Lately there has been a lot of discussion regarding loans. I wanted to get a feel for everyone’s opinion.
What amount of loans for the 4 years in total would you be comfortable with your student and possibly yourself taking out for the following categories of schools?
Rankings #1-10 - $XXX
Rankings #11-20 - $XXX
Rankings #21-100 - $XXX
Rankings All other - $XXX
For myself I think I would go this way:
$50K
$45K
$25K
$15K
I am sure we could have chopped this up differently, but you have to start somewhere.
Seems like it would make more sense to consider likely major and career path when considering what loans are an acceptable risk. For example, some may see it this way:
Low income career path (e.g. arts, social work, early childhood education): $0
Career path requires expensive professional school (e.g. law, medicine): $0 (and emphasize low cost in choosing undergraduate to save money for professional school)
Typical or higher income career path: federal direct loan limit
IMO, borrowing more for a ‘better’ school is a slippery slope. An engineer from #1 may not make any more than an engineer from #51, or even one from #101. And, of course, the student may not even graduate from #1, or may graduate with a history degree and need even more money for grad school.
I have a nephew who was in the top of his HS class. Very smart, was accepted to Brown and Cornell and NYU but chose UF which was of course 1/8th the cost of the others. And he didn’t graduate from any of them. He makes a lot of money managing restaurants (owned by his uncle who went to the U of Chicago) but he’s very glad he didn’t borrow $50 grand to go to Brown.
It depends on degree and college. An engineering degree from MIT or a maths degree from Harvard justifies much higher loans than similar ones from UTD or SMU. A medical or law degree justifies more loans than masters in philosophy or psychology from same college.
I’m in favor of federal limits for a student, more or less regardless of anything else with regards to undergrad. Less is better many times, but that is my upper limit with only a few exceptions when a student really can’t go anywhere without more (and has the aptitude to do well).
When it comes to parents, I feel everyone has to make their own decisions. It doesn’t matter if it’s money spent or loans, etc. It should be well thought out regardless.
Ditto with grad school and prof school.
There are too many variables to have a one size fits all mentality. Absolutely none of my views would depend upon the ranking of the school overall. Some might depend upon how the major at the school is respected by folks working in the field though. School #202 might have a really good reputation and be worth it for the desired path.
I’m also one that draws the line at federal limit for student (although we’re going to try to avoid it). I would not take loans myself to pay for my children’s school. I’m low income, single parent and will be 59 when my youngest graduates from high school I have zero interest in paying student loans on social security!
As for ranking, that doesn’t really play into it for me. If one of my kids did happen to get into a top ranked private school I don’t think our net price would change much anyhow. If it cost 4X as much then they’re probably just not going.
One other thing to consider is that a student who tends toward frugality in personal spending habits may be capable of handling a larger amount of loans than a student who is more spendy – but the frugal student is more likely to be unwilling to take a larger amount of loans, while the spendy student may not hesitate to take an excessively risky amount of loans.
Everything in context. Loans are a tool. Kids who understand what a payment looks like and can adjust their post-grad life accordingly (and their in-college life) is in a much stronger financial position than ones who don’t. And that goes for social workers, librarians, 8th grade math teachers as well as hedge fund analysts and moguls at a hot tech company.
I know people going broke on $300K per year, and folks living and raising kids on 80K and doing just fine- even in the same town so cost of living differential is not a factor.
I’ve got people working for me (so I know what they make) who spend every penny they earn. They’d love to participate in the 401K match (or so they say- who turns down free money?) but they “can’t afford to”. They use their miles (or so they think) for a “bargain” vacation which ends up costing thousands of dollars for hotels and food. They buy designer clothes and go out for drinks after work to places which charge $15 for a cocktail. They order dinner in (or get excited when they have to work late so the company pays for dinner) and don’t understand why they don’t have any money left at the end of the month.
I graduated from college into a recession; I didn’t mind living a frugal lifestyle because all my friends were living the same life. We doubled and tripled up into tiny apartments; we “entertained” in those tiny apartments because we couldn’t afford more than an occasional meal out; we signed up for every single freebie our employers offered and some of us (not me) were happy to hold down a second job if it meant faster loan repayment. And those loans were nothing compared to what folks have today. My first actual vacation (which wasn’t going home to mom and dad or spending a weekend at an aunt and uncles house) was my honeymoon, many years after graduating from college. But who expected to be flying around the world when you were just starting out?
Not all debt is bad debt. You can buy a crappy house in a crappy area with bad schools and horrible commute for cash or get a mortgage debt to get a good house in a safe central area with good schools.
You can go to community college or random school for less or consider some debt as an investment in your future for a good school.
How much debt is a complex question depending upon student’s academic strength and future income as well as if parents are willing to support or there is financial aid. It’s a very individual decision but as a general rule, cheapest product isn’t always the best value.
I blame House Hunters for a “must have it all, anything else is not worthy of consideration” mindset. After watching some of their shows it’s absolutely obvious that no one can even remotely live with a small or starter house. Everyone needs granite, oodles of bedrooms and bathrooms, and a huge area to entertain guests. All of it has to be updated in the latest style, of course.
Advertisers can get people uninterested in sports to watch a sports game for the commercials. They know enough about the human mind and how it works to do many things. It’s not just snake oil they sell - or maybe it is actually, just bottled differently.
With college, it’s not at all unusual to ask kids/parents what they thought from a visit and have it all revolve around how nice the dorms/gym/cafeteria/t-shirts were (pro or con). Some have no clue about anything being done in their academic field of study. Many fall for the, “they love me and want me - look at all the mail they’ve sent me” bit too.
It depends. My high achiever is interested in dental school. However her college savings are enough for an in state public for undergrad only. So, while she might get into Duke, paying for it with loans and then more loans for dental school just doesn’t seem smart.
Remember that old game “Life”? Spun the the wheel and right out of the starting square with the first spin you got assigned a career with a salary attached. And then you added kids to fill up your plastic car. In two minutes you knew who would win. We did “overs” on those spins continually cause we knew in two moves who the winners and losers were.
I don’t know who invented that game but I’m sure they did it to teach their kids a lesson of some sorts.
By “ranking”, I assume you mean USNWR ranking? USNWR ranking is not a good metric for deciding on college preferences, and certainly not loan amounts. There are many important factors in deciding on loan amounts. One needs to consider the relative costs, expected relative benefits, and long term financial and life implications. All of this depends on on both the individual and unique situation.
For example, suppose a student has the following options:
Full ride +$13k enrichment/laptop Stamps President’s Scholar at GeorgiaTech
Expected $10 loan over 4 years at Vanderbilt
The GeorgiaTech Stamps scholar appears to be the better deal from a financial perspective. However, if the student is having 2nd thoughts about engineering and is instead thinking of a major that is not offered at GeorgiaTech, then the benefit of being able to choose the desired major and more easily pursue a career in the student’s desired field may be worth the extra cost of Vanderbilt, including the loan. There are greater benefits to taking on loans when there are not low cost alternatives to a similar desired career.
One also needs to consider long term financial implications of the loan. For example, taking out a $50k loan for medical school may have lesser long financial implications than taking out a $30k loan for a bachelor’s, with a student who is undecided and maybe thinking about pre-med. A similar statement could be made for different expected career paths, as well as different expected benefits and preferences for individual schools. Some individual students will also be able to handle these loan amounts better/worse than others from the same school with similar career prospects – both due to personality and spending habits and external circumstances, such as family/medical limitations.
This makes it difficult to answer your original question with a specific number. I can say with certainty that the maximum loan amount would not depend on USNWR or other ranking, and I’d favor very low loan amounts, if possible.
Our POV is that the kids have $X. They can attend whatever school they want as long as it costs no more than $X. It doesn’t matter if they get accepted to a higher ranked school if the cost is more than that amt. There is no moving $$ target.
“An engineering degree from MIT or a maths degree from Harvard justifies much higher loans than similar ones from UTD or SMU.”
This assumes that the student will indeed go into a higher paying position quickly, and pay off the extra loans. I’ve got a Seven Sister diploma and an Ivy diploma somewhere in my basement, and never did land on a good-paying job track because, well, life.