<p>NPR's All Things Considered has been doing a series on Paying for College:</p>
<p>A suggested rule of thumb is that a total of college loans should not exceed the amount a graduate could be expected to earn in his/her first year working after graduation.</p>
<p>Pye, Thanks for posting this --- I'd caught one of them halfway through earlier in the week and had been meaning to try to find out if they were on the web.</p>
<p>I am not sure I agree with the idea of using first year's predicted earnings as a baseline. How do you accurately predict what a child just starting college now will be making 4 years (or 5 or 6 in many cases) from now? So many kids change majors, or end up doing something completely different from what they major in that I think it is very difficult to predict first year earnings. Many kids seem to have inflated expectations about what they will earn as well --- the kids I talk to expect to all be making $50,000 or more right off the bat, some think they'll come out of college and start earning much, much more.</p>
<p>I also think I would be more comfortable looking at what the monthly cost of the debt will be in four years, rather than the total amount. And, I'd want that monthly debt to be no more than the monthly payment on a new car.</p>
<p>pyewacket, I'd have never gone to med school under that rule. Mayhbe more realistic, amount borrowed should not be more than salary made in 4 years.</p>
<p>Quiltguru (at first I read that as GUILT guru!):
Was it a problem for you to pay back heavy medical school loans? My D is hoping to attend medical school, but worries about the finances. We are paying for undergrad (state school), but she will have to pay for medical school.</p>
<p>bookiemom, the only physicians I know who didn't pay back loans were the slackers...and got caught. All of us complained, but we all paid off our loans. Some deferrals are built into the system, so for most payback didn't start until 3rd or 4th year of residency. Residency salaries are low...<$40k, but salaries even in the 1st year post residency are >$90 to 100K for most, except perhaps primary care specialties like family practice, pediatrics, or internal medicine. Please DON'T let the specter of loans scare your child away from attending med school.</p>
<p>NPR was addressing undergraduate degrees only.</p>
<p>I am more in line with Carolyn's way of figuring. I just look at what our payments would be per month to pay back the total loan and determine if that payment is within affordable reason. We are paying back the college loans so maybe you are just talking of the kid paying it back but I still think that is a way to look at it...the monthly payment.</p>
<p>The way I like to look at it is to assume that they are still carrying student loan debt when they are ready to buy their first home. Altho there is now quite a bit of flex in lender ratios, the "rule of thumb" is that non-housing related debt should be no more than 6% of their monthly gross income. Assuming (and hoping :eek: ) that they are not carrying other debt (credit card, boat...), one can use this 6% figure as a guide. If they expect to earn $36K/yr, this means $180/mo loan pmt etc.</p>
<p>I would say no more than $20,000 (absolute max) unless the student is an engineer (from accredited institution with a "real" engin. degree, not something like biomedical technology studies) or an accountant (see above). Basic thought - if you are going to earn in the $30k/year range when you graduate, even $200/month in debt is going to be hard. If you are almost certain of getting a high-paying job upon graduation, without grad school, and your employer will pay for grad school, then take on a bit more.</p>
<p>IMO, undergrad debt should be kept to a minimum for those who want medical or law school, which has little or no financial aid or opportunities to earn money during the school year.</p>
<p>Realistically, most kids who come right out of college make less than $20K a year. And they typically have no benefits. Many go back home to and mitagate their expenses that way. Many only have sporadic employment. Unless you are taking a preprofessional route, that is typical. Even some very "prestigious" jobs pay little for kids right out of college unless there is a special skill that a company needs. So that loan payment can be a real bear for students. </p>
<p>As for medical school, that is a whole different story. My niece is $160K in debt, but that appears to be typical. She won't be making that amount in a year for a long time as she will be an intern/resident for the next 4 years, and who knows if she will go onto another specialty. My nephew who just finished his residency is going into a fellowship. He has managed to chip down his loan amounts, but he is certainly not going to be making his debt in a year. It appears, that this is typical in professional schools. I do get concerned about kids taking huge loans for law school who have large undergrad loans, as the law profession does not necessarily pan out with big salaries. </p>
<p>It so depends on the individual situation. Those who have family to help either in letting them live at home those first years to giving some financial dollars are, as always, at a huge advantage. For those who are leaving a dysfunctional household, it might be worthwhile taking a large loan for a chance for a better future for onesself. I am the most concerned for kids and families who have no idea what the value of the education is for the money they are borrowing. I know some families breaking their bank accounts and borrowing heavily for programs that have no advantage over the community college/local state school route, and what they are selecting costs 4-5 times more with little payback possiblilites. XYZ Business College may not give a student any edge in job possibilities and if it charges $20-30K in tuition, you had better think long and hard about that selection over a state/community college.</p>
<p>Nursing B.S. can also take on more debt. Starting salaries around here (not metropolitan area) are in the mid-40s.</p>
<p>And employment prospects are hot, I would think, too, Mini. All of these things figure in the equation.</p>
<p>I did not have a college loan to repay. However, I have a similar experience that may give you some guidance. With a combined family income of about 100K, no car payments, moderate house payment, no other loans and raising two kids, we also had a loan for 35K we had to pay off. It took 7 years to pay off and was a severe burden, even with a fairly frugal lifestyle at that income level. </p>
<p>In my working career of over 30 years, I have had at least 3 very different careers, was sometimes unemployed for months at a time and our income fluctuated quite dramatically. Your experience may be different, but I found that carrying a large loan was an extreme burden and economically, quite dangerous. </p>
<p>I cannot imagine having a colleg loan for the kind of dollars some of the people in this thread have mentioned. But then, with my experience of having to change careers a couple times and being unemployed that has a major impact on my view of carrying debt of any kind.</p>
<p>Best wishes to all,</p>
<p>gnusasaurus</p>
<p>I hesitated to post on this thread, but now since gnusasaurus has broken the no debt ice... My wish for my child would be to carry no debt at all.</p>