As parents, are you willing to pay for your kid’s expensive top school tuition, for example, $200,000 for 4 years or let your kids take out loans and pay back by work after graduation? Thank you for sharing your thoughts.
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I don’t think that high school students understand the impact that having debt will have on their lives after graduation. Many recent university graduates are lucky to get a good job in their preferred field that pays enough to live.
Of course if your child is an engineering, computer science, or nursing major they are likely to get a good job immediately after getting their bachelor’s degree. However, even if the intention is to get a degree in one of these fields, many students change their majors while in university.
Given this, we set a budget for our kids, and insisted that they stick to the budget. We would not let them take loans. We paid up to the budgeted amount without our kids taking on any debt. This worked out well for D1, who did graduate on budget and now has a dream job that does not pay particularly well, but does pay enough for her to pay her own living expenses and which should lead her in a good direction. D2 is half way through university (in an internship over the summer right now) but is on track to graduate under budget.
We were fortunate to have academically appropriate options that were not too horribly expensive. However, full pay private schools were just off the table (such as BU or NEU at full pay).
As a high school student, I was introduced to the adage that college tuition, whenever possible, is a loan from one’s parents that is repaid to one’s children. That made sense to me. Yes, we will happily pay for our children’s college education. We started saving before they were even born. The only repayment we’ll expect is for them to do their best to pay for their own children’s college education.
Different families have different philosophies, and I’m sure you’ll get a variety of responses — all equally valid and entirely dependent on the philosophy and circumstances of each individual. Good luck with your own decisions!
Your kid can’t take out 200K in loans by him/herself.
I agree that saddling kids with that amount of debt is not a recipe for sucess. Our goal was that no one - parents or kids - take on debt for undergrad. We saved every month from the day our kids were born. Similar to @CardinalBobcat, I wanted to give my kids the gift my parents gave me - a great undergrad education. I always remember my dad saying “I never regretted any of the money I spent on education.”
In most states, there are ver good public university options that will cost less than $50K per year, and, if your student has great stats, there are also good merit scholarships to be had if you look outside the top 30 or so schools private schools.
Every family is different, and some don’t have as many options as others, but I think it would be a heavy burden to start off one’s young adult life and career with lots of debt. It also postpones the ability to start a retirement nest egg early in their career, and we all know the value of compound interest!
Are you considering signing PLUS loans for them or would they borrow from you? I don’t know the interest on $200k of PLUS loans but I’m sure it’s a lot. I wouldn’t want them paying that. If they can’t pay then you’d be responsible for the payments and it will cost you much more than $200k.
If I could afford to pay $200k but just didn’t want to I wouldn’t let my kid borrow the money from me. At 17 they have no concept of what the repayment would look like. I wouldn’t want my kid to resent me, and I think that if I could afford to spend $200k but I made them pay me every month year after year they’d grow to resent it.
Either way, a $200k debt will affect all areas of their life: the jobs they can take, where they live, how soon they can save for retirement, their ability to buy a home, and even their relationships. Not everyone is willing to commit to someone who carries that kind of debt.
I think you need to figure out how much you can comfortably spend and target schools in that price range. You can search for schools that offer good merit aid for your kid’s stats to help cover some of the costs.
I think you should set a budget showing what you can comfortably afford, and encourage your child to seek out merit. If your kid has what it takes to get into a top school…then there should be good, affordable options to choose from. I would allow them to take out the student loans that are permitted, if necessary ($5500 year 1) but I would not go higher than that.
We asked our kids to take out $3,000/year in loans. If we are in a position to help them pay them off, we will.
We have the same philosophy as cardinalbobcat but recognize that we are also very fortunate to have the means to easily fund an education (neither i nor my husband had that advantage so we are especially grateful we can do it for our children). If that were not the case, then we would have been looking at colleges where D19 and in due course D26 would get good merit money. I have a significant aversion to debt having seen how some family members have been impacted by it, and would never take out more than a very limited amount even for a top college. Part of that is also that I would like my children to have the freedom to choose the job they feel will fulfil them most after college, rather than the highest paying one just because they are saddled with debt.
@oldfort has nailed it. Your kid can’t take out that much in loans. Unless you get rejected by PLUS, the school itself offers up student only loans, your undergraduate can only take out $5500 freshman year. $27k Altogether. If you co-sign, you put both of you on the hook instead of just one of you.
So it comes down to how much YOU as a parent are willing to borrow.
I don’t think borrowing is bad. College, IMO, expects past, present and future earnings to pay for it from student and parent. Past from savings, both kid and parent. Present by austerity measures during those years as you pay out of your paycheck and the student takes on part time and summer job. Future, in that you borrow to make up for the gap, if it’s not considerable. $30k for the student is typical (interest accrued on that Direct Loan). Student will be in good company. A lot of kids take out these loans.
For the parent to stretch a year’s lump sum to be paid to the college over 10 years, if affordable, doable, PLUS offers that choice. Trust me, though, 14 years of paying for 4 years of college is painful. We did it with our oldest as cash flow and savings thatbwebfekt we had to keep at certain levels motivated us to take out the loans.
Here are the limits on loans your kid can get in their name only:
Freshman $5500
Sophomore $6500
Junior $7500
Senior $7500…
Anything above those amounts will require either a qualified co-signer (usually the parents), or the parents will need to take those loans.
So…if you are asking if I would co-sign $50,000 a year worth or loans, or take out loans as a parent in that amount…the Thumper family would not have taken $50,000 in loans for undergrad schools. And the “name” of the school wouldn’t matter to us…at all.
@austinmshauri Parent Plus Loans are loans taken out by the parent. The parent is responsible for repayment not the student. The student isn’t on the hook for Parent Plus Loans…at all. Student name isn’t on those loans.
The repayment on $200,000 of loans would be in the $3000 a month range for ten years. If taking the Parent Plus Loan, the Parent needs to decide if the parent is willing to assume these payments for 10 years.
You got some answers to this question on your other thread…
My added advice. Don’t count your chickens before they hatch. Acceptance rates to the expensive top schools are very low and are not a slam dunk for any applicant.
But to help you…if you think you can afford the payback on those loans…start putting $3000 in the loan repayment amount in the bank every month…right now. See how sustainable you think this is.
One of mine wanted to go to a full pay school vs the merit-money school he got into. Both of the schools were equivalent academically, but the one he wanted had a better location. He talked about loans and I sat down with him with a spreadsheet to show him how constrained he would be by large loans. He attended the merit money school and was very happy to graduate with minimal debt.
As others have said, an 18 yo can’t take out loans in that amount. You could loan him/her the money or take out a loan and have a written agreement that they will pay back the loans, but how would you enforce that if they don’t pay? No assets to seize.
That being said, having your students take out the loans in the amounts quoted above and requiring him/her to work is what I would do. If that covers the gap, great. If not, then the school is not affordable. If the kid is a superstar and is sure he/she wants to go to a high paying job, it may be worth it to borrow a bit more than the federal loan limits for a tippy top school (a kid that wants to go into finance for example) with the understanding and agreement that the extra money will be paid back and with the parents being fully aware that it may not happen.
As parents our thinking about this focused on one thing: try to save enough money so that we could cover the costs of undergraduate education for our two children. We started early, and we succeeded (with some unexpected help from our own parents). So after graduating the kids could each focus on establishing their own careers and independent living.
This worked for one kid: he never needed another dollar from us, except that we helped him to furnish his first apartment after graduating. This didn’t work for the other kid who had a hard time making a living wage in NYC and eventually decided (after the economy collapsed in 2008) to go back for another degree (MBA). We paid most of the costs of that second degree. Why? a) because we could, and b) because the interest rates on Federal Direct Loans were usurious. She needed help to surmount that hill.
Now both kids (no longer kids) are financially solvent and into interesting careers. We don’t regret for a moment that we paid the educational costs. They work hard; they create things. We’re glad to have facilitated this.
$200k loans for undergraduate would be mostly parent loans or loans cosigned by parents.
In any case, such a large amount of debt tends to be a bad idea for both the student and parents. Even well-paid physicians and dentists often struggle under financial pressure due to their medical or dental school debt of that magnitude (or more).
@mackinaw I am guessing that this OP did not save enough money to cover costs at an expensive private college. If he had, he wouldn’t be asking about $200,000 worth of loans to pay for college for one kid.
@compiler as said in at least one of your other threads addressing college costs…NO ONE…repeat…no one has to attend a college that costs $50,000 a year or more. There are less costly instate public options in every state. You are trying to justify taking out $50,000 a year in college loans. And you seem very unclear about who actually can do so. It’s not your college student…it’s you. It appears you want someone here to tell you it’s OK to take these $50,000 annual loans so your kid can attend an elite school if he is accepted. Frankly…that’s your decision. If you want to take those loans, fine, then take those loans.
But understand…your kid can’t take that amount in loans without a qualified co-signer…which would probably be you. And if you take the Parent Plus Loan…that is YOUR Loan, not your kid’s.
If you have that much discretionary money right now that YOU could loan the money to your kid, you have to decide if it’s worth it to you to draw up a loan document. If your kid can’t or won’t repay you…what will you do? Would you sue your own kid? Or what?
I think you need to cast a wide net if finances are a significant consideration for your family. Are they?
@thumber1
Why do you only focuse the amounts but instead of say something about your decision how to get the money for your kids to pay for the expensive top school tuition? $200,000 for four years tuition is just an example as I said, for example in my question. I can make the other examples such as $150,000 or $100,000 for 4 years study, are you willing to pay for your kids or let them take out loans and pay back after they work?
I’m pretty sure I already posted this on one of your other threads…but I’ll try again.
Our kids took the Direct Loans as listed above. We would not have taken out $50,000 a year in loans for ANY college. At all. And we would have not co-signed any loans either.
The “Thumper Family Plan” to pay for college was that BOTH parents worked full time in professional jobs. We paid for college out of current income from one of those jobs. No $50,000 a year loans. No $10,000 a year loans. Only loans were the Direct Student loans our kids could take in their names only.
This plan worked for us. On the advice of our financial planner, we did not have college savings, but rather fully funded all of our retirement accounts instead. This was our choice, and might not be what others would choose.
It took the commitment for BOTH parents to be employed full time at professional jobs until all kids were out of undergrad school.
We had the income to support this. We also had the income to be qualified loan recipients…but did not choose that route at all.
@compiler why are you asking? Is your income insufficient to pay a $70,000 college bill? Do you feel that your student must attend a college that is not within your budget…without loans? Do both parents work?
I’m not sure I understand why you are asking?
If one were to take out loans or cosign loans on behalf of their student I think they should be prepared to be the creditor. That means if the time comes to pay on the loan you either have to get it from your children or you have to have the means to forgive it (pay it yourself). What I think is a bad idea is not being prepared to pay the loan yourself. Your child is an unsecured risk. They might be in a position where they cannot afford to pay the loan or they might simply choose not to pay the loan. Either one leaves the burden to you and the second could possibly create major relationship problems. Me, I wouldn’t allow my child to borrow anything I wasn’t willing to pay. I might not tell them that initially and expect them to make every effort but I would look at the debt as my own. In my case since I wouldn’t choose to loan my child $200,000, they would have to go to a cheaper school.
The thought of trying to impose a $200k (or even $100k) liability on a 17- or 18-year old boggles my mind. At the very least you’d need to sit down with one of the many online repayment calculators and then go through with your kid not only all the visible costs that they see that will need to come out of their first salary (rent, food, furniture, utilities, transport (will they have a car lease too?), phone/internet etc) but also the invisibles - tax, medicare and SS deductions, car insurance and maybe household goods insurance, health insurance, a rainy day account with funds set aside for co-pays, unexpected vehicle repairs etc. Then ask the child if they would like to go out to a restaurant or show or concert occasionally, and if they’d like to go away on vacation. And would they like to start a 401K? Then once all that is deducted from the typical starting salary of someone with their intended degree in their intended city (which could change 15 times before graduation of course), see how much they have left over for loan repayments. While you’re at it, use the calculator to see what the total interest paid over the life of the loan is, so that the kid can see that the “$200k loan” is actually much, much more. If it is the child insisting on going and saying they’ll repay the loan, then hopefully that should inject a dose of realism. If it is the parent, realize that “making the child pay back the loan” is something that may need to wait a few years, and that the parent is on the hook in the meanwhile.