This should be at the top of every forum on CC.
Well- I know two young people with debt in the $700/month neighborhood (one is higher).
She DOES think that it’s ok because she got to go to her dream school. She is 28 and has accelerated her payments and is on the verge of paying off the debt. She is happy with her lifestyle, her career, and wouldn’t have changed a thing. The debt means she’s not drinking $15 cocktails at fancy bars after work or buying designer shoes like some of her colleagues, but she’s very happy with her life.
The other actually paid his debt off early. Lived like a monk after graduating. Again, wouldn’t have changed a thing. He has his entire life ahead of him to to worry about car payments and a mortgage…
You need to know your kid (and yourself). As parents if you have gone through some belt tightening years so your kids know what “no spending” means (beyond food, electric bill, and gas to get to work) and they didn’t complain constantly that they were being tortured, your kids are probably good candidates for debt assuming they’ve got a plan to get a job and live modestly. If every thrift campaign you ran as parents resulted in the kids whining constantly, then that’s a good sign that the “no spending” life is not for them.
I don’t like the demonizing of debt- it’s a useful tool when used correctly. Or of course- it can shackle you for years, ruin a marriage, prevent you from reaching other goals.
It depends.
The day I stopped paying my educational loans I opened college savings accounts for my (then) two babies. I faithfully deposited the exact amount of my loans every month- even during some lean years figuring that now was “payback” time for me. So while I never got the rush of “wow I’m rich” once my loans were retired, I got the “wow I’m rich” by the time the kids were 12 and 10 when I saw how quickly those payments had grown.
It was helpful to have had the discipline of a college loan- every month, that payment is due.
^^^
Kudos to you, blossom, but unfortunately I think you are the exception rather than the norm. Perhaps I’m wrong; maybe we only hear about the debt situations that get out of control and the vast majority of folks are careful with their borrowing and manage their payments without difficulty.
@blossom <<<
don’t like the demonizing of debt- it’s a useful tool when used correctly. Or of course- it can shackle you for years, ruin a marriage, prevent you from reaching other goals.
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Yes, it can be a useful tool when used responsibly. I remember a 5th year senior who posted who discovered that his aid had run out. In that case, taking on larger debt for that one last year was necessary because his eng’g degree needed to be completed for him to find a good job. Simply leaving at that point, and facing the fed debt he already had, wasn’t a great option. Taking on a private loan for that last year was a necessary evil.
The problem is that a 17/18 year old often isn’t that self-aware. Their brains aren’t yet fully matured. They may “think” that they’d be ok with “living like a monk” or “living in parents’ basement” while paying off big debt after they graduate, but many kids do like the “finer things in life,” and do want a “significant other” relationship post-college, and that isnt that conducive to paying off big debt.
Also…the presumption that the new grad can just live with mom and dad for a few years to pay off the debt is also short-sighted. The job may not be near the home-base. The job may be in a place where rents are high.
And…really…typically paying off big debt does NOT just mean forgoing big $15 cocktails. I wouldn’t want anyone to think it’s that easy. It’s not. If it were, we wouldn’t have the student loan debt crisis we have since most people probably have no problem avoiding $15 cocktails (I don’t think I’ve ever had a $15 cocktail in my llife! lol)
Yes, if the stars are all aligned and the student lands a 6 figure GS job out of college, then the risk from taking on bigger debt is not as big an issue. BUT …no one can accurately predict that outcome for a 17/18 year old kid.
It’s like the risk a pregnant mom takes when she drinks. It might be ok, it might work out, but you may not know until years later. Should the mom who drank while pregnant proclaim that it’s ok to do so because HER kid turned out ok? Should the mom who smoked like a chimney during her pregnancies be used as an example that “it’s ok” just because HER kids turned out ok?
My niece just got her first job after a private school education paid for by her parents. It’s a whole new world to figure out how to live on $3000 per month net. Her mother wanted her to take over the student loan payments but there is no way she can afford that. Many kids now have health insurance covered for a few years on the parent’s plan. They don’t know how lucky they are. Cell phones too.
I agree that debt can be a useful tool, but when kids have no safety net (either because parents are maxed out on debt or are low income) then they need to take advantage of lower cost opportunities. In those cases, borrowing has to be well thought out and the amount of debt should be minimized as much as possible.
Trying so very hard to be very cautious with school debt has me focused on chasing auto merit aid which fuels it’s own frenzy and stress. But in the end, the day my kid graduates with my home equity, 401K and savings intact, and kid with minimal to no debt, it will all be worth it. This I learn from this site and people like @mom2collegekids
I would think a new grad with 3k a month net could take on her debt, at least with IBR. That,s a starting salary in the 40s. Not bad/pretty typical for a new grad.
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It’s a whole new world to figure out how to live on $3000 per month net. Her mother wanted her to take over the student loan payments but there is no way she can afford that.
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with IBR
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How much is the debt? How much are the payments? Were these Plus loans or student loans?
I wonder what the IBR would be for a single person with an income of $40k. I’m thinking that there wouldn’t be much reduction.
I can understand how a 20-something female can’t afford student loan payments on $3k a month. Single female life can be pricey. 
Rent at a nice safe apt, utilities, internet, cable, clothes, hair, nails, makeup, shoes, car payment, car insurance, cell phone, food, toiletries, entertainment…it all adds up! Her rent alone may be half her take home pay.
I know I’m being a bit silly here because economizing can certainly happen. But…I look at my 20-something nieces with their mani-pedis, salon treatments, hair extensions, clothes, hair products, and so forth. Looking good doesn’t come cheaply!!!
I don’t think the debt is much, maybe the subsidized stafford loans only. Definitely not more than $25k. They aren’t complaining but it is still just a payment they’d (or anyone) rather not have. If she HAD to make the student loan payments, she could and would have even less spending money every month but she’s lucky and her parents can give her a little breathing room. One issue for her (and it is totally a first world problem) is that a few of her friends live there and they aren’t living on their salaries as they are subsidized by family, so they don’t think anything of spending money for a weekend away or a night out. It will be hard to keep the extra spending down. My sister believes that by this time next year, she’ll decide that roommates aren’t that bad and it would be nice to have some extra money in her pocket.
IBR may only have a minimum payment, but the interest that isn’t paid with the reduced monthly payment continues to accrue, so if you then go off IBR your payments can jump to a pretty high number. Better to pay now than later.
@mom2collegekids, you know I am a fan of the paying for college knowledge that you bring to this website. i have followed some of your threads where you really have helped some people get real about unaffordability. Kudos for starting this thread.
I agree with @blossom that debt can be used responsibly. My husband and I left graduate school with consolidated undergraduate and graduate school debt of around $60,000. We took jobs that payed okay with excellent free housing and free day care on the work site for our new baby in a country that most Americans would not want to go live in at a time when the safety of said place was questionable. We hunkered down and paid off that debt in 15 months, and have never had any debt since. Since then we have continued to live overseas, though in a more appealing location, and have been able to make a good income and have lots of amazing experiences because of the credentials we earned.
What concerns me the most is the going for the big debt because someone feels faced with no other choice in order to fund their education. Just yesterday a colleague who I don’t know very well emailed me because she had heard that I had learned a lot about scholarships for college in the last year or so. Her senior daughter applied to and got admitted to a school that costs in the vicinity of 65,000/year for a performing arts degree. They as parents did not know the cost of the schools their child selected going into it. They let their child take care of all the decisions. The child got a scholarship of 30,000/year for the first two years. They don’t qualify for financial aid, but can’t afford their full EFC. They don’t want to say no to this opportunity for their daughter or disappoint her, so are seriously thinking about borrowing the rest. I was in shock that they are even willing to consider this. I don’t have much advice to offer them except maybe take a gap year and reapply to less expensive schools next year, as I don’t think she applied to any that they can afford this year.
This is the kind of debt decision that people make with their hearts instead of their heads, because they don’t want to deal with the tears, the disappointment, the loss of bragging rights, the regrouping and finding something cheaper, or whatever interferes with this crazy decision to take on this debt load.
On less than 3k a month, I’m making a mortgage payment, loan payments, insurance, phone, and on and on. 3k for a fresh grad per month isn’t bad at all and it should be completely doable without much sacrifice.
Of course, if said recent grad is choosing to live in a very high COL area then yeah, I could see it being a problem… but they’ve made their choice.
Here’s an example of a student who will likely be taking out large loans, unnecessarily.
I laugh when a new grad can’t pay off an educational loan due to the costs of hair and makeup.
I graduated from college into a terrible recession and somehow managed to support myself. Was it in high style? No. Was it in a doorman building with a health club? No. The kind of things that new grads did in the old days for social life looks quaint compared to today’s COLLEGE kids, let alone new grads supporting themselves.
The bottom line is that if your kids are going to insist on a professional manicure and the trappings of a Kardashian lifestyle in their early 20’s, educational debt is not for them. There is always something new to spend the extra $20 on. But if a kid is intent on launching a career and understands how to make financial trade-offs, responsible debt management can (doesn’t have to be- but CAN) be part of the educational funding plan.
I agree that living in mom’s basement should not be part of the plan other than as a safety net. A kid who wants to work in TV production is heading to Dayton Ohio if that’s where the first job is. A kid who wants to work as a museum curator is moving to Minneapolis if that’s where the job is. I counsel SO MANY young people who have failed to launch and there is one commonality to all of them- inflexible geography. I tell them all- “the only reason I will accept for not casting a wide net geographically is that your kidney transplant team needs you close by. That is a legitimate reason”. The rest is hogwash.
The “dream job” is in Charlotte? So move to Charlotte. Go on Craigslist; find an elderly couple renting out a room in exchange for weekly lawn mowing and taking out the garbage.
I realize families offer different levels of support to their adult children, and will confess that I still have my new grad on my cell plan, but mostly because the carrier specials/discounts make 4 lines about the same price as three. same with insurance. Family policy costs what a family policy costs. Why not leave her on (gives her double coverage) if there’s no cost benefit to removing her. I have female students who, for cultural reasons, won,t consider leaving home until married, I understand the high rents for a single woman in a new city who rents a pricey apartment where she feels safe for the first year until she finds a roommate. I get it. Or at least I try to, but…“I can,t pay my student loans because I need my mani-pedis and salon appoints, and I have to be able to go out with my more affluent friends?..” I’ll admit that I really have a hard time with that one. I mean, when does one allow that kid to grow up? Being an adult is tough sometimes and requires hard choices.
“This is the kind of debt decision that people make with their hearts instead of their heads, because they don’t want to deal with the tears, the disappointment, the loss of bragging rights, the regrouping and finding something cheaper, or whatever interferes with this crazy decision to take on this debt load.”
^^^This^^^
Ordinary- I also understand the cultural thing. But in my experience, those young women are getting certified to be OT’s, PT’s, other allied health or educational jobs. So it’s not totally out of the question for them to find a job close to home while they figure out grad school and the future, living in parents house rent free.
But a kid who wants a job in brand management/finance/arts management/industrial sales? You go where the job is. I spoke with a young woman recently who is graduating with a degree in psychology and is focused on corporate HR. (great career for someone with a psych degree). I asked if she’d applied to GE’s training program (pretty much considered the gold standard for an HR launching pad.) She blanched- they require moving. Moreover, you get transferred a year into the program into an operating division. Mind you- they pay for the moves… plus the extras… plus it’s pretty much like winning an Emmy once it’s on your resume. However, she has a boyfriend…
Yikes. This is an ambitious 21 year old? With loans to start paying down?
So IF you are contemplating loans for your kids-- and your kids are only 18 years old now- explain to them that yes, they are going to have to be flexible in order to land the kind of job that allows them to pay off those loans, whether quickly or on the regular timetable.
My sister took out a chunk of loans to attend one of the seven sisters and took about 20 years to pay them off. For the most part, this was a conscious choice, as the rate was very low. She regrets nothing. She won a full ride to a Masters/PhD program at an Ivy. It was a worthwhile gamble, and really, she only went because it was her dream school (a term we all hate).
My kids will have loans. It’s the right choice for them. I’ll make sure they understand amortization and that they plan on accelerated payments. We’ve always shown them how much money they can save just by not eating at restaurants, etc…It’s not ideal, but it’s okay.
One of my daughters went to an admitted students day last weekend, and absolutely loved the school, but came home and said “that’s okay, I’m prepared to love too. This one’s not worth 50,000 more.” I never thought I’d hear that from her, and it was one of the proudest days of my life.
So – my opinion seems to mirror @blossom 's. Debt’s okay if you go into it realistically, with the right attitude, and don’t take it on unnecessarily.
You’re right @blossom Most of my students who will stay home until married are in nursing, social work, education, and a few in business, all fields where they can work locally. If grad school is on the table, it is a program available within commuting distance.
I think for many students debt is necessary, and I adhere strongly to the standard advice we give on this forum…keep it to the direct loan limits. But after this conversation, I might now add, and be sure you’re ready to give up your manicure to make the payment,
Kind of add a funny aside, the thing my own new grad doesn’t have money for because of the loan payment? “Beauty stuff”.
The latest…
Cornell no debt vs. 40K debt NYU, wondering is Cornell is “a joke” (yup, direct quote)
http://talk.collegeconfidential.com/new-york-university/1878865-cornell-aem-vs-nyu-stern.html