<p>After visiting a State university in the Northeast a few weeks ago, I got the impression that it is "normal" for a student to graduate with $40,000 or more in debt when they graduate college, and that this is factored in when colleges are awarding scholarships, etc. I am feeling somewhat discouraged as I had been hoping my D. would be getting good scholarship assistance to pay for tuition - now I am thinking that also includes her graduating with $40K of debt, which seems totally unreasonable to me. Does anyone have any info on this topic?</p>
<p>According to what I have read the average student debt is @ $22,000 which I even think is a little high, but somewhat liveable with as regards monthly repayments (@ $250 a month for 10years). $40,000 is higher than I would want my kids to have. The repayments would be $450-$500 a month (depending on the interest rate) every month for 10 years. That is quite a chunk out of the paycheck even before living expenses.</p>
<p>My 2 look like they will each come in a little under $10k which I am fairly happy with.</p>
<p>Somewhere I read that you shouldn’t borrow more than you expect to make your first year of working.</p>
<p>I agree with swimcatsmom that the basic rule of thumb is that your debt should not be more than ~22k or the base stafford loan amount for each year:</p>
<p>3500 freshman year
4500 sophomore year
5500 Junior year
5500 senior year</p>
<p>As with many things, YMMV as students with exceptional need will also be eligible for Perkins Loans in addition to the stafford loan, so they may end up graduating with more than the 22K in stafford loans.</p>
<p>Independent students and students whose parents were denied a Plus loan are eligible to take out additional funds as unsubsidized stafford loans (but this does not mean that they should). At the end of the day, student loans will have to be repaid and too much debt will strain other areas of your life.</p>
<p>usually concur with the others. But in today’s economy, there will be a LOT of graduates begging for a any jobs, and that repayment clock starts ticking 6 months after graduation. $250/mo. may not sound like a lot, but if the best you can do is a Part-time, hourly job, it could mean living at home. And, of course, if any of the health care proposals pass, the net income of a graduate may decline by whatever dollar mandate that is required for coverage.</p>
<p>I think in this economy you will see students take on much larger debt because their parents contributions are less than originally thought or their parents can not contribute at all. Even though we did receive a nice FA package from the university my son is attending, we both are still taking out loans My son will most likely graduate with about $25 - 30K in loans when all is said and done. My husband and I will have probably twice that. And I have another son to start college in three years. </p>
<p>Yes, it is scary. But my son applied to 13 schools and he is going to the school that gave us the best FA package. This is our choice as we have been honest and open with my son and the whole debt thing from probably sophmore year of high school. What you have to understand is that you don’t necesarily have to do the payback in 10 years - sometimes you can extend the payment to 25 or 30 years. And it is not to say that you would take thirty years to pay it all back, but it is a good idea when you are just getting on your feet to take the lowest payment and then when you are making more money, you can always send in extra principal or refinance the loan to a shorter term.</p>
<p>It is never easy when you have to sign for any loan.</p>
<p>Speaking from personal experience, my student loan was about 85% of my first entry level job right after graduation. My salary was steadily increased and doubled the entry level in about five years. So, my student loan was not a problem at all. In my case I am happy that I made the decision to borrow. Otherwise, I’d have to work a whole lot more as I was self-supported, since both parents passed away without inheritance. It’s really depending on the earning potential of your career.</p>
<p>I’m reading the original poster’s question differently than everyone else.</p>
<p>balancedmom, you seem to be thinking that the school has in their mind how much debt you should take on and I don’t think that is how it works. The kind of financial aid package a school offers you is more determined by how much aid they have to give anyone than how much debt they want each student to be responsible for.</p>
<p>Some schools meet a student’s full demonstrated financial need with only scholarships, some schools meet a student’s full demonstrated financial need with loans and scholarships and some schools don’t meet a student’s demonstrated financial need.</p>
<p>How much debt your daughter will incur is determined by you and her. You shouldn’t assume how much of the assistance from a particular school will be in the form of a scholarship unless they tell you what you can expect in their financial aid policy.</p>
<p>I don’t quite understand why you think it’s unreasonable. Our EFC is 50,000+ per year. Now, we could borrow all 50,000 or we could pay for it. If we should decide our kid should borrow all of our EFC, then she would graduate with 200,000+ loan. It is entirely up to you how much debt your kid will have upon graduation. College education is not free.</p>
<p>If 40K is normal now, I would expect 50K to be normal 4 years from now. For a 10-year loan at 8%, add another 20K in interest bringing the total to 70K. Payments would be about $600/mo. That’s the reality of normal.</p>
<p>The student has to understand that they will be paying off the debt. It is up to the student to decide their level of comfort with respect to the projected amount of loans required to complete college. There are plenty of people - all with a vested interest in you taking out loans to go to college - who will tell you, “It’s OK.” Only the student and perhaps the parents can say “no.”</p>
<p>The huge sums borrowed justify considerable research to find an affordable college education. Most importantly, the student needs to stay on course to graduate in 4 year, or less. Fifth years get very expensive.</p>
<p>Balancedmom,</p>
<p>I think you are right on the money with regards to your observations. With most schools, if they judge you to have financial need (their cost of attendance > their determination of what you can pay), then they will offer federal & state aid (if you qualify), then loans and work study, and then grants. And they will assume that the student will take the maximum Stafford Loan amount each year ($5500 Fresh, $6500 Soph, $7500 Jr/Sr). Most schools also don’t meet 100% of what they determine your need is.</p>
<p>The exception would be some ivy & higher-ranked privates have no loan policies and state that they will meet 100% of what they determine your need is.</p>
<p>However, if your student is exceptional in some way (very high test scores & grades, top notch athlete, etc.), then he/she may be offered a merit or athletic scholarship that would reduce the amount your family is expected to pay.</p>
<p>I think the lesson here is to make sure that your student applies to a range of different schools, and make sure to include several that you can afford (probably in-state public schools). If your student is exceptional in test scores & grades and you are looking for scholarships, then you need to seek out schools that offer scholarships for academics (generally the tippy top schools, i.e. ivys don’t) and where your student’s scores/grades put him/her in the 10% or so of applicants.</p>
<p>You are smart to be thinking this through now with your student before he/she applies to schools.</p>
<p>I’ve always read it was in the low 20’s but rising. Students can take an extra 2000.00 now with staffords (my son had to this year) and many are relying on private loans.
One excerpt from 2007 and a map link that is interesting from the same year.
The debt level worries educators and families. About 60% of all students who graduated in 2007 had some school loans to pay off, and the average total debt was $18,800 at public colleges and $23,800 at private schools. That average debt was 18% higher than it was six years ago, the study found.</p>
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<p>Kliebo, I agree with your statement on extending the loans. Many in the medical field I work in did that, just like you try not to concentrate on the whole cost when buying a home, sometimes 25 years makes the monthly payment reasonable and you can add to it when your salary allows. A relative of mine did that so he could buy a condo and still still within his budget. He was an accounting major and within 15 years, had a large part paid off, but it wasn’t crushing him to do it.</p>
<p>The problem with this kind of debt is that the vast majority of graduates are liberal arts majors and the chance of getting jobs right now is slim. Moroever, it won’t be much better several years hence. (One of the downsides to all the machinations in Washington is that whatever passes will make employers much less likely to hire unskilled – see France, for example.) Most jobs available are part-time without benefits.</p>
<p>With the exception of certain (somewhat) more employable majors (such as econ, biz, engineering), or having a guaranteed job in daddy’s company upon graduation, increasing debt for undergrad is a BIG mistake, IMO.</p>
<p>I agree, but what are some to do? For many even their state schools are only reachable with loans. I know many in CT that pay close to 20.000 for UConn and at least have to have stafford loans to ease their parents portion.</p>
<p>I know many that are postpoing the debt going to grad school, at least part time. They feel in the end, the advanced degree will help them with their major and you can only hope that is true.
My nephew was finance/accounting and had no trouble finding work, but not with benefits for a year or two. He was also the last hired/first fired a couple of times when the belt tightening started. You can only do what you can do, but not going to college in many cases is a dead end also.
I have many friends without degrees making more than my friends with degrees, some work at banks, some hospitals, etc. but you see that less and less. They started over 10-15 years ago when it wasn’t such a nessesary item.
CC in our area is awful, but I know that isn’t the case everywhere. I tell my kids, find the cheapest option where I wont be wasting my money and keep praying things get better.</p>
<p>Just a note about “payments would be $X”. With the current repayment plans, borrowers for several kinds of student loans can get a couple of forms of income-contingent repayment plans. Because of that, a $40K loan total doesn’t mean a particular monthly payment, especially if the student is a low wage earner out of college. As an example, if you have the Subsidized Stafford loan total mentioned earlier (22K) but your income was also about 20K, then your payment could be in the ballpark of $47 a month. Check out [Student</a> Loan Borrower Assistance Repayment Plans](<a href=“http://www.studentloanborrowerassistance.org/repayment/repayment-plans/]Student”>http://www.studentloanborrowerassistance.org/repayment/repayment-plans/) for more information and numbers. Under one of the available income-based plans, “If you earn below 150% of the poverty level for your family size, your payment will be 0. If you earn more than 150% of the poverty level, your loan payment will be capped at 15% of whatever you earn above that amount. Except for the highest earners, this amount will usually be less than 10% of total income.”</p>
<p>Of course, this can also involve longer repayment, but if it takes more than 25 years, they write the rest off. These plans don’t apply to PLUS loans, among other things.</p>
<p>By the way, that doesn’t mean I’m okay with loans – my goal for my children has been no loans at all for undergrad, and we’re 1 for 2 so far. We’ll see about daughter next!</p>
<p>From a recent article…</p>
<p>I still remember a few years ago when in an online discussion a student asked, is a hundred thousand dollars a lot of money to borrow? The question nearly knocked me out of my chair. I know Ive become desensitized when the question now is is $250,000 a lot of money to borrow?, but I only shake my head. Students in particular need to get an understanding of what is reasonable debt, and what is a life-killing nightmare.</p>
<p>A good place to start is a college debt calculator like the one at Collegeboard.com. Calculators like these give students and parents a much clearer picture of just what their student loans are going to cost them over the long term.</p>
<p>Lets look at an example According to the National Association of Colleges and Employers (NACE), the average 2008 starting salary for a college graduate (B.S. in Business Management) is around $43,800. Typical monthly take home pay for that level annual income would be about $2,823.</p>
<p>If a student took out only the Stafford loans (typical loans included in the financial aid package) and graduated after four years with $27,000 in debt, then his or her monthly payments on those loans would be $311 per month. Thats just about 11% of the graduates total monthly take home income. 11% is considered pretty reasonable by most experts.</p>
<p>Now what if the student borrows that $100,000 as I mentioned in the first paragraph? Well be generous and assume they can get the additional $73,000 at the same interest rate as the Staffords (in reality, the interest rate will be higher). The graduates monthly payment is now $1,151 every month. That payment represents over 40% of their monthly take home income. That kind of payment is insane. There is no way a newly minted college graduate is going to be able pay for those students loans and cover the cost of their rent, their car, their utilities, their groceries. Its just financial suicide.</p>
<p>Before you decide that you just cant live without the degree from a college that is going to put you in the hole above you neck, you better get a handle on what the real cost of that debt will be.</p>
<p>I agree Scottaa, but many as stated above with that amount, do 25-30 years. That would make it 650-695.00, still high, but not crazy high.
I hear a lot of students at work, some going into law school, some want to be PA’s, talk of loans like they are all going to be making big money. Maybe they will, but many don’t. Blinders can make you careless, but when they come due, they quickly come off!</p>