<p>Recently I made a thread concerning Early Decision and FA. Sorry for not posting this in there - but I feel like this question is enough to warrant a new thread.</p>
<p>I've heard many stories about how an undergraduate can accumulate "too much" in student loans. I've also heard other stories about how taking out too much in undergrad loans can prevent a student from attending graduate school due to an obscure "cap".</p>
<p>All the research I've done on this issue doesn't seem to support that idea. While I've seen that there is indeed a "cap" on student loans, it seems that the "cap" on undergraduate loans and the "cap" on graduate school loans are distinctly two different caps. What I'm wondering is whether or not one "cap" influences the other.</p>
<p>I'm hoping that I'll be able to pursue a graduate degree when I get to that age. I'm only a rising senior in HS now, but it is indeed a goal that I have. I just want to make sure that I'll be able to take out the loans that I need to pay for graduate school even if I have undergraduate loans already. A graduate degree is likely something that would likely put me in a position to pay off all of those loans more effectively afterward. </p>
<p>Can anyone clarify this for me - and perhaps help me understand the nature of student loans in general?</p>
<p>Let me know if I need to provide more information.</p>
<p>The main federal student loan is the Stafford loan. For a dependent undergrad student the aggregate (cumulative) Stafford loan limit is $31,000 while for an independent undergrad student the aggregate is $57,500. The aggregate Stafford limit for a graduate student is $137,500, more for medical students. This limit includes any undergrad loans the student has. So the more Stafford loans you have as an undergrad the less you will have available as a grad student. </p>
<p>Thanks! Based on what you said above, and what is stated on finaid, it seems that the cumulative undergraduate “cap” on the Stafford loan is enough to prevent the situation I stated above from even happening? Correct me if I’m wrong.</p>
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<p>If this were the case, then the most I could accumulate over the 4 years is only $31,000 - in which case $106,000 maximum would still be available for graduate within the cap? Something about this doesn’t seem correct.</p>
<p>Also, never mind the caps so much as what YOU are going to be able to pay. I know kids who are in it for over $80K and I really don’t see how they are going to be able to pay that without a lot of hardship maybe for the rest of their lives. H and I had combined professional/ug loans of about $50K at lower interest rates than what are given now back in the early 80’s and we were not free of those things until our child was in middle school. Right in the nick of time as we had a medical crisis about then, and needed every penny. It greatly compromised our abilities to buy a house, car, pay for private schools since those loans needed to be paid, month in and month out. This was with H making a high income since he got an MBA from a top business school with his loans that made a big difference in his market value. </p>
<p>Swimcatsmom, Kelsmom, I remember posting that a dependent student could accumulate close to $60k in Staffords if the parents are turned down by PLUS. Is that incorrect? Are dependent undergrads indeed limited to tat $31K figure? </p>
<p>Mind you, those are Stafford loans only. Some kids have loans that the college extended to them, regular loans with family cosigning, Perkins Loans, and some states offer loans as well.</p>
<p>Paying them is indeed something I’m concerned about. But that is one reason I’m interested in how these caps impact graduate school. I feel that having a graduate degree would help put me into a more stable financial position in regards to paying back those loans.</p>
<p>I know that just recently, Congress passed the Health Care and Education Reconciliation Act of 2010 as part of the overall healthcare bill. It seems that with this bill, payments on students loans will be limited to 10% of income and the loans altogether will be relieved after 20 years (10 years if in public service). I’m not entirely familiar with the whole process of paying back loans prior to this legislation, but this change seems to be quite helpful?</p>
<p>Also, with institutional loans that you speak of. I wouldn’t think that these loans would relate to any sort of “cap” when it comes to applying for grad (especially if I don’t attend to same school for grad)? My main concern for this thread is if caps will prevent me from attending grad school at all.</p>
<p>What sort of graduate degree would you be seeking? Usually the academics offer stipends for their grad students and it is the professional degrees such as MBA, MD that require loans. It’s insane to take loans to pay for an English PHD, for example, because the chances that you will find a job that could pay off such loans is small. Whereas becoming a doctor greatly enhances earning power.</p>
<p>My planned undergraduate major is Political Science. I feel it would be difficult for me to determine exactly what graduate degree I would seek 5 years ahead of time. However, some possibilities are Public Policy/Public Admin. (maybe Law?). Again, I’m fairly sure I’ll be a poli. sci. major but can’t say for sure what graduate will be.</p>
If a dependent undergrad student’s parents are turned down for the PLUS loan then they are eligible for extra Stafford loans that take them up the same limits as independent undergrads.</p>
<p>I know that just recently, Congress passed the Health Care and Education Reconciliation Act of 2010 as part of the overall healthcare bill. It seems that with this bill, payments on students loans will be limited to 10% of income and the loans altogether will be relieved after 20 years (10 years if in public service). I’m not entirely familiar with the whole process of paying back loans prior to this legislation, but this change seems to be quite helpful?</p>
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<p>In order for the loans to be forgiven, the student cannot miss a single payment. If even one payment is missed, the loans will have to be repaid in full.</p>
<p>Under IBR, I believe the new 10%/20 year limit applies only to those who take their first loans after 2014…the current IBR cap is 15% and 25 years of payments until the balance, if any, is forgiven. Basically it works on a sliding scale, depending on inome and family size, so the payments could be as low as zero if you’re making less than 150% of the federal poverty level. But the interest will still accrue even if your monthly payment is not sufficient to cover it and 25 years is a very long time!</p>
<p>I would just like to say that I would likely apply for graduate school loans after 2014. </p>
<p>My mom and I are just really trying to make sure I don’t accumulate a large amount of debt all in my name to the point where I cannot attend graduate school. Perhaps this can be done with her taking out PLUS loans on my behalf. She has good credit history, but tbh I’m not sure at the moment how much she can handle in terms these loans. We are working on figuring that out.</p>
<p>If some of you have read my other thread, you likely know that I’m interested in applying to a very expensive private school (ED is still iffy atm) as my top choice. If I were to get accepted with NO merit-based aid, I’m thinking of possible things I could do to help manage that situation. My mom has already said that shes willing to take PLUS loans, and perhaps with her taking PLUS and me taking Stafford (plus whatever institutional loans/aid I get) the burden could be shared in a way that isn’t detrimental to either of us.</p>
<p>I’m pretty sure that the 2014 change to 10% IBR is for those who take out their FIRST federal loans (not just their first graduate loans) then. I’m sure you can google it and come up with the exact wording. You should probably do more research into how IBR works as I believe the income considered also includes your (future) spouse’s earnings, but not THEIR student loan obligations…or something like that! So it may not be the good deal it appears to be in terms of actually lowering monthly payments.</p>
<p>You have to also consider that it’s always risky to borrow money based on unknown future income levels…and the longer the payment period, the higher the risk. Federal programs and terms change quite frequently…so there’s no guarantee that in 6 years, 15 years, or 25 years these programs will exist in their present form or that you will be able to qualify for them. Although they’re going into fields where they would be very likely to qualify for IBR and PSLF, I don’t intend to allow my kids to borrow more than I feel they could reasonably handle on a standard repayment term simply because I know that, without parent loans, I can likely afford to help them out if they have periods of unemployment or unusually high expenses. In other words, I view IBR and loan forgiveness as a “fall back” position more than something to count on because, at the end of the day, you and your mom are going to be on the hook for every dime if these plans don’t work out for you. As a parent, your mom can and should be able to figure out the bottom line for your family and set reasonable limits on college spending.</p>
<p>I get the sense that you don’t realize how difficult it is to maintain a household, family, vehicles, etc. and are underestimating the limits that outstanding debt will have on your future choices and lifestyle. I think you and your mom should very carefully prioritize your educational goals and needs separately from your “wants” and then weigh them both against the cost of various options (I don’t think ED is a good thing if affordability is questionable). In any case, you absolutely should reflect on the impact that higher debt loads will have on your lives and the sacrifices you will have to make in the future in order to accomodate your wishes now. There are many students who find themselves surprisingly happy at their affordable, lower-choice schools and many who are miserable about the debt they accumulated for their dream schools.</p>
<p>I definitely understand your point here, but I feel its hard to grasp what kind of impact debt will have. Considering that I don’t know now how much I’ll have to pay then. </p>
<p>However, I have to say that my mom doesn’t really seem to share this same idea. I know that her parents didn’t give her a dime to help her attend college, she took out student loans to pay for it entirely. She has never complained to me about any sort of impact the debt has had on her, only that eventually she was able to pay it off. In fact, she doesn’t even have a job thats related to her college degree in any way whatsoever. Essentially, she didn’t need the degree to do the work shes doing now. She speaks to me as if student loans are the norm, and that eventually I’ll “pay them all off” because thats what she did. She went and pursued exactly what she wanted to do and I never heard anything about her student loan debt impacting that goal.</p>
<p>She says she’s definitely willing to help me pay for school, through getting her own loans and such (and this already puts me into a better situation than she was in), but she frequently tells me “not to worry to much about it, you’ll find a way that will work”. I suppose I’m just trying to say that she doesn’t seem to treat it with the same seriousness that you do here.</p>
<p>The problem with loans today, is that the amounts needed to pay for a private school,room, board and other costs is so much more than what your parents had to pay. Not just in absolute dollars but in terms of percentage of income expected. Even those contemplating medical school are hesitating about taking loans since doctors’ still high salaries are not keeping up in proportion to medical school costs. For undergraduate degrees, it’s even a worse problem. Kids can end up $60-80K in debt when they take out private loans on top of government ones, and have trouble finding a job paying more than $20K a year, if that. And it’s not as though they can look forward to a big salary increase in a few years. How can they repay that monstrosity of loans?</p>
<p>We had a difficult time paying loans at a lower interest rate, when our annual pay exceeded the full amount owed. It was like a toothache for years as we repaid it. With the pay/loan ratio so much smaller for graduates who take out a lot in loans and with the higher interest rates, it’s a much bigger problem. Like impossible. Your mother may not be aware of this change in situation. Also, your earnings may not be much affected by the fact that you went to a much more expensive school than state/local options. You just put yourself in a lot of debt for a long time.</p>
<p>I don’t mean to offend anyone, but find it odd that lots of parents say they will help with expenses but don’t specify exactly what level that support will be and have never actually saved any significant amount of money for their kid’s education…why is that? Were they having to pay off her own education, making significantly less money, etc? What’s changed that suddenly they think they’ll have thousands more a year, after taxes, to make loan payments that will escalate every year their kid is in school and will continue for years beyond that? </p>
<p>Unfortunately, every year there are parents who have last minute second thoughts when they realize that THEY will end up tens of thousands in debt at a point in their lives when they should be doing serious saving and planning for retirement. Or they find out that they simply won’t qualify for enough in loans to make it work (a blessing in disguise, imo). Their kid is unhappy that they cannot attend the school they told their friends they’d be going to and even more unhappy if the parents have a late epiphany (and an astonishing number seem to) and they have already turned down their other choices. Those kids are pretty much limited to a gap year, CC, or the relatively few schools that still have space available after May 1st and they are not happy campers. </p>
<p>UT, if you were my kid and I knew we couldn’t afford your dream school without significant, but unknown, FA then I would make sure that you to applied to one or more financial safeties. They would likely be an instate public, an OOS public with reasonable tuition and scholarships, and/or a private school that would either guarantee to meet 100% need with no/low loans or have guaranteed merit scholarships. Perhaps one that would give you options to study in Washington, as another parent suggested. Or one that would give you a good chance of being accepted to your dream school and program as a transfer for the last two years. I would NOT say “don’t worry, you’ll figure it all out” because, as cpt said, private schools just cost way too much now for most kids to have a prayer of coming up with the amount needed unless they have very good scholarships. </p>
<p>It’s not a myth that times have changed for students! For example, thirty years ago I paid most of my own way through a similar private university, with a few scholarships and a steady 20 hour/week paid government internship, and ended up with less than $10K in debt (which was probably average, or a bit above, for the time period). I lived in a very cheap apartment with roommates, shopped at thrift stores, drove a 20 year old car, and generally cut lots of corners to make it work because it was a challenge and a point of pride for me (I had three younger siblings, mom was a teacher and dad was a musician). Although I had a solid degree and experience, I struggled at times to keep my bills current through recessions, layoffs, salary cuts, and relocations and was very glad that my student loan payment was only $53 a month, which was around 5% of my take-home pay in the early years (and I know kids now that are taking their first jobs after college for nearly the same salary that I was making, but taxes, benefits, and housing costs have increased dramatically). I replaced my car with a newer model but essentially continued my student lifestyle, with roommates but in a better house/neighborhood, for another 8 years until I really felt that I was on my feet financially and professionally and wasn’t living paycheck to paycheck…and that can change rather quickly when houses and kids enter the mix or, as in my case, a sudden illness/disability occurs! </p>
<p>My kids, even with college funds, a reasonable amount of help from me, and a proportional amount of financial aid, scholarships, debt, and work simply could not afford that school today because costs have escalated so much faster than financial aid, loan caps, and salaries. Even if they could borrow enough to make up the difference, around 1/3 of the current COA or $20K/year, chances are good that they would not be able to meet the required payments of $800+ every month and would likely end up in the nightmare of default if life didn’t work out perfectly for them (and what life does?). I understand these are tough choices to make and I suppose one could rely on something like IBR/PSLF to kick in, but what would happen if that doesn’t work out? Or if they, like your mom and many others, end up not working in their original field and take lower paying jobs in order to change fields and potentially have to make payments for 25 years while trying to have a life and raise a family? It’s just not a gamble I’d take with my kid’s (and grandkids) future…way too many unknowns and it leaves them with very few options, especially if they get so far into debt that they can’t afford to graduate!</p>
<p>Sk8rmom, we’re in the same situation. As are many parents since the cost of college has truly spiraled out of control in a way that incomes, scholarships have not. As a government employee, I can look up what my father was making back when I went to college and see what the exact same GS level would pay. The difference is not proportional to the increases in my college costs.</p>
<p>That’s true and it’s hard to imagine what it will take for our kids to educate their kids! In the early 80’s, I started as a GS-5 with the DoD and got RIF’d right before I would have been elevated to a GS-7 (and I had major plans for that $2K increase). All sorts of things were tried by the higher-ups to get me back for two years as this was the same agency I’d interned with for so long but it just wasn’t possible (well, maybe if I’d been willing to move to Alaska!). I missed the project and the people but quickly moved into manufacturing only to get promoted and then laid off again within two years, and then once again during a corporate buyout. Finally worked two “lesser” jobs and started my own business just to feel like I had a little control over my own destiny! In fact, to this day, I try to always have a second, and sometimes third, job even if it doesn’t pay very much…I just hate the thought of being unemployed! I think my experience is pretty comparable to what many grads faced then and still do today with shifting careers and industries. While it teaches you to be frugal and to plan for the worst, I truly can’t imagine how I would have survived with a lot of debt and I’m pretty sure it would have had a serious effect on my ability to provide for my children.</p>
<p>It seems to me that if my parents had saved a significant amount, it would only show up to the institutions that we would have more to pay (i.e. EFC). In which case, would only result in less financial aid being offered in the first place? This whole financial aid system almost seems to benefit those who work LESS. A couple of years ago, my mom went on disability for a few months and because of that, she made a lot less. Its strange that I wish that we could use THAT year’s income to determine EFC. </p>
<p>Technically, if she had saved more - we’d get less? It’s almost as if she should work less, so that we’ll get more. I’m not saying I like it this way - just rather everyone who describes that financial aid process to me makes it seem this way. </p>
<p>Oh, and Sk8r - I understand most of your post and thank you for putting it into that perspective. It was just that first thing you said that I’m wondering about.</p>
<p>I almost wish we had a lot less money than we do (just in terms of applying for FA).</p>