<p>@gimmechocolate: Thank you! I was beginning to think I must be living in an alternate reality. I completely agree. Although we were fortunate not to have to take the loans we were offered it is indisputable in my mind that the loans listed were clearly labeled as LOANS. So unless you don’t speak English well enough to understand what the word means, there is no way you can read that financial aid letter and not understand that you are being offered a scholarship, a work-study opportunity, and LOANS. </p>
<p>Sigh.
There are steps you can do to accelerate the payback of the loan, such as living with a roommate or in a studio apartment, eating less and eating cheaper, buying a cheap used car rather than used, shopping at thrift stores, wearing warm clothes and not setting the thermostat high, using the library for entertainment, making your own coffee, not drinking beer, and cutting on many other things.</p>
<p>Point being:</p>
<p>If you are willing to drastically cut your lifestyle, you can pay off a 100K loan in LESS than 10 years on a 30-40K salary (Not much less though, so she should have thought twice about her major).</p>
<p>Sure the loan calculator says you need to earn 150K a year to pay off a 100K in 10 years comfortably but… no one ever said you need to be comfortable.</p>
<p>Most financial planning calculators are assuming you’re paying 31% of your income in apartment or mortgage/taxes/insurance cost. They also make a fair number of assumptions for food/clothing/entertainment costs. </p>
<p>If you’re $100K in debt at the end of four years (and remember that if you borrow a portion of that $100K with loans that are not subsidized the amount will be more) you need to make, roughly, a $1,200 loan payment each month. That’s $14,400 after tax income. You can squeeze that out on $40K a year if you follow the above advice about roommates, frugality, etc. And if you’re willing to work a second job, babysit, tutor, etc., if will be that much easier.</p>
<p>Most people graduate at 22 years old so we’re talking about 32 years old when they’re done. That’s still plenty of time to make a life.</p>
<p>Life is about choices and consequences. Seems like borrowing $100K is a choice and frugal living with side jobs for a decade is the consequence.</p>
<p>No one is saying that the girl in the article didn’t know she was borrowing 40k. No one is THAT obtuse. What we are saying is that she didn’t understand the implications of 40k. Many adults in my(and I’m sure that girl’s life) tend to give us the advice of “If you go to college, you can easily pay it back” stress on EASILY. Norhting about 40k is going to be easy-it’s possible but not easy. Basically, schools are making 40k sound like a piddly loan when it clearly isn’t. The average payments should be explained as well as the impact on lifestyle. I know that as an 18 year old entering this process by myself, I have no concept of how much money 40k is. It’s like an imaginery number. If someone tells me it’s not that bad, and that it’ll take that much debt to get educated, I would do it. Luckily, I have a number of great resources on CC to tell me that a large amount of debt is NOT worht it. This contrasts with my high school, GCs, and other adults in my life who say that an education is worth it at all costs. When we stop that myth, we stop the problem</p>
<p>*Luckily, I have a number of great resources on CC to tell me that a large amount of debt is NOT worth it. This contrasts with my high school, GCs, and other adults in my life who say that an education is worth it at all costs. When we stop that myth, we stop the problem *</p>
<p>If by weed you mean have the government decide who gets to be middle class and who is going to be poor for the rest of their lives and take that decision out of the hands of the individual completely, no that’s absolutely not kinder.</p>
Ain’t that the truth. The one constant of all these college tours that I’ve experienced and heard about is how beautiful the campus is, how nice the dorms are, how good the food is, how big the health club is, the sporting events, the entertainment options on campus, etc. Not that it’s a four-year party (I’m sure most students squeeze the work in somewhere) but the reduction in the after-graduation standard of living for most graduates, especially those with big loans, is something most of them are not expecting.</p>
<p>If by “weed” you mean send some marginal college kids to technical school so they could learn a trade, then go for it! We could always use plumbers, electricians, and masons. Many of the kids who aren’t meant for college would be better served at a technical school</p>
<p>I know of too many adults above age 40 that absolutely refuse to hear how 60,000 + in student loans is too much. They convince themselves that everything will be all right. I think education is important in overcoming this misconception, but if the recipients of the education close their ears, it does no good. </p>
<p>Last, I have a hard time believing that a student willing to go into massive debt for an undergraduate education is going to be able to live as frugally as needed to pay it back in ten years. I wish the reporter would have asked the girl what type of cell phone and cell phone service she had. (I say this because I laugh to myself when I hear how poor some are yet they are sporting the latest iphone with its required media package.)</p>
<ol>
<li> For engineering, anyone who can get admitted should try to attend a top 20 or at least top 30 engineering school, regardless of how much debt they have to take on. Your University of Missouri graduates will have much higher malemployment and unemployment that those schools in the top 20-30. The Missouri graduate who finds himself working at Walmart for $9/hour will be in for a much greater shock than the good school graduate who finds out how my debt eats out of his $35/hour paycheck.</li>
<li> I ran some numbers so that if you got a free ride at an average school and paid full freight to go to MIT, it would essentially be a wash. Detailed assumptions are below.</li>
<li> Maybe employers don’t care where you went to school in the long run. The problem is if you go to a bad school, then you will have a hard time getting those first two or three good jobs to build up your resume.</li>
</ol>
<p>Thank you for putting that so succinctly. I’d note that in the private student loan market (and even with PLUS loans and unsubsidized Staffords) – it is often possible to defer payment when the student is in school, but interest keeps running – so by the time the student gets around to paying the $40K debt it could have morphed into a $50K or $60K debt.</p>
<p>That is combined with pie-in-the-sky estimations of post-college earnings, along with lack of understanding of taxes and other expenses that reduce discretionary income. </p>
<p>So you get a liberal arts major thinking that she will easily get job paying $50K annually – assuming that means she will have more than $4K spending money in hand every month – and therefore a monthly payment of $1200 ought to be easy … but the reality ends up being a $30K job with a lot less than expected in take-home pay after payroll deductions - plus the new grad suddenly discovering a whole set of real world expenses, in a world where she has to pay her own rent and utility bills. </p>
<p>I honestly don’t think a person really understands the implications until they are actually out in their own supporting themselves. They may be able to do the math – but they assume that things will work out or be easier, because they haven’t had the life experience of paying bills every month and making sure it all works out in the end. There are all sorts of big expenses in life that we encounter that aren’t factored into the monthly budget – for example: car breaks down; car is towed; purchases of furniture and household appliances; cost of moving from one apartment to another; clothing purchases, including acceptable clothing for work; dry cleaning for the work-acceptable clothing; airfare home to visit parents, etc.</p>
<p>The mother should have known better. She’s a business woman who owned a B&B. She was the adult when her daughter was presented with the FA package.</p>
<p>In terms of Timmy2’s post I wish I totally understood the economics involved. I freely admit that I don’t which gives those of you who do a vocabulary to discuss certain specifics that I can’t approach.</p>
<p>I wish I could.</p>
<p>I would love to have the post fully explained.</p>
<p>However, I would also like to say that one can’t quantify the value of the experience at MIT being among one’s peers, living in Cambridge and having pride that one is at the top of one’s game.</p>
<p>We also can’t quantify the possibility that extra intellectual stimulation would enable the student to invent or discover apparatus or principles that allowed him/her to earn far beyond averages and far beyond what s/he might have earned had their education been at a less innovative institution.</p>
<p>I am an engineering recruiting manager and nothing could be further from the truth. Consider a top student who could have gone to a so called elite school but elects to attend a good state U. but elected to attend elsewhere for whatever reason. I have seen many new State grad get hired over more prestigious school grads due to demonstrated ability and attitude during internships and the interview process. I also have personally heard the lament of “But I went to a better AND more expensive school!” Is it better to attend a brand name engineering school? YES. But when you factor in taking on on debt the answer rapidly becomes: NO!</p>
<p>Your point is better made for soft majors, not in disciplines where competence can be quantified and experience verified.</p>
<p>Heard something last week from a relative who’s in a very well known company and has a lot of techies working under him in the west coast. He was discussing the lack of sufficient comp sci graduates who are a fit in general, and mentioned the two schools that he’s had the best luck with and are his top choices: Waterloo/Canada and Urbana Champaign, neither of which has ever been on my (limited) radar. I began to wonder if this was an outlier, and just how universal the acceptance of rankings in US News or other entities is in the eyes of employers.</p>