I think the Stafford limits are reasonable. You’ll still have kids that struggle, especially if they don’t finish the degree, but still have the debt, but at least it’s not a horrific amount. You can get out from under it. It’s the private and unlimited parent plus loans that can really sink a person.
@ASKMother - I make 45K/year and a 37K car loan would kill me! I mean there’s no way. So, that may be the “average” cost of a new car (seriously?), but it is way out of reach for many. I currently have THREE vehicles and the combined value is maybe 8K. LOL
An “average new car” in the US costs about $36k, but there are many new cars for sale for much less than that. Plus, most individual purchases of cars are for used cars, which can be substantially less expensive.
@MYOS1634: “My reaction was: we shouldn’t need parent loans to send our kid to a public university in-state.”
Eh. Even the tuition-free German unis don’t subsidize room and board.
I’m on-board with free-tuition programs but not so much for subsidizing room and board.
How would you handle areas of the state which are not in reasonable commuting range of a public university (or where the public universities in commuting range are highly selective and therefore admission-inaccessible to most students that the state sees as ones who would benefit themselves and the state by going to college)?
" I know we shouldn’t have to protect people from themselves, but at some point letting all these people sink themselves financially is going to bite us in the ass."
I think we certainly should! Because we all pay the price for defaulted loans and it puts our economy at risk. Look what happened with the mortgage loan crisis.
" Parent Plus loans have NO LIMIT. This is absolute insanity to me."
“There is no check of income or debt to income ratio at all. Zero.”
It is insanity and again this is the reckless lending practices that got the mortgage loan business and the banks in trouble during the last decade.
“maybe someone can help me understand why the average of $30K per student is a bad thing or cause for alarm?”
For one, many loans are taken out by people who never wind up getting a degree or wasted on for profit schools offering a substandard education.
On another forum there was a discussion of a kid whose parents took out a huge ($50k) loan for the kid’s freshman year (yikes!) and the kid dropped out at the end of the year. Now the parents are on the hook and the kid is not on a trajectory to be able to help repay this. Parents are not happy campers. This probably happens more than is talked about.
@jym626 we know one - parents have $60000 in loans and he spent three semesters partying. At least the kid has a steady job and is making payments.
My H knows a man whose D lost a merit scholarship, so he took out loans so she could still go to the same school! 3 years later she’s still at home, working and he has a $100000 loan in his name.
I just can’t have sympathy in these situations.
I want to add that the D in the second example did graduate from college, unlike the first young man.
Oh my, @Leigh22 - I cannot imagine. We tend to focus on the outstanding debt after a student graduates, sometimes forgetting these situations where the student doesn’t graduate, or loses their scholarship. Ouch.
Like the housing market, when money supply (loans) is tight, housing prices remain flat or decline. In essence, if you can’t borrow, you can’t buy so costs come down. Tuition has spiraled out of control. Although not the only reason, access to easy money (very little traditional creditworthiness required) has dramatically added to the cost. As long as the money supply is there, people will access it just like they buy way too much house because they can. Although many blame the big banks for the financial crisis boom in 08 /09 (yes they were bad players and greedy as hell), the consumer, I feel, was equally at fault. Buying way too much house with interest only, 100% loans, negative amortization products, etc. Put them all in the category of fog a mirror liar loans. In FL, I saw so many “educated” people take money from retirement accounts and buy two or three investment homes with virtually no money down thinking the music would never stop. Multiply that by several million and the bubble bursts. Lot of short sales / foreclosures (including on my street which has killed the comps if you want to refi).
Hopefully not headed there with college loans. Please, no programs to alleviate debt repayment. You borrowed, you pay it, period! That’s called risk / reward.
There could be a few options:
1). Many that don’t have a commutable 4 year university do have a commutable community college …so they could start THERE…and if they have the grades after those 2 years, then they could qualify for an room grant. Food should be earned. I strongly believe that the student needs to first demonstrate thru academic performance that they warrant a grant that covers room.
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State community colleges and State universities should have a number of 100% online programs/degrees. This could eliminate the whole R&B issue for many.
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the gov’t could provide better incentives for companies to provide tuition assistance. Right now, I think that if a company provides more than about $5k per year in tuition assistance, there is some tax liability. Change that.
I don’t believe in an extra generous gov’t program for just any high school graduate. Too much waste that way. A student that has demonstrated academic success for frosh/sophomore college years is likely going to continue.
I think the student loan system needs to change. Frosh/Sophs going to a community college could have the option of taking NO student loans for those years, and then be able to take $15k-20k per year loans for Junior and Senior years. This is such a win/win option. Students with college financing issues could be encouraged to go to a low cost community college (pay as you go) with the knowledge that they’d be able to borrow $15k-20k per year for their last 2 years. And those who make it to junior year are far more likely going to finish college.
Yikes indeed!
And yes, this probably happens more than we think. I remember reading that many schools see 100-300 frosh not return after Frosh year, often due to failing grades/dropping out. Very likely a number of those students took out loans for frosh year and aren’t likely going to be employed in a way to easily pay those loans back.
How long has this been going on? I wouldn’t put a lot of faith in a situation like this unless the kid is earning a substantial income. My concern is that after a couple years of making payments, the kid is going to be tired of seeing a good chunk of income going to a school loan which benefited him little.
This happens a LOT. Kid loses merit, begs to be able to stay, and parents borrow.
I have little sympathy as well.
I don’t think online programs are a solution for traditional students (they’re terrific for working adults). There’s really value to being in class with others, seeing peers and professors in real life going to the library and office hours, etc.
Free community college with a guaranteed tuition and room/board grant at an instate public university for students with a set CC GPA, is a good idea - it rewards students who do well and it guarantees that those going to CC aren’t going to be stuck after two years, without access to merit scholarships reserved to freshmen only.
(Room only grant is a problem when you see that about a third to half college students at public universities are ‘food insecure’, which basically means thy don’t know where their next meal will come from and are hungry on a regular basis with not enough to eat).
My thinking about loans changed about 10 years ago when I was in Louisiana and there was an article about college loans discussed as the ‘normal’ way to pay for college, with lower income parents taking on debt for their kids and unable to reach the next economic stage on the ladder because thy could never get out from under that debt (all in the hopes their sacrifice would lean their kid would have a shot at a middle class job) while university directors lamented their lack of financial aid funds. The story read like a nightmare to me, even though it evidently wasn’t intended as such.
Making sure that the state’s residents who qualified for it can graduate from public universities debt free would be a first step. Parents shouldn’t have to take on debt for a public university in-state and students should have as little as possible to no debt. In that situation, I wouldn’t have sympathy for ‘elective’ debt, nor do I have sympathy for parents who borrow 100k because NYU is their kid’s dream.