay gratification, and make wise choices, and how compound interest works. My oldest is 1 year out of college making a 6 figure income. He can afford to spend money, but he has a budget and is saving and investing. It seems like some of his college friends are being smart with their money (and realizing that this bubble may burst), while others are in the “This money isn’t going to spend itself” camp. Each kid seems to be following the path of his/her own parents.
@barfly- re:post 23-- couldn’t agree with you more. My kids have worked and saved for years too. We as parents have saved and lived below our means for years to help them with college costs. I recently worked with an almost-grad who has $200,000 in debt and a child on the way. He will have a very good job, but I’m still just shocked by those numbers.
Hillary to the rescue! (Lol) http://finance.yahoo.com/news/how-hillary-clinton-might-solve-the-student-debt-crisis-153633224.html
My friend’s daughter and her husband met at an expensive private school in TX. She was fine with going to a cheaper school but dad wanted the prestigious school and was willing to pay so no debt (except she was shocked to discover her trust fund which was fairly substantial was also used up to pay for school - she was expecting that to come to her and did not know it was being used up.). The husband is not from a well off family and has over $100k in debt. He thought he should make more money than he can because he went to “x”. Held out for a while till he had to accept money due to a surprise pregnancy (she makes fairly good money but had not been in her job long enough to get maternity leave plus had to go on rest due to complications). He does not make anywhere near enough to be paying that kind of debt. Between the 2 of them, Once she goes back to work, they’ll manage. But that is a big burden financially.
Again, those programs are only really of use to people who have all of their debt in the form of federal student loans, and of that group only for people who have the financial discipline and wherewithal to stick with the IBR or ICR plans which require regular, steady payments for up to 25 years. The people described in this thread are probably not in that boat.
There’s a good example of this in the Parent’s forum right now, where the son (after having some academic performance issues in the last year of high school) had his heart set on an unaffordable dream school. The mom is being realistic but the dad is taking the son’s side and not wanting to hear about the risks of borrowing tens of thousands of dollars per year for no reason. Most of the parents on the forum were pointing out the risks but as always there were a couple of people saying, “Oh, why not just borrow the $20,000 for the first year and see what happens??”
Sometimes you just have to say ‘no’ to your kids. Some parents are uncomfortable with that, and some parents are really uncomfortable with talking about money.
@DmitriR The son in the thread you are talking about ended up enrolling in a somewhat distant but realistic community college.
True, but I was just highlighting the fact that the dad wasn’t very supportive of the mom’s point about finances and the fact that some of the people commenting were dismissive of her concerns. (I remember one poster repeatedly suggesting that the parents should just go ahead and borrow the $20,000 for the first year at the expensive school to avoid upsetting the son even though the mom was unsure about the family’s finances as well as the son’s commitment to academics). The fact is that people will give into ideas that they think are bad (cosigning for loans that they aren’t sure they can afford, for example) just to avoid having tough conversations with their spouses or children. It happened to work out better for that family but it wasn’t easy and there are many families who would have given in and borrowed the money.
IBR and ICR plans like the ones described in that article aren’t going to save people from those kinds of mistakes.