<p>So we seem to hear that 17 - 20 year old students can't easily get loans beyond the Stafford Loans in their own name. How is it that I am hearing of a neighbor 23 year old graduating last year $110k in debt? Where are these other loans coming from? I've tried to tell my husband that our kids CAN'T simply borrow more money (and we don't plan to borrow it for them). Just curious.</p>
<p>Most likely the parents either cosigned the loans or the amount you are hearing is family debt and the parents took out parent plus or other loans in their name. That amount of loans will hamper that student’s adult life for a long time, even if s/he has a good paying job.</p>
<p>They have their parents cosign loans for them. The loans are really on the parent (or grandparent or whoever the credit worthy adult is). Those loans have both the kid and the cosigner equally on the hook as the info, including outstanding amounts, late payments, show up on both signers’ credit reports. And most of the time unless you purchase insurance, if the kid or the other party dies or becomes disab;ed, the the other one is still on the hook. So it’s YOU borrowing the money and your kids signing on as extra collateral for those loans. </p>
<p>But really, the Stafford maximums are $27K and if not subsidized the interest starts churning away immediately. If the parents tried to get PLUS (parent loans) and are turned down, kids can get about $4-5K more a year, so that’s another say $18K on top of that, and with interest, the kid is already past the $50K point. Then if the student gets the maximum Perkins loans on top of that (have to have need and those funds are part of fin aid packages and limited) they can have another $22K on top of that. I can see $75-80K easily by the time the kid graduates, especially since the interest rates were up there for non sub loans for students–they’ve gone down somewhat now.</p>
<p>Thoroughly agree, Annoyingdad, and that’s what I figured. But its not the parent loans I am asking about. Most parents I know won’t co-sign loans, but some say they will have the kids borrow most of their tuition money on their own, and I am arguing that I don’t think that’s possible/easy. Captain, that is informative.</p>
<p>Yes, those are co-signed loans.</p>
<p>however, several years ago, Sallie Mae USED to let students borrow HUGE amounts in their names only. Then when those students failed to repay, changes were made. Now a student can only borrow small amounts w/o co-signers.</p>
<p>Those parents may say they will have their kids borrow on their own but what actually happens when push comes to shove may be different. What financial institution would lend large sums to an 18-22 year old who may only have a few thousand in the bank and has only worked in a supermarket or at a dorm front desk without some kind of guarantee, government or credit worthy cosigner, that it will be repaid?</p>
<p>If the neighbor is 23, is there a graduate degree in there somewhere? The limits for grad school debt is much, much higher than undergrad. </p>
<p>Other than that, no bank is lending out 6 figures to a 20 year old. My guess would be that the parents are taking on PLUS loans without realizing that they’re the parents’ loans… or they made an incredibly stupid deal with their child that they would take out the loans and the child would pay it off.</p>
<p>Mom2college that makes more sense now, with the changing rules on Sallie Mae loans. Hope that changes mean that fewer kids will be so deep in debt now and in the near future.</p>
<p>Unfortunately, parents and kids alike don’t seem to get the way cosigned loans work. Many parents will cosign for a small line of credit to get their kids started in that direction, or most commonly car loans. But we are talking much smaller amounts of money, shorter time periods with those loans. These school loans can be for 25 years an in the $100K range. Whole other story. And just because your kid at ages 17-22 commits to paying them, doesn’t mean he’ll have a job at the levels where he can, and that he is responsible about them. And then the parent’s credit is compromised as well.</p>
<p>I have a friend who could not get her mortgaged refinanced, could not get a small business loan nor a decent interest rate for an auto loan with a big portion of her daughter’s defaulted school loan on her credit report. Not to mention that it has ballooned to a ridiculously high amount in the last few years. Her daughter can’t find a living wage job, much less able to pay even the interest on these loans.</p>
<p>Sadly too many students and parents don’t understand the FA process. They “hear” that schools give millions in FA…or they hear that 99% of a school’s students receive FA, so they assume that their child is going to get enough aid. Then spring comes along and they find out that none of the schools are affordable. So, they resort to loans.</p>