How much $ do you think you can afford to borrow for college? Reality Check :)

Paying for College
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<p>Students...how much do you think you can afford to borrow for college that you would be able to pay back without the debt being nearly impossible, unbearably painful, or just plain annoying (to the point of regret)?
(see bottom of post for monthly payments for various student loan debts.)</p>

<p>Remember, loan repayment begins shortly after graduation....around age 22 and continues until you're about 32 (if borrowing for undergrad and not going to grad school). Those are the years that you should be "moving on" with your life, not stuck living with your parents because your loan payment is preventing you from affording "rent" money. :(</p>

<p>Another consideration...if you'll need to borrow for grad/med/law/business school, too, how much can you afford to borrow for undergrad?</p>

<p>Also consider...you may not have the option of living at home while you repay your loan. Your parents may not want you to move back home, you may not be able to find a job in that area, or you may not feel comfortable living back at home after having years of freedom.</p>

<p>Now...I realize that some kids must borrow <em>some</em> money for college otherwise they wouldn't have any other opportunities to go. That's not what this is really about...although it might make some kids think of some cheaper options.</p>

<p>There are some kids who do have less expensive, yet very good options, yet they think "big student loans" are the quick and easy answer to getting what they want.</p>

<p>Few kids stop and "do the math." Instead the option of student loans seems so promising. Also, some kids don't realize that they will need co-signers for the bigger loans, and many parents can't/won't co-sign for these loans - to protect you from owing so much, and to protect themselves in case you default and don't pay.</p>

<p>And, please, note the amount of salary that you would ** immediately ** need to start earning in order to comfortably pay back such loans (a person can only live cheaply for so long, then it gets really "old" as you see your peers being able to afford things that you would be able to afford if you didn't have these high loans.)</p>

<p>Remember, these payments would be for 10 LONG YEARS... Some would be like paying 3-6 extra car payments every month for 10 LONG years.</p>

<p>** For instance, if you were to borrow....</p>

<p>$5,000 per year ($20k total after 4 years), your monthly payment would be: $230.16
You'd need to immediately be earning a salary of $28k to comfortably pay that off.
Total payments each year: $2761.92 for TEN LONG YEARS</p>

<p>$12,500 per year ($50k total after 4 years), your monthly payment would be: $575.40
You'd need to immediately be earning a salary of $70k to comfortably pay that off.
Total payments each year: $6904.80 for TEN LONG YEARS</p>

<p>$18,000 per year ($72k total after 4 years), your monthly payment would be: $828.58
You'd need to immediately be earning a salary of $100k to comfortably pay that off.
Total payments each year: $9942.96 for TEN LONG YEARS</p>

<p>$25,000 per year ($100K total after 4 years), your monthly payment would be: $1,150.28
You'd need to immediately be earning a salary of $138k to comfortably pay that off.
Total payments each year: $13,803.36 for TEN LONG YEARS</p>

<p>$50,000 COA for a private ($200k total after 4 yrs), your payment would be: $2,301.61
You'd need to immediately be earning a salary of $276k to comfortably pay that off.
Total payments each year: $27,619.32 for TEN LONG YEARS
**</p>

<p>Info from.... FinAid</a> | Calculators | Loan Calculator</p>

<p>AND.... the higher loan amounts would likely even result in HIGHER monthly payments since big loans usually require higher interest rates.</p>

2

<p>Those numbers are real, but many students, especially when they go onto grad school, etc. extend the loans out. I’ve known many I met at Yale that intended to do 20 or 25. My nephew was doing that until he came into some inheritance money and paid it off at 33. Granted the interest is high, but it makes it doable. When you think of what you finally pay for a house or car sometimes, it’s scary, but you always have the option of paying more if you can.</p>

<p>For instance, 20.000
Standard Repayment - 10 years $230.16
Extended Repayment - 20 years $152.67
The first has interest about 7,000, the second about,16,000</p>

3

<p>Wow…</p>

<p>You’re saying that if a student borrows $20k (5k per year - which is smallish loan), and extends repayment for 20 years, he’ll end up paying $36,000 back ($16000 in interest)? Wow, that’s a lot. Gosh, you’re only reducing your monthly payment by about $80 a month, but then you’re paying for an additional 10 years… Yikes!</p>

<p>Of course, many kids who are delaying the start of their paybacks by going to grad school, are further borrowing to cover grad/law/med/business school costs. So, the idea that such kids would only end up borrowing $20k total is very unlikely since those costs are typically a lot higher.</p>

<p>For instance, someone who has borrowed $20k for undergrad and $180k for med school would owe $200k. But, even if he stretched his payments out for 20 years, he’d owe $1600 a month for TWENTY years, and he would pay an additional $166k in interest above the $200k he originally borrowed. </p>

<p>(Actually the payments and interest could be higher if the interest rate was higher than the Stafford loan rate.).</p>

4

<p>That was the 6.8 rate, fixed rates, but it does add up. I don’t think a lot of people look at the whole amount with interest. I had to take a 5 year loan to pay for my last used car, just needed one at a bad time. I glanced at the full pay off amount recently as I paid the last payment, but it was better than getting a car that was a junk and not as reliable and it was a low payment I could afford monthly. Look what you spend on most homes, but you do it because most can’t pay it upfront and want the tax benefits. That said, you will always find people that will say an investment in education to them is like an investment in a home, car, condo, etc. I agree only to a point. I don’t feel spending 50,000 for a busness degree that yields what a 20,000 one could, is wrong just to be in a certain school, but that is a personal choice.
I also don’t think most students look at monthly payments in a realistic way. They think, 300.00 a month isn’t a lot, that’s a car payment, but what if you need a REAL car payment, what about rent, food, insurance, utilities, cell phone bill, and on and on.
My nephew lived home for years saving money and paying down his loan, but how many students want to do that? In some ways, college can be a bubble, but it pops soon enough.</p>

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<p>Maybe I’m wrong, but I don’t think the students who are borrowing the “big loans” are getting them all at 6.8%. I think some/most of their loans’ rates are closer to 10% - which would increase the payments.</p>

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<p>Yes, and many more are signing up for loans that will give them even larger monthly payments ($600 or more!). </p>

<p>And, yes, during that 10 year repayment period the student is likely to also have a car payment for 3-5 years. For many students, getting a “decent looking” car is part of the “coming of age” while embarking on their careers. And, even it that isn’t the goal, it’s hard to go thru a 10 year period (after college) and not have to buy a car.</p>

<p><<<<<<<<<
My nephew lived home for years saving money and paying down his loan, but how many students want to do that? In some ways, college can be a bubble, but it pops soon enough.
<<<<<<<<<<<<<</p>

<p>Many grads can’t move back home to “save money” to put forth their student loans, because their jobs are elsewhere. And, few grads WANT to live at home again. Many parents won’t let Janie have her boyfriend spend the night.</p>

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<p>The interest is about the same depending what loan you are consolidating. This page explains a lot:
[FinAid</a> | Loans | Why Consolidate?](<a href=“http://www.finaid.org/loans/whyconsolidate.phtml#extendedrepaymentcaveat]FinAid”>http://www.finaid.org/loans/whyconsolidate.phtml#extendedrepaymentcaveat)
Sometimes if you need smaller payments for a while, and there isn’t a pre-payment penalty, it’s a good idea.
My nephew was an only child and had the house to himself a lot, but yes, my sister didn’t like overnights, but he dealt with it. The money he saved was great and now he is getting married and buying a condo. My niece is finding it harder, having to have roommates and skimping a lot, but is working and doing the best she can. Her job paid for her masters which helped a great deal to keeping debt down.
Some professions though, it is impossible not to accumulate debt.</p>

7

<p>^^^</p>

<p>I agree that it is impossible with some professions not to have debt (unless wealthy). My DS2, who will graduate “debt free” for undergrad, will have to take out loans for med school. The amount will depend on where he gets accepted. We’re hoping for an in-state public acceptance because the cost is a fraction of other places.</p>

<p>However, since he’ll be a surgeon, he’ll likely have an easier time repaying his loans, as opposed to someone with similar loans who may not earn as much. </p>

<p>As you can see above, once you start borrowing $100k or more, you really have to be making top money during those early years to afford repayments.</p>

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<p>DS just began his repayments. He actually has two Stafford loans, one from undergrad and one from grad totally about $38,000. His total payment per month (for both loans) is $399 a month for 10 years. </p>

<p>Our gift to him will be to help him with these repayments any time we can…birthdays, Christmas, etc. That $399 a month is a FRACTION of what we were paying monthly when we were paying the college tuition/room/board costs. Seems like a “bargain” to us to help out and we are grateful we are currently in the position to do so.</p>

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<p>mom2collegekids…I hope you are right. I have been listening to financial people who are saying that physicians may have a tough time making the kind of income they had in the past due to a combination of government planned health care, liability insurance skyrocketing, etc.</p>

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<p>thumper…your son is blessed that you were willing to help with his college expenses, and to occasionally help with with his student loan payments for the next 10 years. $38k loan at $400/month probably wouldn’t be staggering for someone with a grad degree. :)</p>

<p>Sadly, many kids don’t have any help from their parents (for whatever reason), and some think the answer is mega loans for undergrad. </p>

<p>ebee…I completely agree with your concern about how a doctor may have difficulty with loan payback with the present healthcare reform plan and out-of-control liability since tort reform isn’t being included in reform. Actually, I’m hoping the reform doesn’t pass since, it will be unaffordable. Because of repayment concerns, we’re really hoping that DS2 gets accepted to one of our in-state public med schools - the prices are very reasonable - we could probably pay for much of it ourselves.</p>

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<p>The reality of it is that as a young person you want as little debt as possible. With the kind of salaries that most bacholor degree graduates can expect to make it will take forever to pay off a significant loan. Do the math and be smart. A nursing degree from , say Emory , isn’t any more valuable than a nursing degree from GA State. And GA State is a fraction of the cost.</p>

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<p>As I’m sure you are aware, student borrowers are not necessarily required to pay a fixed unchanging amount for 10 years, at least on the federal side. In addition to the standard fixed-payment-for-10-years, there is the Extended Repayment (the repayment period is lengthened), the Graduated Repayment (payments start low and increase gradually), and the Income-Based Repayment (the monthly payment is capped based on income and family size). [Student</a> Aid on the Web](<a href=“http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp]Student”>http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp)</p>

<p>I know that you hate debt, and so do I. You are extraordinarily blessed to be able to provide your kids with a debt-free start in life, and I certainly wouldn’t advocate students borrowing hundreds of thousands of dollars willy-nilly. But the reality is, most students today will have to do some borrowing in order to get their degrees. If we advise students that they should never even consider student loans, we are severely limiting their college options in most cases. As Pearl notes, the goal is to minimize it as much as possible, and to make smart borrowing decisions.</p>

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<p>This IS a reality check. Especially if a student considers their first job, and those expenses…and it will affect getting a mortgage etc because of debt load. </p>

<p>Thanks for posting this info…</p>

<p>I was pretty blessed in that my parents paid for my school
It was an OOS situation for me but a bargain compared to what my friends LACs cost–my parents didn’t tell me what to choose–but where I chose to attend worked out great for them. Because of that–and the 14 hr drive to school, my parents bought me a car…
so I was blessed to start with no school loans and a car (w 3 yrs of college miles) when I graduated. </p>

<p>I am hoping we can do our best to help DC have that advantage but the tuition now is far far higher -like 10x what my parents paid per yr…</p>

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<p>Yes, and it’s this kind of thing that concerns me. I realize that some kids have to have “some” debt, because for them attending ANY college is not doable without some debt. The issue is understanding how that debt will affect the student’s future life, and avoiding as much as you can while still getting a qualify education.</p>

<p>This is really more of a wake-up call to the kids who have GOOD academic alternatives, but blindly go forth taking on massive debt just to go to a more expensive school, when the resulting income can’t justify it. </p>

<p>Frankly, there are very few professions that require students to attend only certain pricey schools that would require massive debt.</p>

<p>Yes, I am aware that there are ways to lengthen your loans to 20 years and so forth, but when you look at those numbers, you’re almost paying back double of what you borrowed. For the short-term and often unnecessary goal to attend college A over College B, choosing College A with massive loans will likely be a regrettable choice.</p>

<p>LasMa’s D is a good example. She chose the more economically-wise college’s FA package over others that were laughable (according to LasMa). She could have chosen a school that would have required massive debt, but she chose not to. I’m sure she’s getting a fine education at her chosen school. Her smaller student loans will be more affordable than the ones that she might have taken if she had gone elsewhere.</p>

<p>BTW…my kids will not likely be “debt-free” when they start their lives. They will be debt-free for undergrad. DS2 will be going to med school - there likely will be debt with that. He wants to minimize that by (hoping) getting accepted to one of our state’s public med schools because they are much less expensive, or to a top private that might give him some non-loan aid in some way. But, either way, he’ll likely have debt from med school. Our goal was to not compound his debt load with undergrad debt, too.</p>

<p>DS1 is deciding between grad school or law school. If he goes the grad school route, he probably could get a lot of that paid for. However, if he goes to law school, he’ll likely have debt from that. But, again, the goal to not compound that with undergrad debt, too. </p>

<p>Again, I realize that some need to take on some debt for undergrad. I just think that kids need to go into such debt with their eyes wide open. There could be some painful and long uncomfortable consequences if they don’t.</p>

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<p>^ Amen to that.</p>

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<p>bump…</p>

<p>I’m bumping this because there have been a few kids posting lately who haven’t “done the math” and are considering massive students loans…</p>