<p>I've addressed how much a dependent undergraduate can take out in loans in another thread. The other question that often arises here is how much a student or parent SHOULD take out in loans. The question is parsed in different ways, like "Is this too much debt?", "How much is too much debt?", and "Is it worth it?". </p>
<p>The easy answer is that no debt and less debt is always better. The reality is more complicated than that, and it does come down to the individual student, and also very important, that student's family. More important than the major, the program, the talent of that student is the family, because the chances are overwhelmingly such that family help through out college and even out of it, is needed or very useful. Things happen, and kids don't make it through that engineering program, and that computer science degree doesn't pan out as in job offers as one might have expected. Trust me on that one, as I have already seen this first hand, not as a personal anecdote but because my oldest went to a top of the top school in engineering and computer studies, and even then that low hanging loose fruit of a $50K perfect job did not fall into the open mouths of those who so graduated.</p>
<p>It was more the anecdote when it did happen. Yes, those kids intrepid, directed, mature enough to "go git 'em" at the career office to aggressively seek that job with the desired training did get them, but that is not the way it usually worked out Life happens. Stuff happens. And a lot of those $50K jobs turn into $30K ones when it comes down to the offer. They are not always where the student want to be located either, and often seed money is needed to start that whole new career life. A lot of kids want, need, take some time off between graduation and job. "The Graduate" (old timers will know the phrase from the Dustin Hoffman movie) summer, even year, is very much a reality. </p>
<p>So family is very much in the picture whether you like it or not. How much a parent can help out financially is extremely relevant in this scene. A parent who makes it clear that he is not paying, cannot pay penny one, should not be cosigning ANY loans, because the chances are pretty danged good he will have to do so under any number of scenarios and you can't bankrupt out the obligation nor is there a statute of limitations. Even if the kid dies, the parent is on the hook for these loans..</p>
<p>So for those kids who can see clearly that their family has financial problems, don't stick your head in the sand. If that phone is ringing and the word to the kids is to not pick it up, and if you do it's "for personal business matters", your parents are already behind the 8 ball in bills If the mail is laden with bills, and parents are stressed and tense about money, you know it's a problem. Regardless of what they may say to you, there is already financial trouble on the scene and you don't want to add to it.</p>
<p>A college education should be funded out of past, present, and future income of both student and parents. The past is comprised savings. Your piggy bank, college account, those checks you got for your birthday, Christmas, graduation, your savings comprise your part of savings. Your parents should have savings too. They knew when you were born 18 years ago that college was part of the possibilities and that it costs money. They either did or did not save for it. It was a conscious decision on their part either way. </p>
<p>The present is what you and they can be doing NOW. You should be looking for a job if you need money. Weekends, summer. And watching what you spend. Yeah, that last high school trip sounds great, and a new college wardrobe would be might fine, but if you are short money, you gotta pull in the belt somewhere, and what you spend on those things could be bringing down the cost of college in the PRESENT category. Your parents will likely getting some tax break, and saving some money having you out of the house if you are going away to school, and their subsidizing your home living expenses is part of that PRESENT category if you are commuting. By commuting you can let your parents have a big contribution in that category as room and board is usually in the $7-12K range. A big line item here. If your family is living so close to income limits or beyond, that one red cent cannot be contributed out of current income and every benefit like tax money, savings in having you gone, is already taken into account and going into a deep pit of debt, then you know there is a problem here. </p>
<p>What you and your parents have done in the past and can do in the present is the best indicator for what they can afford in the future. If your parents have not saved dollar one, and are not making ends meet right now, taking out loans is sheer lunacy. </p>
<p>So there isn't any set formula in how much loans any one person/family should take out. It's all a matter of opinion. But when a kid says their parents can pay zero in college, have zero saved, and the it's all on the 18 year old, but the parents will co sign, we are talking about some people who are not anchored in reality. There is nothing you can do about how your parents handled or handle money, but if it smells pretty bad, then adding student loans to mix is going to be contributing to the stench. Maybe you don't care and want to get as much out of them as you can. Maybe you do care. All of this is a very personal thing. </p>
<p>My personal opinion is that an ideal balance if the split to be about 20/80 between kid and parent. Could be 10/90 or 30/70 but the 20% of the kid paying and 80% of the parent paying to me is just a good mid ground. There can be a lot of leeway,because it is all family, after all, but we gotta start somewhere, right?</p>
<p>Then, ideally, there should be some division of past, present and future income for the student and the parents. If The parents can come up with on average $16K a year out of savings; they have saved about $45-50K in some form, for the kid's school, a $60K school just might be doable, especially if the old belt can be tightened for the next 4 years, with cutting out of as much extra as possible, savings in having the kid out of the house, not buying that new car, and putting that $1000-1500 a month towards the college bill. Most colleges will even let you go a monthly plan. Then you gotta borrow for that last piece and though PLUS (parent loans) are no bargains, they are quick and easy, and let you extend that college payment out for another 10 years hence or more, and borrowing 25% of the cost can be doable. </p>
<p>You gotta run the numbers on all of this, but that's what it takes. And the kid has to break into his savings, work and borrow those old Staffords. </p>
<p>That's what a lot of families are doing who do not qualify for financial aid, yet do not have the quarter million for private college saved up or don't have a trust fund in the picture. It's saving, scrimping and borrowing.</p>
<p>What's frightening is that too many families are going heavily or exclusively on the borrowing part. If you can't pay it now, where do you think the money is coming from later, when you are older? When you could have no job or be earning less, or have other complications like health problems and some emergencies in your life? It doesn't get easier, for the most part. </p>
<p>So no pat answers here. Just bringing it out how parents and family matter in the picture. Students need parents involved to get more than the Stafford guarantees anyways.</p>