<p>Not that I'm considering this or advocating it, of course. :)</p>
<p>I was listening to a conversation recently where a newly graduated student claimed to have borrowed $35,000 each year for 5 years at a top tier private school (yes, one of HYPSM). The claim was that these were education loans, with parents cosigning - not second mortgages, or private loans. This was apparently not a need-based package; the claim was that it was a full-pay family, but the student funded the entire education through work and loans.</p>
<p>Is such a thing really possible? Are there no limits?</p>
<p>The student and parents may have been signing/co-signing Sallie Mae student loans.</p>
<p>Sounds like this student may have had a high “family contribution” that his family couldn’t pay.</p>
<p>If the parents borrowed…they may have took out Parent Plus loans. But, since you said “co-signed” I think it may be Sallie Mae or a private education loan.</p>
<p>Wow! That looks insane. I can’t imagine how parents can even pay that after. And it is not private student loans? Whew! Don’t want to be in their shoes!</p>
<p>To be clear, I don’t believe the story. I was a bystander in the group, and I’m confident that the parents of this family would have contributed heavily to any education. Also, it seemed that the $35k figure was invented on the spot - it came after a few questions, and the new grad didn’t seem to be familiar with the term “principal.” Still, it piqued my interest.</p>
<p>Are there limits, or could this actually be possible?</p>
<p>Unfortunately, people unfamiliar with the term “principal” are particularly able to get in over their heads.
Who knows?
Maybe the parents thought this was a relatively cheap, deductible way for their kid to borrow?</p>
<p>OK, based on mom2ck’s comments, it sounds like this kind of crazy borrowing is actually possible, and that people really do it. That’s incredibly scary.</p>
<p>danas - I agree, the new grad was clueless as to how burdensome that kind of debt would actually be, and was trotting out the “education is worth any price” mythology. Once again, I doubt the story. The claim was that the student turned down a free ride at a lesser school against the parent’s wishes (very believable), and that the parents refused to support the choice. My guess is that in reality the parents are providing some support, that they’re also receiving FA, and that there are some loans - but nothing that draconian. However, I can’t really know for sure. But certainly, this was the kind of kid that could make a mistake like this.</p>
<p>I know a young lady personally who is $90K in debt for ug loans. Her sister took out over $23K this freshman year and will be taking out more next year. The parents look at it as “investments in the future”. I think they are are nuts. The older one is not able to even cover the interest on the loans.</p>
<p>Yes, and then the media finds out about a case like this, then generalizes that to “OMG you can’t go to college unless you have or can borrow $200,000.”</p>
<p>Though the given example may not be accurate, yes, absolutely, yes, there are families who do this. There are high income, low asset families that depend on debt for all they do. If the pyramid ever reaches ground and repayment cannot be made, than there will be big trouble. But I know a lot of families who are more than hundreds of thousands of dollars in debt to pay for their kids’ educations.</p>
<p>That the parents are taking on the debt is a whole other thing than the student. I hate to see students taking on huge loans because if they are doing so because there parents will not, then they are stuck paying these loans back without a way to do so. Most kids are not going to be making the kind of money to repay these amounts.</p>
<p>I remember when my kids were young, doctors and lawyers who I consider financially successfully, finding their loans to be huge obstacles. These are folks that borrowed money with a realistic ability to pay it back and it was still tough. When I see kids who are not in any career bound paths that are far from getting into a job that pays well borrowing huge amounts, it is almost always a sure recipe for a lot of pain. </p>
<p>I see how hard it is for kids with NO loans, AND parental support to make it on their own. WITH loans and NO parental support…the stress level is cranked up as it is not doable. You defer and defer the loans that get bigger and bigger. No house, no job with a good credit record needed–it creates a lot of obstacles to have that loan monkey on your back.</p>
<p>Once again, I doubt the story. The claim was that the* student turned down a free ride at a lesser school against the parent’s wishes<a href=“very%20believable”>/B</a>, and that the parents refused to support the choice. My guess is that in reality the parents are providing some support, that they’re also receiving FA, and that there are some loans - but nothing that draconian. *</p>
<p>Well…there may be more to this…</p>
<p>If the parents weren’t going along with this, then why would they co-sign (unless he got granny to co-sign). Or, maybe he took out these loans before a couple of years ago. Before all the bank failings, Sallie Mae didn’t require co-signers or interest-only progress payments. OMG. Students could borrow up to COA (minus aid) all by themselves… (nutty!!)… That was often the basis for many of these mega-sized NYU and other debt stories we’ve heard. </p>
<p>Anyway…if this person is - say 25 or so - and in grad school, then perhaps he did borrow under the old rules, and he’s now in some kind of grad school so he’s not yet feeling the bad effects of all that debt. So, he’s bragging about what a great decision it is. Once he’s in his 2nd or 3rd year of paying back that debt, he’ll be thinking quite differently.</p>
<p>I realize that these (old) policies were in place to help poor kids get educated but, heck, it’s like giving a desperate person enough rope to hang themselves. No one needs to go to a pricey private on big loans.</p>
<p>I think you can still get a SMALL Sallie Mae loan w/o a co-signer (not COA!!), but the interest rate is higher and you need to make interest-only payments throughout college years.</p>
<p>I strongly doubt that it was to “help” poor kids. Well, maybe only in the “Kevorkian” sense of help… </p>
<p>I guarantee you that many of the lenders who gave out these loans would have never considering giving out a similar amount of money for, say, a small business loan without making very sure that the borrower had a realistic plan, solid collateral, and a clear way of being able to pay it back within the term of the loan. That’s what you do if you’re a bank and you want to turn a profit while also helping people out.</p>
<p>*Quote:
I realize that these (old) policies were in place to help poor kids get educated but, heck, it’s like giving a desperate person enough rope to hang themselves. No one needs to go to a pricey private on big loans.</p>
<p>======================================
I strongly doubt that it was to “help” poor kids. *</p>
<p>While I completely agree that it’s like giving these kids a noose, the people who made these decisions really believed that providing these loans was a way to let the “poor” have the same access as the 'rich". Obviously these people can’t/didn’t do the calculations for loan pay-back.</p>