“I’m gonna have debt anyways, so the amount doesn’t matter.....” Ack!

@austinmshauri re: “What happens if they take the 6-figure debt but decide to change their major or don’t have a high enough GPA to stay in the program?”

Naturally the unexpected can happen but the point is to consider loans in the context of other factors, both personal variables (like, say, parent age and years to retirement) and academic/career variables ( like typical earning potential for major or plans for professional or grad school-which have different economic ramifications). The MIT example is a good one {although few students would have to take out such a large loan for MIT (due to need blind admissions and commitment to meet 100% need)}. Chances of switching to a major leading to lower pay is less likely at an institute. And in terms of the GPA, LOL, many MIT students struggle with grades at some point in the first two years (but not because they are drinking or playing video games) but MIT does not pitch them out. They end up making it through and more.

Yeah, I don’t get the “the kid really wants it” argument. Like, would you finance a maserati just cause your 17 year old wanted it?

No. Pick a more affordable school.

EDIT: hopefully no

“In general, I would say this is bad advice. An engineering grad from MIT with a decent GPA and a couple of internships should be able to find a job that allows them to easily pay off $100k in debt, and the MIT degree will open more lifetime doors.”

lol.

Or you could NOT take 100k in debt, still get a job that easily allows you to pay off 100k towards something else–like a house–and still have an extremely high quality life with lots of open doors.

I’ve beaten out enough MIT kids to know this.

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“Last year and this year, an astonishing number of parents of athletes have told me that they are taking out full parent loans for their kids to play sports at D3 schools”

@hgtvaddict, I was always amazed by the parents who spend carloads of money on their kids’ sports for the sake of getting into “a good college”. or even “playing in college”. I get that some sports are expensive. A kid of mine loved and still loves playing what is an absurdly expensive sport. He wanted to and loved competing. So I did what I could within reason. But not as a strategy for getting into college, or playing in college and especially not as a strategy to get a scholarship to play in college. It seem to me that the parents who talked about their kids getting college scholarships (which I know are only true for Division 1) had paid the price of a college education many times over by the time their kids were applying.

Today’s high school seniors were in elementary school during the financial crash, and it is likely that many parents whose family finances were damaged did not tell their elementary school kids that they are now significantly poorer than they were before (or what appearances may suggest).

Some parents also may not have brought up their kids with the notion that things cost money and that sometimes choices must be made in terms of what to spend money on and when to save money for future spending.

Of course, that is also often with definitions of “middle class” that involve income ranges higher than what may get college financial aid ($260k/year or higher).

Since the government owns or guarantees most student loan debt, the effect of defaults would be to increase the government budget deficit and debt (neither of which people seem to care about these days)

In terms of private student loans, a bailout of private lenders would be “necessary” if these included “too big to fail” banks that were endangered by having enough defaulting student loans.

In neither case would the borrowers be off the hook any more than they might be able to deadbeat on their loans today.

Or the student can earn an engineering degree at a free ride school and forget about the high risk low probability of success pre-med path. Particularly if $100k debt is unpalatable (requires parent loans) or the student does not get admitted to MIT.

But then, this hypothetical is uncommon. There do not seem to be too many students who have an engineering mindset who are also interested enough in medicine (and its biology and chemistry prerequisites). Yes, there are some (and they tend to ask about biomedical engineering, which seems to be a rather mediocre compromise that makes the pre-med path harder but falls short of other engineering majors’ job prospects).

@menloparkmom, I was actually referring to the various State’s Attorney Generals’ lawsuits against several banks for robosigning and other predatory lending practices, which resulted in a national mortgage settlement which required those banks to spend at least $10 Billion in reduction of mortgage principal for some borrowers. If you want to talk about the federal government’s bailout of the banks, though, I’m under the impression that this bailout came with some handcuffs such as the HAMP and HAFA programs. I never watched The Big Short or made a study of what happened. I did, however, purchase a house at a short sale done under the HAFA program. In my purchase the seller was allowed to walk away from a $200,000 deficiency judgement. We were told that one of the reasons why the process took so long was that the bank was verifying that the loss would be covered by the government. Given that the seller was not judgement proof, it made sense to us at the time that the bank wouldn’t walk away from pursuing a deficiency judgement unless it was receiving those funds elsewhere, so we never questioned that statement.

^^the problem with that agreement, although it was laudable, was that it did NOT cover hardly any of the millions of mortgages that were originated by the NON Banks.

" $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. "

https://www.justice.gov/opa/pr/federal-government-and-state-attorneys-general-reach-25-billion-agreement-five-largest

$1.5 billion was a drop in the bucket compared to the values of the mortgages of all the underwater homes around the country prior to 2012 that homeowners sold, or utterly walked away from, in part because they also lost their jobs in the great recession.

The great majority of those former home owners got nothing.
Wall Street then proceeded to gobble up hundreds of thousands of those homes across the nation to turn them into profit making rentals.

This is just such a sad state of thinking.

I’m often shot down because I ask the posters about their ability to pay fees.

One kid, applying OOS to our instate schools, asked me not to ask new posters about parent budgets and ability to pay.
I’ll paraphrase: he said, “Can you STOP posting about costs and just help us find a way to pay!”

I don’t remember who he was but I responded, “Why did you apply to Berkeley if you couldn’t afford the OOS costs?” “Why didn’t you ask your parents about paying your fees BEFORE you applied?” They don’t want to hear it because that might make the money fairies fly away.

The tough thing is that students AND PARENTS engage in magical thinking and often only focus on scraping up the funds for year one and expect that things “will work out” thereafter. They never really have a plan of how they will actually pay for 4+ years at the U. How are the kids to keep their heads if the parents are wishing along with them and expecting to appeal so the kiddo will get 109% funding?!?!

Didn’t read the whole thread. The lack of financial literacy in our nation is astounding. As a financial advisor, I see this every day. Not just in the lower income / blue collar sector. You’d be surprised how many well educated, professional people don’t know even basic financial concepts pertaining to debt, compound interest, diversification, etc. Really appalling. We really need to make this part of the overall curriculum in HS.

Sorry- this thread and several recent planning conversations surrounding debt set me off.

Rickie- for sure this is not a problem confined to low incomes. At my company, you can’t believe the hoops we need to jump through to get people to sign up for direct deposit for the 401K with a FULL COMPANY MATCH, i.e. free money. Free money. It is astonishing the number of people who cannot be bothered to read the benefits pack (all sorts of other free goodies.) People who qualify for subsidized public transportation- they’re taking the train anyway, who wouldn’t want that extra check every month, all you need to do is sign a form (once) and for your entire tenure with the company, you get extra money every month to defray the cost of your transportation. People who check Yelp 10 times before going out for lunch (they only want the highest rated restaurant, with many gluten free options even if they eat gluten) who don’t bother to read their health insurance packs to see which providers are in-network vs. out of network. And then they get hit with a bill for thousands of dollars and they are outraged, even though the provider list states in black and white “You are responsible for X% of your charges out of network, here is the network”. You can’t risk $10 on a bad sandwich, but you’ll risk $2500 on a medical procedure which won’t get covered???

Keep doing what you are doing. But it’s a high hill to climb. People would rather file a claim on their homeowners insurance for a $500 stolen laptop, then sign up for company subsidized life insurance which might mean their dependents keeping their home, sending the kids to college, etc. if they die.

Confounding.

We almost became a casualty of this thinking as I was blinded by the status of a college and also legacy status during college decisions last year. Fast forward to one year and I can say that I am happy we chose the state flagship with an almost full ride from our city’s full tuition scholarship. S is so happy at our state school and all of those thoughts about it being too big and maybe not prestigious enough are no longer concerns. Yes, it was big but he found his tribe and it was as prestigious as we made it. Friends opted for a different path and are already feeling the effects of the debt in their first year but now they are too far in to go back. Hope this serves as a cautionary tale to parents making their choices now. Full rides and state flagships should trump debt if you can’t afford it. We need to start a movement and what I tell parents that ask me why we chose our state flagship is to not be blinded by the cache of a name as college admissions is a business after all…

I wish there was a way to convey just how much the new grads would hate that debt, even small amounts of it, and what seems like insignificant stuff now is the kind of stuff that will leave them longing for no debt. My oldest took the direct loan senior year, mostly in order to have “start up” costs after graduation. Payment is easily affordable, but still…she looks at the amount and thinks, I could get my hair colored in the salon instead of doing it myself. That’s a couple of nights “out” a month. You talk about significantly more, and it’s “I have to have a roommate” and maybe “I should find a side hustle.”

The original post sounds very much to me like mindset described in Ruby Payne’s Culture of Poverty work, except the sentiment is expressed by more people who would consider themselves middle class (of course, here on cc, lots of wealthy/rich people seem to think they’re middle class!)

@rickle1 Agree w you 100%, but I’m skeptical that adding to HS curriculum would fix it. Our HS’s idea of financial planning consists of what a savings account is, and what a checking account is.

I personally am a fan of just going through links in “Ritholtz’s Reads” (he’s an investment advisor/manager).

Lots of good stuff for personal finance, general life coaching, and eclectic science and social science tidbits.

The trick is getting teenagers to read that stuff.

I have a person working in my department under me that got a degree, isn’t using it and is paying loans monthly at $700 per month. She is also now trying to get a masters degree so she can get a job using her degree. Which means continued working and living at home and taking out more loans.

I also have another person working for me who is using her degree, but lives at home while she is paying back loans.

We almost need a scared straight type of program for HS kids revolving around debt. Of course many kids do what their parents do and let me tell you there are some adults I know that definitely be overspending.

US is a consumer country. Most people want to spend and compete with the Jones. Also there are lots of parents who are not willing to say no to their kids, hence you have spoiled little brats who want to go to the top 25 universities ( which tend to be expensive) and the parents pay for it.

Parents don’t teach their kids about finance and managing a budget at home.

What I find interesting is that we have alot of information at our fingertips, but neither kids nor parents are willing to look up the information and read it. They can read about saving for colleges, investment, etc.