<p>This article was in the December 16 Wall Street Journal and addressed some interesting issues parents and students face each year during the college search and selection process. </p>
<p>Assessing</a> the Value of a College Degree - WSJ.com</p>
<p>One of the best suggestions was that students should not borrow more than they will earn in their first year after graduating.</p>
<p>I think that’s a good rule of thumb. Thanks for sharing!</p>
<p>Thanks for the link. I enjoyed reading the article.</p>
<p>HumanCapitalScore.com’s projections can also help a student figure out how much money to borrow for college. Many experts say total student loans shouldn’t exceed a grad’s first-year income after graduation.</p>
<p>I would even say that a student shouldn’t borrow more than half of what they’d likely earn the first year. A student whose first job pays $40k per year, will still find it a pain to pay back $230 per month for a $20k loan while ALSO paying for all of his living expenses and moving on with his life. $230 a month is like a second car payment.</p>
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<p>Exactly. So I’d say even half of first year earnings is at the upper end of sensible borrowing.<br>
You really want to have those loans paid in full before you get into your late 20s or so, by which time you may want to get married, start a family, buy a house. Most people can handle a modest car payment on a 5 year term. Most people would need a much longer term to handle a loan the size of a small mortgage.</p>
<p>Many of the CC posts talk about borrowing far more than the article mentioned, which was part of the reason I found it interesting. The other problem, of course, is that many college students have no idea at all how much they might earn, and my guess would be that they think they will earn far more than they will upon graduation.</p>
<p>Another amusing point in the article was they looked at where students applied and assumed that they did not attend “Big Name, High Rank University” because they did not get in. My limited observations show that often students apply and are accepted to top univerisities, but don’t get the money they need to go there and choose to attend the college that says to them: “We love you, we want you, and we will pay for you to come here.”</p>
<p>Did anyone else try the projections at HumanCapitalScore.com? I don’t think the results are truly meaningful, but it’s kind of fun to try it with different scenarios and see if the outcomes change.</p>
<p>“What matters more, it seems, is graduates’ personal drive. In a surprising twist, a stronger predictor of income is the caliber of the schools that reject you. Researchers found students who applied to several elite schools but didn’t attend them—presumably because many were rejected—are more likely to earn high incomes later than students who actually attended elite schools.”</p>
<p>I love this part of the article!</p>
<p>*The other problem, of course, is that many college students have no idea at all how much they might earn, and my guess would be that they think they will earn far more than they will upon graduation.</p>
<p>*</p>
<p>Too many college kids hear about extreme examples of various people’s incomes (perhaps exagerrated by bragging) and think that’s what they’ll be earning after graduation.</p>
<p>There is a young graduate on this forum that is struggling to pay his student loans. He thought that by graduating from a name school that he’d be earning about $50k at graduation. He’s making far, far less than that and is struggling to make his loan payments. </p>
<p>He’s not the only one. There are many kids who have to move back home after they graduate, because they can’t pay rent and pay their student loans. This can be a problem if their job isn’t near their parents’ home and/or if living at home means following “parent rules” which many kids in their 20s don’t want to follow. </p>
<p>*You really want to have those loans paid in full before you get into your late 20s or so, by which time you may want to get married, start a family, buy a house. *</p>
<p>True, but that means double payments. If a student wants his 10 year student loans to be paid off early (which is a great idea!), he’ll have to double his payments. I do think it can be difficult to get married, buy a house, start a family while still paying student loans. </p>
<p>The sad thing is that instead of encouraging students to pay off their loans early, some are encouraging kids to borrow larger amounts and spreading the payments over 20 years. In such cases, it will be like paying 2 mortgages during the time that most people are raising families.</p>
<p>^I agree. I think people are wildly optimistic about what a typical starting salary is for a college grad. $50,000 is darn good for most. Of course, salaries are adjusted for cost-of-living by region but still, $50,000 is pretty good. You might get higher with a job on Wall Street or an engineering degree (or a few other highly paid occupations) but those are few and far between.</p>
<p>I know this is not an option for everyone but we won’t let son go to a school we can’t afford to pay cash for. If your only choices are going to college with a loan and not going at all - I would pick ‘loan’ any day because a college education is very valuable over a lifetime of earnings. But that’s not what I’m seeing in a lot of cases. There’s a lot of ‘well, my kid could go to State U for $15,000 a year but he or she deserves to to go to the $50,000 yr school, so we’re going to take out loans.’ That’s crazy. At the end of the day, a degree is a degree whether it’s from Harvard or Podunk U. It’s what the kid is motivated to do with it that counts.</p>
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<p>Me, too! I repeat this over and over again here at CC. IRL, my experience has been that it matters not what school you attended but how motivated you are to succeed.</p>
<p>If your only choices are going to college with a loan and not going at all - I would pick ‘loan’ any day because a college education is very valuable over a lifetime of earnings. But that’s not what I’m seeing in a lot of cases. There’s a lot of ‘well, my kid could go to State U for $15,000 a year but he or she deserves to to go to the $50,000 yr school, so we’re going to take out loans.’ That’s crazy.</p>
<p>Yes, and there’s worse situations found here on CC. There are situations where the parents won’t be sharing the debt, so the kid thinks he is going to borrow the big bucks to go to Dream University. </p>
<p>How many times do we read on CC that kids are compiling lists and they don’t want to consider finances because “if it’s a good school I’ll make is work somehow.” How naive!!! These same kids will either find some idiot to co-sign for them, or they’ll find themselves without an affordable school in the spring when they find out no bank will lend an 18 year old $50k for freshman year.</p>
<p>so, $25K ~30K total subsidized loans such as Stafford and Perkins should be o.k.?</p>
<p>$30K at 4% for 10 years is over $300/month.
Are you o.k. with that?
Would you be o.k. with that, year after year, if you made $40K/year?
If your take-home pay were about $2K/month, and you were paying nearly half that in rent and utilities? </p>
<p>Average salaries for recent graduates of top private universities (Ivies, engineering schools) seem to run about $50K among those who report data to payscale.com.
The reality for many grads probably is closer to $40K.</p>
<p>“The other problem, of course, is that many college students have no idea at all how much they might earn, and my guess would be that they think they will earn far more than they will upon graduation.”</p>
<p>Completely agree with this. I still remember when I was graduating with my MBA and looking at “average starting salaries”. Especially in a down market, not realistic expectation.</p>
<p>“so, $25K ~30K total subsidized loans such as Stafford and Perkins should be o.k.?”</p>
<p>Try building a mock budget and see what you’ll have left after car payment, rent, utilities, insurance, groceries…then add in child care expense (for when that happens down the road). DH and I lived this and I won’t allow my child to do it. The impact on their quality of life in those early years is not worth it if you have another option.</p>
<p>Child care expense is one of those things you don’t tend to anticipate until you’re faced with the cost. In talking with a coworker recently, I couldn’t believe how much the cost had gone up in the last 20 years - more than double what I used to pay. </p>
<p>I agree with the poster who said if it’s loans or no college, then certainly take the loans. But if there’s a cash option of a lower cc standard versus taking loans for the higher cc standard, I’d go with the cash option.</p>
<p>I think that is a little too extreme. Other than HYPS etc, most of the top schools will use Stafford and Perkins loans as part of their FA package to families having EFC of $20 - 30K/yr. In other words, most of upper low and middle class families would expect $5k ~ 7K/year loan if they send their kids to a top tier school.</p>
<p>The odd of getting a full ride at good state schools is worst than getting into HYPSM.</p>
<p>I agree with MomLive in that our D is going to a College that we can afford. She wanted to go to some of the big named schools either here in Canada or in the US but we were lucky that she has many friends and mentors that talked to her and convinced her that where you get your bachelors is not as important as where you get your masters. She is in the US but only because she was able to get a financial incentive. Would love to have said go wherever you want and are accepted but the reality was NO. She loves where she is and has absolutely no regrets. We will see what happens when it come to the Masters degree.</p>
<p>An education is not all about income. . . that’s all I’m gonna say.</p>