<p>Bay, I think the point we are arguing here is that the limit on Federal loans makes the private loans ‘necessary’ in situations where the child is hell bent on going OOS or to a dream elite school or simply must live on campus for the “college experience.”</p>
<p>Thanks denise, I was addressing the OP’s post. But regarding your discussion, I think each family should be free to make that decision based on their circumstances. Personally, I am not at all loan averse - I believe loans can allow you to do things that can change your life in a positive way. The key is being responsible and managing your loans properly.</p>
<p>I am not minimal and reasonable loan adverse either. Key word being minimal. If a family or student needs to take out tens of thousands dollars worth of loans I don’t find that minimal or reasonable.</p>
<p>Wait–are ParentPLUS loans private or federally-funded? They certainly are subject to adhering to the 6.9% interest rate set by the US Dep’t of Education.</p>
<p>Denise, these loans can also be used for the time being to be paid off later when IRA’s can be withdrawn without penalty, although they will be taxes as ordinary income. I don’t find that strategy unreasonable at all.</p>
<p>Parent PLUS loans are federal loans (and they are 7.9% interest).</p>
<p>Using IRAs to pay off student loans seems like an awful thing to me, as it will jeopardize the parents’ financial security. Who is going to help the parents when they run out of funds because some of it was used to pay off kids’ loans? So many folks have so little set aside for their retirements and social security & medicare are not as secure and reliable as one might hope. Most kids do NOT expect to support their folks in retirement and few jobs have pensions any more. Where will the money for elders come from when the job gets cut and no one wants to hire an older worker who is overqualified or not up to speed with what the employer is seeking?</p>
<p>Here on CC most of the talk is about 4-year dream schools, but a lot of those private college loans are made to students at for-profit 2 and 4 year schools. The students sign up for expensive private local schools because they’re assured that they’ll more than get their money’s worth with great jobs after they’re graduated. Then it turns out there are no jobs, or at least not ones paying at the expected rate. Or they end up dropping out. There’s just the loan payments, all conveniently backed by the government.</p>
<p>HIMom–it works in theory if the parent invests wisely & the money compounds over many years without having to pay taxes on capital gains. Yes, there is the extra payment ‘juice’ of 7.9% for the time being (thanks, kels!). This also only works if the student realizes that the COA has to be within the means of what has been earmarked inside the IRA for college.</p>
<p>Well, obviously H & I are not wise investors as our IRAs have not done very well at all. Likewise, the money we earmarked for the kids’ college has also shrunken in value and we kept from liquidating it as long as possible to give it time to recover. I wonder how these families who deplete their IRAs will be able to replenish them? What happens if they can’t and their job is outsourced? What happens if they get disabled? What about if their pension disappears?</p>
<p>I still think there will be a LOT of stretched families in the future–parents & kids who sacrificed EVERYTHING plus took on crushing loans only to find out that the monthly and total payments are WAY over what they can afford with whatever income their beloved college grad or even professional grad will be able to earn. It really concerns and scares me.</p>
<p>Isn’t part of the problem that there is a glut of excess college students, and not as many careers that demand university educations? I recall awhile back, a professor saying that students with average grades who then go on to accumulate large loans are really better off not attending college at all because their job prospects will simply not be worth it.</p>
<p>Right now, the economy is to blame for a lot of people with degrees who are unable to find jobs, but when the economy becomes stronger, maybe it would be better to work on making high school diplomas more valuable rather than just assuming that the vast majority of average students and beyond will attend college.</p>
<p>I think there are so many aspects to this problem. One is the expectation that college degree = high paying job for all graduates. This has never been the case, despite all the hype and with a tough economy, even less so. Even when I graduated from college in the 70s, many with undergrad degrees had to get some advanced degree to get a job, even working for the state government.</p>
<p>Lenders now have few to no incentives to care about being repaid when loans are guaranteed by the federal government and also not discharged in bankruptcy.</p>
<p>Families and HS students are often in a very poor position to evaluate the cost/benefit of the various options available to them.</p>
<p>It is also true that many students graduate from HS without adequate skills for many jobs, including basic math and reading/writing skills.</p>