Recommended loan limits

Parents Forum
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<p>Wyanokie, I have two kids. One went to a “top” school, graduated near the top of her class, and got a job right away after graduation. But she had friends from college with weaker GPA’s who had a hard time finding jobs – I think that over time they all eventually found jobs, but it wasn’t easy for all of them. By “weaker” GPA, i don’t mean bad GPA’s – I just mean weaker than my daughter’s, which was in top 5% of her class. (I am assuming that 95% of her classmates had weaker GPA’s – I know the percentile simply because that’s the criteria/cutoff for the level of honors she graduated with). </p>

<p>My other kid went to college for 2 years, dropped out, worked for 3 years, went back to school at an in-state public, graduated with a B+ average, got a job right away, with about the same starting salary.</p>

<p>It’s very easy for people to post about what starting salary is at Google, but I know something about their hiring process, and it can be very long and also somewhat unpredictable. </p>

<p>I don’t know percentages. I don’t know what percentage of kids who enter MIT with high hopes are graduating 4 years down the line and getting those coveted jobs, and what percentage are “settling” for less. </p>

<p>Here are some figures from a year ago:
<a href=“25 College Diplomas With the Highest Pay”>http://www.forbes.com/sites/susanadams/2013/04/12/25-college-diplomas-with-the-highest-pay/&lt;/a&gt;&lt;/p&gt;

<p>Keep in mind that the figures quoted in that article are averages. In other words, if the average CMU computer science graduate was earning $84,400, that means that a lot are earning less. Also, the sources of data for average or median salaries are often based on surveys which exclude students who have not been able to find employment. </p>

<p>As a parent I would not have allowed my kids to borrow $50K for an undergrad degree. I did take PLUS loans, and so if you count my borrowing along with my daughter’s, I think that came to around $40K - but the PLUS loan was my way of financing, and my upper limit in my mind was based on assets. That is, I came to a decision about how much I could borrow based on looking at my own net worth, including home equity and retirement accounts. </p>

<p>I agree that a STEM - technical degree potentially leads to significantly higher salaries than a liberal arts degree, but there are no guarantees. </p>

<p>I think that if you are in position to pay $40K a year for college, then have your son apply to schools that will be affordable. If he wants to study engineering and has the stats to get into MIT, then there are also some excellent schools that are known for offering strong merit aid. (But keep in mind that the “stats” are a lot more than test scores – and 800 on the math SAT is not all that unusual. The kids who get into MIT typically have a set of ECs or awards that back up their GPA and SAT.</p>

<p>I agree with @cptofthehouse – if the school name is worth borrowing for, then the parents should be doing the ones borrowing any amounts above and beyond what is offered via the federal student loan program. </p>

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<p>@furrydog

What guarantee does the OP have that her son will have an OK GPA? Some kids have a disastrous freshman year – for all sorts of reasons. </p>

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<p>I know nothing about finance, but for engineering I can share our family’s IRL experience. Where did not matter. What mattered was ABET certified program, work experience, and high GPA. (Co-oping is definitely a good decision.)</p>

<p>Our oldest graduated from a small unknown to the general public state tech university, but it is a university that industry likes. He had multiple job offers from corporations around the country. He had a high GPA. (The only grads who had job offers at graduation had 3.5+ GPAs) His salary after 2 yrs matches the published data for tippy top engineering programs. We paid for his college out of pocket (in our world, that tells you his degree was low cost. :wink: ) He graduated debt-free, spent the past 2 1/2 yrs saving, and just bought his first house 2 weeks ago. (He didn’t graduate until Aug of 2011, so it hasn’t even been 3 yrs.). </p>

<p>He has had multiple promotions since he graduated. Work performance, once hired, is all that matters. No one cares where you went to school. Knowing how industry views a programs grads is more important than what the general public thinks of the school. Find out what companies actively recruit grads. (Should be easy to get answers from a coop/career center of any good engineering school. If they don’t have on campus recruiting and are not open with that sort of info, that is a program I would avoid. Having companies look for you is definitely an easier scenario for employment than you having to look for companies.</p>

<p>HTH</p>

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<p>This is a hard question to answer. </p>

<p>We pay interns well also in EE and CS. Starting salaries are in the high 70s. </p>

<p>Statistically, it’s probably a risky proposition, but if he gets into a top school, he’s already blown away the statistics, and I think it’s far less risky. Like any successful business enterprise, making it work involves dedication, persistence, and yes risk. I think investing in one’s career is a good investment for someone driven. </p>

<p>I think if a kid is mature and dedicated to his chosen profession, I think borrowing what you need is fine. </p>

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<p>Everyone’s story is going to be different, but OP might also want to visit the learning challenges threads, the disastrous freshman year threads, the decided to take a gap year threads…My point being, the only thing you can control in the financial burden equation is how much you take on, which i encourage OP to think of as “how high the monthly payment will be for 20 years” ( Signing bonus? Seriously? I know plenty of STEM people and nobody with a bonus, barring one CMU grad in Cali.)</p>

<p>S1 graduated with no debt at all, and had a job in his field before he even graduated (having met much trauma and taken The Long Way). The job is awesome. The pay is wretched – just above poverty level. I shudder to think of him turning it down because of loan payments. S2 is almost done and we will probably have a 4K PLUS loan to pay back. That’s it. The financial Independance of debt free is so much better than a brand-name school purchased with a lifetime of debt. Forget talking to him about debt – he’s so sure he’ll have a fabulous job, he’s not rational now. Find a really good school that’s affordable with little to no debt for anyone.</p>

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<p>I work for a large national company. We don’t provide signing bonuses to new college grads. We do make sure our salaries are in-line with the location from which they work. And a $25/hour intern must be working in a large, expensive metropolitan area (with commensurate expenses). </p>

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<p>My D, a new grad, just got one at her company with a BSCS. </p>

<p>My company gives them out all the time if the market suggests that we need to. It currently does. </p>

<p>Statistics are funny. You can take the average graduate in the average job in the average company, and sure, they make less and don’t get signing bonuses. </p>

<p>If you strive to be average, by all means avoid all debt. </p>

<p>The average professional baseball player makes less than the poverty line.
The average professional baseball player is in the minors, perhaps at the A or AA level</p>

<p>I would argue that attending MIT or other top schools already puts the student at “AAA” equivalent. </p>

<p>If you take the median salary of professional baseball players at “AAA” and higher, and you thought you were good enough to be there, you’d definitely borrow money to make sure you made it to the “show”. You also wouldn’t spend all of your time lollygagging, partying and putting it all at risk.</p>

<p>Statistics are funny, but people aren’t statistics. </p>

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<p>Above regarding signing bonuses. So the rub is…no way to predict IF the market will suggest these signing bonuses when the OP’s kiddo graduates.</p>

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<p>If you take out large loans, there is no GUARANTEE that you will get a high paying job right out of college, no matter where you get your degree from. However, there IS a guarantee that you will have high debt repayments. So, how much of a gambler are you?</p>

<p>Oh, and H has a PhD in CS, works for the largest software firm in the world, and barely earns in the six figures. His new employees (recent Masters degrees or PhDs) earn about $65,000-$75,000 in the US (less overseas). So, there is wide variance in pay - even in great industries. </p>

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<p>@"Erin’s Dad"‌
Our ds was actually salaried during his co-op job. (He cooped for 12 straight months and lived in a corp provided apartment.) He earned full benefits until college graduation plus a scholarship for each semester he had left in school. </p>

<p>If you broke down his salary to an hourly wage, it was somewhere around $21.50-23/hr. (I’m not positive how many weeks his salary was based on) His place of employment? A small town in TN.</p>

<p>No bonuses when he started his job after graduation, though.</p>

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<p>Hence the term RISK. Just because something is risky doesn’t mean you shouldn’t do it. I take a lot of calculated risks and usually come out ahead, but sometimes I don’t. That’s life. There is risk involved in not taking any risk. </p>

<p>The expected lifetime salary of a new graduate in EE or CS right now is probably between 3 and 4 million dollars, but the standard deviation is significant too. To me, borrowing 30-40K to maximize the potential is an easy no-brainer. Borrowing 80-120K gives me pause, but under certain circumstances, may also be worth it. Clearly the risk is even higher. </p>

<p>People do become astronauts, movie starts, professional athletes, and Fortune 500 CEOs. None of them avoid risk completely. </p>

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<p>@ClassicRockerDad‌<br>
I am trying to understand how taking out loans to attend a top school actually maximizes potential over a career in engineering if one works in industry. Once you are employed as an engineer, what corps or industries care where you got your degree from? My ds and dh (both chemEs) have worked side by side with engineers from top engineering schools around the country and there is zero difference in pay or promotion based on where their degrees were earned. It is strictly performance based. </p>

<p>Could you give concrete examples of employers who wouldn’t hire a grad from a lower ABET school but only MIT? Or a corp that would pay a new grad BS from MIT a different salary than a student from say NCSU? </p>

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<p>My kids are both engineers and went to 2 different instate schools. Both did get signing bonuses. They work and have worked alongside kids from lots of different schools (including kids from Cornell, Yale, MIT,etc). I don’t sense that the kids from more elite schools got more money but maybe I’m wrong on that (but hope I’m not). The key in engineering seems to be ABET accreditation and good recruiting at the school. Both had high GPA’s and that seemed to help in getting good jobs. Both had less than $20,000 in loans before interest . Even with engineering , I don’t think I would have wanted them to come out of school having to repay much more than that. They did not pay anything upfront for their educations so they had money saved already from summer jobs, internships, signing bonuses to help put a big dent in the amount of loans they did have to repay.</p>

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<p>I am clearly in the wrong career, since I’m making less than the interns at @furrydog’s company, and I don’t know anyone who gets a signing bonus who isn’t a professional athlete. If you can get by with less debt, I recommend it. </p>

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<p>Just want to emphasize that borrowing “too much” money (and who’s to say what “too much” really is?) may limit options after graduation. How many thousands of kids go into college as engineering or finance majors and come out as something else altogether - as teachers, or scientists, or linguists? Suddenly, all those calculations based on average starting salaries of engineers and signing bonuses for financial analysts mean nothing. Hefty loan payments can definitely impact the choice of a career post-graduation, and it’s nice to have choices that don’t depend upon starting salary.</p>

<p>Remember, OP implied that her son was interested in the high earning potential associated with STEM and finance careers (correct me if I’m wrong, but I didn’t read anything about loving science or economics, just that they could lead to high-paying jobs.)</p>

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<p>I don’t know where the idea of signing bonuses as being extremely uncommon comes from with some of these posters. I know a lot of people who graduated in the past couple years and almost all of them got some signing bonus. Though the size can vary quite widely.</p>

<p>An amount like 80K seems like it’s more than necessary. What state do you live in? What can he/you contribute on the spot? My personal view is that every school has a ceiling on the potential for the first job out of school, and for the most part the ceiling is higher than the potential for 99% of students. I think very few are held back by their school, and between two schools where these ceilings are both above his potential, he’s probably no better off at one over the other. Unless your son is a literal genius or you live in a state with no decent STEM school, going to a top public OOS or a private is probably just not worth the cost. </p>

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<p>That’s your advice to young people? Take on debt or run the risk of being thought of as “average”? Nice. How do you recommend they pay off those loans if the market is saturated when they graduate and there are not only no signing bonuses, there are not many high paying jobs available? If students require a signing bonus and hefty salary to repay loans and the source of both is dependent on market fluctuations they have no way of predicting, that’s a blind gamble, not a calculated risk. </p>

<p>Debt is a tool and, used wisely, can help people. However, for young people to take on debt that they can only afford if they get a high paying job with a hefty signing bonus is taking a larger gamble with their futures than is probably prudent.</p>

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<p>Not only MIT, there are a number of top schools. NCSU is actually pretty good. </p>

<p>Microsoft when they were a startup
Apple when they were a startup
Google when they were a startup
Akamai when they were as startup.
VMWare when they were a startup</p>

<p>All of these companies recruited at MIT and Stanford WHILE THEY WERE STARTUPs. I don’t think I could have gotten into the startups that I’ve worked for coming out of an ordinary school. </p>

<p>I recruit at the MIT Career Fair every year and there are startups galore recruiting. They don’t have the resources to go to a place like NCSU. They want MIT grads or Stanford grads. Both schools are full of startups started by professors and alums. Many of my frat brothers have done exceptionally well, orders of magnitude greater than one could drawing an average engineer salary. </p>

<p>There is a certain fearless can-do culture at these places. People learn to think big. </p>

<p>You can make a lot of money at a startup and even if you don’t, you could get 5 years of experience in 2 years by working for one. Eventually you learn how to pick a good one. </p>

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<p>You can do better than try to imply he said the converse of what he actually said, come on now. </p>

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<p>That’s not what I said nor what I meant. </p>

<p>I meant that if you would be happy with average job, average wages, etc, then there is no reason to take on the debt. If you have much greater ambition and are willing to take risk in exchange for potentially far greater reward, then it might make sense to borrow money. </p>

<p>I’m not talking about saddling people with unbearable debt, but avoiding risk or debt at all costs is too conservative for the most ambitious among us. </p>