Who has to go into debt to attend a reasonable college?

[bclintonk]

@Hunt

Let me just note that I don’t think debt is necessarily unreasonable. After all, we expect people to go into debt to buy cars and houses. The question is always how much debt is reasonable, and how difficult it is going to be to service the debt. $40,000 of debt for a college education may not be that much, or it may be crushing, depending on the family circumstances, and on the career path of the student.

Absolutely right. Our D1 was a full-pay at an elite private LAC. We had her take out the maximum in unsubsidized federal loans totaling about $29K over 4 years, with the intention that we (the parents) would pay off these relatively low-interest loans quickly and painlessly once she finished, simply as a way of spreading the cost of a very pricey private education over 5 or 6 years, instead of 4. As it turned out, we were able to pay off the full amount of the loans within months after she graduated. We didn’t “need” to borrow, but it was convenient and fiscally prudent for us to take advantage of those low interest rates to spread the cost over a slightly longer period.

I realize we are not typical borrowers—though I also imagine we’re far from alone as relatively high-income, high net worth borrowers who borrowed because we calculated it was part of a sound financing strategy. But even at somewhat lower income levels, borrowing for college can be relatively painless and financially sensible. There’s no shame in borrowing to pay for college, any more than there’s shame in borrowing to purchase a home. It’s only when you buy more home than you can afford, or overpay for what you get, that a mortgage loan is going to cause you problems. And it’s much the same with borrowing for college. Some people do bite off more than they can chew, and get into trouble. Most don’t; roughly 80% of all college loans are repaid, higher than that at 4-year institutions, and even higher at the nation’s top 4-year schools, though the repayment statistics are somewhat worse at 2-year institutions and much worse at private for-profit institutions.

I think the focus should be on the problem institutions, not on student loans in general, because for most borrowers, student loans aren’t a problem. I also think more parents should take the approach we did, and not assume that the burden of repayment needs to fall entirely on the student, who in most cases will have less income and less assets than the parents, at least at the beginning of the repayment period.