We Cosigned Our Unemployed Son’s Student Loans. Now We’re Screwed

Parents Forum
241

<p>No, Dr, but it is very difficult to get a job and it’s impossible to “work your way through college” as the saying goes. THAT is an outdated concept. Part time work makes no significant impact on the COA college at most places (with the “traditional” college experience of dorming/fulltime/etc). </p>

<p>With that said, I still think it is highly irresponsible to take out private loans. Period. I just do. If you have to take out more than the Stafford limit, then it’s too much debt. There are ways to get that education. They’re just not always the easy route. BUT THERE IS ALWAYS A WAY. I come from a low income family. I see it happen every day to my friends. I know people still listed as sophomores or juniors in what should be our senior year because they go part time year round when they can afford it. They juggle that with jobs. </p>

<p>Sorry, but I live in a state with one of the worst economies, highest tuition, and yet people still make it somehow without crushing debt. It can be done. It just might mean giving up the dream or taking a much longer route. That doesn’t appeal to my generation though. We want instant gratification.</p>

242

<p>

</p>

<p>It is actually a double-edged sword. Yes, tuition at CC is less than at 4 year colleges, but the drop-out rate is also much greater. In California for instance, Less than quarter of students that start at a CC ever graduate. Even when they don’t drop out, students who start at CCs are much less likely to graduate within six years, let alone 4 years.</p>

<p>It may seem counter-intuitive, but it is not the students with the most student debt that are the most likely to default on their student loans. Default rate among CC students at over 16% is more than twice that at public 4 year-colleges and nearly three times that of 4 year private non-profits. The main factor that drives default rates is school selectivity. The next most important factor is continuous college attendance. Taking time off to work often results in longer time to graduate and higher drop-out rates which in turn leads to higher default rates. More selective colleges have higher graduation rates, better job placements and lower default rates ** even when tuition is higher**. The most selective colleges have negligible student loan default rates, in the order of 0.5%. </p>

<p>It is also interesting to note that amount the students that borrow the most, in excess of $100,000, the default rate is very low. Now granted, most of the debt is accrued by graduate students, especially medical school and law school grads, but over 10% is accrued by undergrads. Most of it is from funding education at private non-profit 4-year colleges. So, borrowing more is not necessarily bad. It all depends on the circumstances. As anecdotal evidence, my D’s roommate at MIT borrowed well over $100,000 in Federal and private loans to fund her education, a significant portion guaranteed by her parents. In her second year after graduation, she is making $280,000 as an analyst at Rothschild and will have paid off her student loans by the end of the year.</p>

243

<p>Correlation =/= causation. There are many quality students at CCs, but many more that are, let’s be frank here, at the lower end of the aptitude range with weaker familial support systems. So yes, statistically it can look like a 4-year college is the better net EV (expected value) play, but is not necessarily so.</p>

<p>I’ve never heard of a 2nd year making $280k, but I’ll take your word for it. Take my word for it that even in finance, that kind of annual gross is extremely rare for a 2nd year.</p>

244

<p>

</p>

<p>The only colleges that have worse default rates than CCs and for profit 2 and 4 year colleges. If the student qualifies academically, he will nearly always be better off at a non-profit public or private 4 year college than a cc, even accounting for the higher tuition and having to take on more student loans. Low default is all about completing your degree not the amount of debt. </p>

<p>

</p>

<p>Gross salary for second-year associates at Rothschild is $120,000 and bonuses range from 75% to 125% of gross. In her case, she got in the top pool. I met the girl. She didn’t even major in economics or management, but with BS in biological engineering. Just a supersmart and driven student. Is her income level rare? Probably. Very rare? I don’t know if that is true in IB. My nephew who graduated from Brown in 2011 as a history major makes a similar amount at Lazard. Right now, top IB firms make a lot and pay a lot.</p>

245

<p>Also worth pointing out that most scholarships are for incoming freshmen. I had a 3.7 and extensive ECs when I applied to transfer from my CC and was way overqualified for most of the schools I applied for, but the money just isn’t there for transfer students. If you have a shot at some kind of merit aid, sometimes going straight to a 4 year school can make more sense or balance out.</p>

246

<p>“Is the concept of going to CC and then transfer to 4-year college an outdated concept?”</p>

<p>No.</p>

<p>That is what Happykid and many of her friends are doing. However, the people most likely to follow that plan are not the people who post here.</p>

<p>Just sayin’</p>

247

<p>There are several factors that may make CC/transfer a less than ideal model. CollectivSynergy is right, that a large default rate among CC students doesn’t have any meaning to those who would have been able to go straight to a 4-year school. However, those same students who end up defaulting also drag the CC down. Many local community colleges are so full of part-time and remedial students that they don’t offer enough sections of the standard college classes leading to a BA. This leads the CC/transfer student to be unable to complete the classes necessary to transfer in 2 years, instead dragging them out over 3 years. This will usually cost them more, because of the “discount” for taking more than the minimum credits as a full-time student.</p>

<p>Then when they transfer, unless they went to an affiliated program, chances are they may not have the distribution requirements necessary for the 4-year program, and may take an extra semester there. Even if they finish the distribution requirements in summer session, that is another session to be paid for. plus as already pointed out, they don’t qualify for the same scholarships as the first-year students.</p>

<p>They may have reduced their overall cost (3 years CC + 5 semesters vs 8 semesters at 4-year), but that may be balanced by lower aid. And they finish 1-2 years later, which is lost opportunity in a new job with their new degree.</p>

<p>I suspect the majority of defaults are coming from those who count their chickens before they hatch. I’ve seen it in my own family with a nephew who didn’t finish HS, but got a good job at a Nursery (plants, not babies). He went out an bought 40" television with his first paycheck, and would have purchased a 52" but didn’t qualify for financing (and his father wouldn’t co-sign). He got sick and was out of work for a week, and was upset when his father insisted he still had to pay rent on time (as would any landlord - he had a mortgage payment due). It depleted his savings account, and he couldn’t go out with friends for a couple of weeks - too bad! He got a dose of reality. </p>

<p>Loans based on realistic payment options upon graduation - you don’t have to be able to pay it off in 2 years, but can the parents make the minimum payments if the son doesn’t get a job right away? Are they willing to? If not - don’t co-sign the loan!</p>

<p>We made the sacrifices up front (we don’t have $2000 annual cable bill or $3000 cell phone plan - more like $300 for the year on prepaid), as did many others posting here. We’re not likely to default. But I think the payments are somehow a surprise for those who didn’t make the sacrifices up front, and instead borrow $20,000 a year.</p>

248

<p>

</p>

<p>Is she an analyst or associate? Gross salary at a BB 2nd year analyst should be $80K. Top bucket bonus 2011 was $85K or less. I expect Rothschild to be in line with BBs.</p>

249

<p>Salaries and bonuses at Elite Boutiques such as Lazard or Rothschild don’t track with BB firms. They are much more flexible. My nephew was offered a significantly better starting salary and sign-on at Lazard than GS. I am pretty sure my D’s roommate is an analyst not an associate at Rothschild although she did get the highest bonus by far ($160K) of all analysts in her group. Rothschild is also known to promote its star analysts to associates after two years something very rare among BB firms.</p>

250

<p>Sorry, but I just think it is ridiculous that someone with so little experience can make so much. I am certainly not in favor of socialism, but geez … salary structures at some companies are ridiculously out of whack. Sorry to get off track, but just sayin’ …</p>

251

<p>kelsmom, I fully agree with you and I think there are a lot of negative consequences associated with these crazy compensation schemes. </p>

<p>I spend a lot my time trying to recruit the best and brightest students in math and science n my geographic area for MIT, my alma mater, so that they can help advance the frontiers of science. I find it incredibly frustrating when I see some of the best talent siphoned away on graduation to essentially unproductive service functions such as investment banking or business consulting. My D’s roommate was a brilliant engineer who initially wanted to pursue a PhD in microbiology. Instead, she is an analyst at a bank essentially doing excel spreadsheets all day long. What a waste of talent! She admits the work is neither intellectually challenging nor interesting. It is hard to blame the kids who are being offered twice what they would make in industry or many times more than working for a research lab. </p>

<p>Military academies require a minimum service in government in exchange for the free education they receive. Education at MIT is certainly not free, but the true cost of training these budding scientists and engineers is more than twice the tuition being charged students. In addition, more than two thirds of students receive substantial financial aid in the form of outright grants. It may sound farfetched but maybe students who enter high paying jobs on graduation in consulting or investment banking should be asked to pay back at the minimum any financial aid they received.</p>

252

<p>

</p>

<p>They should doubly thankful in today’s weak job market.</p>

253

<p>"Also worth pointing out that most scholarships are for incoming freshmen. I had a 3.7 and extensive ECs when I applied to transfer from my CC and was way overqualified for most of the schools I applied for, but the money just isn’t there for transfer students. If you have a shot at some kind of merit aid, sometimes going straight to a 4 year school can make more sense or balance out. "</p>

<p>hmmm. I’ve never really bought this argument. I think that what your describing does occur but not to the extent that you think. For one, I transferred and got a good amount of aid. </p>

<p>I fully believe that for the very large majority of students, transfering from a community college to a 4 year is far more affordable in the long run (ie; any aid lost as a transfer student is immaterial). </p>

<p>People also tend to forget that community colleges have scholarships too - they are just not as heavily promoted as they are at a 4year.</p>

254

<p>WDY, actually Ema is correct and can be proven by going on to pretty much any U’s site and reading their scholarship pages. Almost ALL are given to freshmen. </p>

<p>Your “aid” package was likely FA. But really, either way your one example doesn’t negate Ema’s point.</p>

255

<p>*"Also worth pointing out that most scholarships are for incoming freshmen. I had a 3.7 and extensive ECs when I applied to transfer from my CC and was way overqualified for most of the schools I applied for, but the money just isn’t there for transfer students. If you have a shot at some kind of merit aid, sometimes going straight to a 4 year school can make more sense or balance out. "
*</p>

<p>This is very true when it comes to merit. A friend of mine thought that they’s save money by having their first child go to a CC first, do well, and then transfer. They later found out that their child got no merit at any of his accepted schools because the offers were for incoming frosh. There are some schools that offer transfer scholarships, but they are usually either lowish ranking schools, or the amounts or merit are a “drop in the bucket” compared to COA. </p>

<p>The same can happen in regards to need based aid unless the aid is prescribed by a state gov’t… for example: Cal grants (Calif), Tap (NY) and then such aid usually only makes an instate public affordable…</p>

<p>Or… the student is transferring to a rare univ that is generous to transfers (USC, Cornell, and some others). </p>

<p>Yes, if you’re a Calif high school grad and resident, lowish/modest income, and you go to a CC first, then transfer to a UC, then you’ll get very good aid. That sort of situation is the exception, not the rule. That is why most CC students end up transferring to their local state univ…they can’t afford to “go away”.</p>

<p>*
hmmm. I’ve never really bought this argument. I think that what your describing does occur but not to the extent that you think. For one, I transferred and got a good amount of aid. </p>

<p>I fully believe that for the very large majority of students, transfering from a community college to a 4 year is far more affordable in the long run (ie; any aid lost as a transfer student is immaterial). </p>

<p>People also tend to forget that community colleges have scholarships too - they are just not as heavily promoted as they are at a 4year.*</p>

<p>What state were you in? What school did you transfer to? What kind of aid did you get?</p>

256

<p>

An example is RIT, Rochester NY.
Freshman merit scholarships are up to $15,000, and transfer merit scholarships are up to $11,000; a difference of mere $4,000.
My sons both took the route of CC for two years, and then transferred to RIT to complete the degrees.
The route worked out better than we expected: my sons were offered more transfer merit scholarships ($11,000) than the freshman scholarships ($8,000 to $9,000; they did applied to RIT as freshman).</p>

257

<p>cellardweller, you’re completely missing the point. A student that has the aptitude to graduate is almost certainly going to graduate whether he/she goes to CC or a 4-year school. It’s not as if a top 10% student in HS is magically going to have a much greater chance to drop out because of going to CC. If you transplanted the Harvard 2016 class to a CC, I guarantee 16% would not drop out.</p>

<p>And trust me, $280k for a second year is very rare, even in finance. I know people at hedge funds, BBs, and boutiques, and I’ve never heard of a second year number that high. Also, keep in mind that if you aggregated the entire starting (IB) analyst pools at all the well-known boutiques, you’re still only looking at a few hundred jobs.</p>

258

<p>*Quote:
Originally Posted by mom2collegekids
the student is transferring to a rare univ that is generous to transfers
An example is RIT, Rochester NY.
Freshman merit scholarships are up to $15,000, and transfer merit scholarships are up to $11,000; a difference of mere $4,000.</p>

<hr>

<p>My sons both took the route of CC for two years, and then transferred to RIT to complete the degrees.</p>

<p>The route worked out better than we expected: my sons were offered more transfer merit scholarships ($11,000) than the freshman scholarships ($8,000 to $9,000; they did applied to RIT as freshman).
*</p>

<p>I said “rare”…I didn’t say none. The fact that you can name one school that might give decent merit to a transfer doesn’t disprove my point. And, the fact that transfers get “up to $13k” does not mean that many actually get the $13k. The school may only a award a couple of $13k awards to transfer students. Also, since the school has a COA of over $50k, I don’t consider $13k (or even 15k) as anything to get excited about. I don’t think that getting “up to $13k” at a pricey school is “generous” at all.</p>

<p>I did mention that there are some pricey (often lower ranking) schools that will give some transfer merit. I can think of a few that I’ve seen…Seattle Univ is one. But, in the scheme of things, usually a CC transfer doesn’t have an affluent family so coming up with the remaining $40k after a $10k-15k award. Again, transfer students often get little to no need-based aid beyond federal or state mandated aid.</p>

<p>I can see how getting such a merit award might be more meaningful if the student can commute from home. Then the $10-15k merit reduces tuition to a manageable amount.</p>

<p>It is very unusual to get offered more merit as a transfer than as an incoming frosh. There must be some reason why your sons were offered less as frosh. SAT scores not high enough? GPA not high enough? What? Or did the school implement a new merit plan?</p>

259

<p>

Yes, yes, yes. Feel exactly the same way. DS’s classmates who went to hedge funds after getting a top tier comp sci education made more than those who went to companies who use them for the actual skills they had developed. And even more frustrating is when things don’t go right in the world of finance the rest of us bail them out.</p>

260

<p>If investment banking was irrelevant, then why the industry exists? WE did not bail them out, somebody who we elected did and they did it to other industries with the cost of $500k / job sometime and most results are either complete failure or vey ineffective.<br>
Market has to decide which industries to exist and which are to die and what kind of talent they attract. Bailing out of any industry is making this Natural process very ineffective while supporting wages that are much higher than they would be based strictly on market values. Remove the artificial influence and wages will level and positions might not be as attractive any more for very talented.<br>
It is the same as re-building over and over again in area that is flooded very frequently. Why? It makes no sense, except that you know that it will be free for you, so why not? Remove free flow of $$, make it personal responsibility and maybe it will not be so attractive any more.</p>