Reasonable STUDENT Debt...

Paying for College
1

<p>I see a lot of threads that show many students attending top schools with no loans or debt when they graduate...I know that they did not all receive full tuition scholarships and that in fact; many of their parents are the ones with the loans that last long after the student (child) graduates. </p>

<p>With no parental support (ie parents don't take out any loans), what would be a reasonable amount of debt for a student to go in over their education (cummulative 4 years) and not be over their head in repayments after graduation?</p>

2

<p>I've hear that a reasonable debt load after graduation would be about 2/3rds of your estimated first year salary. So for those estimating $100,000 salary, a $67,000 debt. For those estimating a $50,000 salary $34,000 debt. I think this is workable if young folks were realistic about their estimates. One thing young folks should take advantage of is buying down their debt (through summer and term time jobs) as soon as possible. Unfortunately many are used to the free ride they have at home and just accumulate debt. I think it is all part of a changing of society towards immediate gratification. The youngsters of today have learned from the best.. their parents.. their government.. and nothing has happened to them YET.</p>

3

<p>I think the maximum amount of debt at a student should carry for their undergraduate education is $19,000 if it takes 4 years for them to complete their degree, $24,500 if it takes 5 years and $30,000 should it take 6 years to complete your undergraudate degree especially because these payments are due about 6 to 9 months after graduation.</p>

<p>This amount is in line with the amount of money a student can borrow in stafford loans whether they are subsidized (the government pays the interest while you're in school) or unsubsidized (you pay all the interest, although you can have the payments deferred until after graduation). Remember once leaving college some students may need to set up apartments, purchase furniture, cars, etc all which require a copy of your credit report and your student debt is part of that credit report.</p>

<p>This way is a student should decide to attend law or medical school where most of the aid is given in loans, they are not over extended or carrying too much debt. I was recently looking at the finacial aid section of a few law schools and I saw this statement at the Penn Law School financial aid site:</p>

<p>*Prior and In-School Credit History
Your credit history will be, and will remain, very important as you seek ways to fund your legal education. It is critical that you have a strong and clean credit record.</p>

<p>We encourage all applicants to order a credit report now to see if there are any problems that will need to be addressed before you apply for financial aid. Too often, we see students who have been reported as a credit risk by creditors, sometimes without their knowledge. Any credit problems need to be resolved before enrollment in the Law School. To receive a free copy of your credit report visit <a href="http://www.annualcreditreport.com%5B/url%5D"&gt;www.annualcreditreport.com&lt;/a>. </p>

<p>Applicants may be denied loan assistance, prior to or during law school, based on a negative credit rating or if they have incurred what lenders consider “maximum debt.”’ It is important that you consider this and manage your finances accordingly, now and throughout law school.
*</p>

<p><a href="http://www.law.upenn.edu/prospective/jd/financing.html%5B/url%5D"&gt;http://www.law.upenn.edu/prospective/jd/financing.html&lt;/a&gt;&lt;/p>

4

<p>If you need to borrower loans to complete your education the first thing you need to do is use the federal loan programs - they have the lowest interest rates and the best terms possible. The federal programs include the Stafford Student Loan, the parent PLUS loan and the Consolidation Loan. </p>

<p>Interest rates are set by the federal govt - there are lenders out there who will offer extra discounts but consumer beware of the fine print and the "gotcha's". </p>

<p>There are loan limits based on each academic year for the Stafford program so you can't get in too deep on that program HOWEVER if you use a non federal program where you have to get a co-signer and the loan is credit based you REALLY need to shop around and beware because that is where you can get in trouble and in deep debt!</p>

<p>There is a new GradPLUS loan (federal loan ) that is available as of July for students going on to grad school - there is no loan limit and it is a far better alternative than having to use a private or alternative loan.</p>

5

<p>So, What are some of the gotchas, FAlady?</p>

<p>(i'm backsliding back into CC)</p>

6

<p>My parents said it would be wise to have your debt at the end of college the same as one year's tuition. If you can get it to that, you will have it made without any heavy financial burden. I plan to strive for this with grants, scholarships, internships, and a good old job.</p>

7

<p>my daughter attended a college where tuition, not counting room an dboard was about $ 34,000- to have at end of her 4 years owing that much, that would have placed a huge weight on her ability to make use of her education, instead of just servicing her debt</p>

8

<p>
[quote]
My parents said it would be wise to have your debt at the end of college the same as one year's tuition.

[/quote]
</p>

<p>One year's tuition is a relative term. If you attend a public U where the instate cost of attendance iw 10,000 that woudl be an excellent amount of debt to walk away with. However, if you attend GWU, the current cost of attendance is 51k. When you consider that tuition is rising at a rate of 4 to 5% a year you are talking about a really wide spread as far as the amount of potential debt being taken on.</p>

9

<p>Here is my situation:</p>

<p>After my financial aid package is completed I will only have 2 federal loans (stafford and perkins) for about 7,000 a year....I am a transfer student so I only have 3 years left...is $21,000 to much debt to graduate from USC from? </p>

<p>By the way, I plan on going to medical school (information for the whole educational debt vs graduate salary % mentioned above)</p>

10

<p>Keep in mind that your stafford loans are going to increase each year.</p>

<p>Next year $4500
Junior and senior year 5500 (you are already at 22k and we have not factored in the perkins, which may be another 12 to 15,000). overall you are talking about 37k worth of debt on a 120k + education (it could be worse).</p>

<p>Just remember that MDs do not start out with 6 figure salaries, it does take a few years after the internship and residency.</p>

11

<p>I called USC and they said that if my parents income remains relatively the same (which it will) then the package will remain the same...including the grants, scholarships and loan amounts...can schools be trusted to keep there word? Or am I just being lured into something that will ultimately be very costly? </p>

<p>Also, about the above statement, I am entering USC as a sophomore this fall and my stafford loan and perkins loans are only for 3,500 each a year (not the 4500).</p>

12

<p>Here's a link with a financial calculator that may help.</p>

<p><a href="http://mapping-your-future.org/oslc/index.cfm?act=Intro&OslcTypeID=1#gettingstarted%5B/url%5D"&gt;http://mapping-your-future.org/oslc/index.cfm?act=Intro&OslcTypeID=1#gettingstarted&lt;/a&gt;&lt;/p>

<p>To actually get to the calculator you have to take the Entrance Interview which is just basically 2-3 multiple choice questions you have to answer. It's rather quick especially if you know your stuff regarding loans.</p>

13

<p>fatherofthe: Could you let me know about those jobs with starting salaries in the $100,000 range? I'll pass the information on to our recent graduate......</p>

14

<p>For any of you recent grads or parents who might have PLUS loans - the loan rates are going up in July so if you haven't refinanced these loans thru an education consolidation program you really need to consider that. </p>

<p>Stafford and PLUS loan rates are currently variable rates and change in July of every year. As of July 1, 2006 new loans disbursed after July will have a fixed rate - anticpate all these rates to change : Stafford now 5.3% to 6.8%, PLUS now 6.1% to 8.5% -- </p>

<p>Also, make sure you use more than one lender when you are borrowing thru the federal educaion loan program - that way if you decide to consolidate your loans when can shop around for lenders that are offering discounts - if you only have one lender on all your loans you can not shop you are locked into that lender - these are federal rules so you are bascially stuck!!</p>

<p>If going on to grad school there is a new program called GradPlus loan - lets students going for professional degrees borrower under the PLUS program that previously only allow parents of college student to use. This is a MUCH better alternative to having to take out a private or alternative loan that is credit based, much higher interest and really ugly repayment terms.</p>

<p>Oh yes, one more thing - Stafford loan limits are going up for freshman and sophmores next year 07/08 school year - the junior and senior limits are staying the same.</p>

15

<p>This might sound stupid but do unsubsidized stafford loans have interest rates? And do Perkins loans have interest rates?</p>

16

<p>Yep, all your loans have interest rates - </p>

<p>unsubsidized simply means the interest begins to accrue and you will have to pay it --- you can pay now every quarter or you can wait and just have this included in your monthly payment when you leave school. You then have six months after you graduate before you have to start making these payments. A subsidized stafford loan means the federal govt will pay the interest on that loans until after the six month grace.</p>

<p>So the inschool interest rate on Stafford loans right now is 4.7% but that will be increasing in July to about 6.8%</p>

<p>The interest rate on your Perkins loan is 5% - now that will not change AND it does not start to accumulate until 9 months after you leave school... so you even have more time after you graduate before you have to pay on that loan.</p>

17

<p>Could I talk to a financial aid officer to change my unsubsidized loan to a subsidized one? Can that even happen?</p>

18

<p>I doubt that. Subsidized loans are need-based if I'm not mistaken. So if you didn't get it offered the first time I'm not sure that's going to change really.</p>

19

<p>Well, one of the schools I was accepted to (a private) gave me a subsidized stafford loan and another in the same state (also a private) gave me an unsubsidized stafford loan. Do you think if I contact the second school that this could change to a subsidized loan? </p>

<p>I am a need-based student as my efc is 0</p>

20

<p>Thanks to Arkansasmom for posting this on one of the other threads>.</p>

<p>NEW YORK (CNNMoney.com) - Mayrose Wegmann, 25, should have been starting on her dream career as a political consultant by now. And saving toward her first home.</p>

<p>Instead, Wegmann, who graduated with a degree in political science and journalism from the University of Iowa in 2004 and moved to Washington, D.C., is working at a non-profit because it pays significantly more than entry-level politics work. And she won't even consider buying a home for several more years.</p>

<p>In fact, she won't consider much except how to meet the $300 a month she owes on her $34,000 student loan balance.</p>

<p>"The school debt makes you decide [about your career] based on the money factor. Not based on what you want to do," said Wegmann.</p>

<p>The Class of 2006, set to graduate this month, will soon be in the same boat.</p>

<p>Approximately two-thirds of all students use loans to pay for their higher education, according to the Center for Economic and Policy Research using data from the College Board. The average debt for students graduating in 2003-2004, the latest data available, was $15,622 for public schools and $22,581 for private – many students rack up even more on their credit cards.</p>

<p>As recently as 1990, only 46.2 percent of students at public schools took out loans, averaging just $9,798 in 2004 dollars. Private school debt in 1990 averaged just $15,054.</p>

<p>Call it a reverse dowry: college debt diverts careers and delays or impedes graduates' plans to get married, buy a home or even to start a family. The effects can last years.</p>

<p>A 22-year old student graduating this year who consolidates their $40,000 loan at 6.125 percent will need to pay $243 a month...until they're 52. By that time, they will have paid $47,494 in interest alone.</p>

<p><a href="http://money.cnn.com/2006/05/01/pf/college/reverse_dowry/index.htm?cnn=yes%5B/url%5D"&gt;http://money.cnn.com/2006/05/01/pf/college/reverse_dowry/index.htm?cnn=yes&lt;/a&gt;&lt;/p>