<p>We just saw my D's financial aid package. There is probably more in loans there than I am comfortable with and we will likely try to see if there is another way to cover part of that. I am wondering what your opinions are as to what is acceptable and what is too much in terms of student loans? </p>
<p>I think that to a certain extent loans are a good way for a young adult to build credit and show they can repay what they borrow. They will need that when it comes time to borrow for a house or car in the future. But, there is a certain point where it is too much and I am not exactly sure what that point is.</p>
<p>I have expressed my opinion on this a few times, and I have seen nothing since then that makes me think otherwise. IMHO, I think $25,000 total for 4 years is as high as I would feel comfortable with, in present value terms. That probably translates into about $27,000-$28,000 in actual $$ by the time the student graduates. The average Tulane student has been graduating with about $27,500 in debt.</p>
<p>One could go into all the variations based on what the student plans to do after graduating, but I think that just muddies the issue. In the end, the idea is to start one’s career with as little debt as possible, and certainly without a burdensome amount. At $25-30,000 one is looking at a car payment, although generally lower monthly amounts because the time to pay it off is generally longer than a car loan, IIRC. So that is one way to think about it.</p>
<p>Of course different people have different tolerance for debt, and some would say anything over zero is too much. That might be a bit extreme, given the realities of college today for most. But I can certainly see someone saying their limit is $10,000 in which case most likely they are going to end up at the state school. Everyone’s circumstances will be different, whether by a little or a lot. Anyway, that is just an op-ed take on it, since you asked.</p>
<p>thanks, Fallenchemist. I had read a post by you somewhere where you said what you thought was too much in loans, though I think I missed where you said what was adequate or OK. I appreciate your input, it helps to know what others think in order to have a guideline.</p>
<p>While using Sallie Mae as an adviser may be akin to having the fox watch the hen house, the url below is a good tool. It starts with an inflation projected 4 year cost estimate customized by school (which seems very high, at least I hope so). You then enter aid and savings as sources of funds, provides Fed limits for subsidized loans, etc. Most importantly, the last screen had a very illuminating look at 1) the monthly costs to service the debt begun in school vs at graduation and 2) the income level needed to service those payments without making your DD or DS go into the danger zone.</p>
<p>You can do 4 scenarios and compare schools. Personally I have converted the monthly cost to a Starbucks equivalent, trying to get my DD to understand that $300 a month is deferring 2 machiattos a day…for 7 years. Not sure if this is a breakthrough or not!</p>
<p>While jobs are not predictable, $50K of debt may be reasonable for the petroleum engineer expected to come out with a +$100K job, whereas the social service career person should really be looking at no more than the wise FC advocated debt limit. If we can only convince FC to run Congress… but that is another thread…</p>
<p>I graduated with $10K in debt in 1983, and it took me 10 years to pay off. My son will graduate from Tulane this year with about $28K in debt, which I think is comparable. I graduated from a SUNY school and I think his degree might have more intrinsic value. He is going on to law school but is being smart by looking a Tier 1 schools that will a) provide him with a meaningful Tier 1 law degree and b) offer decent scholarships. He is also looking at areas that he previously didn’t consider, like environmental law, that have a decent possibility for future jobs.
I also think that for going to a respected private university that costs about $55K a year total, coming out with under $30K debt total is not bad. He has done it mostly all himself, with scholarships, grants, loans and work.</p>
<p>Moonmaid - totally concur. I had less debt than you, I think about $7.5K, but since they gave me 10 years to pay it I did! Was a pretty small payment for sure, back then the interest rates were fixed at a very low level.</p>
<p>Sounds like our sons are similar tracks, except he is lucky enough to not have debt. But his thinking about law school is very similar, and he is hoping to get into one of the top schools that also has a dual degree (MA/JD) option in his major (Russian/East European Studies). There are some interesting niches there. I agree that, these days especially, it is more important than in the past to be looking at a top law school, and to graduate towards the top of your class in that law school.</p>