<p>In every " what school should I go to " thread some random senior asks if they should go to stateU for free or fancyU on loans. Almost every time all the responses say go for free. While I understand free is better, why is there this HUGE anti-loan push coming from every direction. Why is it such a crime to take loans out for college? It seems to me that if it's acceptable to take out a 40k loan for a new car, then you should be able to take out a loan for your education. In addition I know that college loans have very low interest. I really would just like to understand, what is SO WRONG with borrowing a reasonable amount of money to go to college?</p>
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<p>Not everyone takes a $40,000 loan for a new car. Indeed, the average price of new cars in the US is under $30,000, and most retail car purchases are of used cars. Plus, there are people who save up for their cars to buy them without loans or only small loans.</p>
<p>Meanwhile, some of the “which college should I go to?” threads involve loan amounts of $80,000, $100,000, or more.</p>
<p>I think you’re correct that its a knee jerk response here before understanding the circumstances. Thee are scenarios in which modest debt is totally appropriate. But the is a problem with students taking on more debt than they can handle. For many loans are just a piece of paper to sign and the reality of paying them back is not understood.</p>
<p>If you borrow $X for a new car, and you can’t make your payments, the car will be repossessed. If things are truly dire, you can file bankruptcy and make any unpaid debt just go away.</p>
<p>If you borrow $X for college, and you can’t make your payments, your degree can’t be repossessed. If you file bankruptcy that college debt won’t go away. It will continue to accumulate until it is a) paid off, or b) you die. Yes certain kinds of college debt are “forgivable” through certain government programs, but most college debt will be with you until a or b. Period.</p>
<p>For fun reading on this topic, see [Project</a> on Student Debt: Home](<a href=“http://www.projectonstudentdebt.org%5DProject”>http://www.projectonstudentdebt.org) Click on the tab labeled “Voices”.</p>
<p>Also, student loans are NOT “very low interest.” For next year, all Stafford loans (sub/unsub) are at 6.8%, barring any move by Congress to change the unsub rates. That’s a relatively high rate, compared to auto loans, for example, which in my state can be had for as low as 2.99%. (Not that I would ever take out a substantial loan for something that depreciates as soon as you drive it off the lot.)</p>
<p>If the difference between college and no college is $25K (federal limit) of total debt for four years then the answer is easy: take the debt. Much more than that is questionable.</p>
<p>I agree that there are circumstances where debt makes sense. My DS chose debt over state school, but it will be limited to 22K in a very marketable field. The problem is that debt is cumulative. Many people will need further education beyond college, and that’s where debt can really pile up. Taking on undergrad debt, without knowing what you future holds, can constrain future plans.</p>
<p>Sent from my DROID2 GLOBAL using CC</p>
<p>Because 40k in debt equals to payments of $460.32 monthly over a period of 10 years. Most of us, not just those just out of college with relatively lower salaries, struggle to have that much money left over after routine monthly expenses. You would have to “do without” a lot of things for a decade. In addition, you would have little flexibility in making decisions for your future such as grad school or job changes.</p>
<p>First of all, it 's not true. I know I don’t automatically jump on the debt free wagon. There are a number of situations where taking a loan is reasonable. I’ve outright said that. So have a number of others on this board, when the situations so warrant.</p>
<p>All a student is able to take on his own, are the federal loans, for the most part. That is all an 18-22 year old with very little in the way of an earnings and credit history should take. Those loans accrue interest, so it is entirely possible for a student to max out on federal loans so that s/he can’t take any more for grad/professional school. When you look at that repayment nut, it’s a tough one to crack,even at those levels.</p>
<p>Those private loans that require a cosigner are simply making it palatable for a parent to be on the hook. It’s not like signing on a car loan that is over in a few years. These loans can be in place for 20 years continuing to accrue interest, and in some cases penalties. Both parent and student are then on the hook for the rest of their lives for their loans, both having credit histories reflect it. One party is disabled or dies; the other is on the hook and these loans are not dischargeable through bankruptcy. The only reason they are available at all is because they are good deals in that the lenders have to pay them back one way or the other. They are not a good investment. I’ve actually heard people call student loans “investments”. Absolutely, they are not… Not when there are far better ways to meet the undergraduate education degrees.</p>
<p>Student loans can be a good thing when they are used wisely and when the lenders can truly afford them. If parents have their backs to the wall financially and are already in trouble, cosigning or taking a large student loan for their kids is pure folly. It’s just adding more financial stress that very well could be a tipping point for ruin for both kid and parent. The way the educational system is set up in this country is so that parents are primarily responsible for the payment of college, and loans are just one way to meet the costs. Basically, college should be paid by past, present and future income. If you and your parents could not save in the past, can’t make payment to college in the present, how can you possibly think that the future is going to be able to take the entire payment burden? It isn’t working that way. I have seen so much sorrow and problems from these loans.</p>
<p>Our kids who are out of college have always been employed and are gainfully employed right now. Yet, they are having a difficult time making ends meet even without loan payments. That’s with parents nearby who can help out here and there, as well. If they had a loan payment on top of the challenges they are facing as young adults trying to eke a niche in the world for themselves, it would be untenable. The numbers would not work out. And those numbers are not working for a lot of their peers in that situation. </p>
<p>Past performance is the best indicator of future performance. So it is with financial management. Those families and students who have been able to keep their finances in good shape in the past with savings and plans, able to budget for college, are the ones in the best position to take out loans to ease some of the squeeze, spread it out over more years. The future becomes the present very fast, and the past becomes past due even faster with loan payments.</p>
<p>I know too many kids living at home with their parents after 4 years away at college on borrowed funds, now facing along with the parents the payback, and life is not good at all for parent and child. You think you want get away at age 18? It really stinks to be living at home in your 20’s after being out for 4 years. The resentment and pain is terrible for many, both parents and child, in these situations. Just think about what the monthly payments are going to be on those loans. And when you go out in the work force, it often means more money needed to get started. Not to mention that you will feel very poor among your peers at work who don’t have that nut you have to pay.</p>
<p>Sure, I’ve taken out loans to buy cars. At the time I did it, I had a job and a salary. I determined, based on an actual job that I had in hand, that I could afford the debt. </p>
<p>Some kids entering college today seem to be banking on unrealistic job prospects. Say, for example, someone’s dream is to go to NYU’s Tisch School but it’s only affordable with loans in the amount of $100K plus. Not a good idea. There’s my knee-jerk response knowing absolutely nothing other than the fact that performing arts jobs are hard to come by and starting salaries tend to be low. </p>
<p>You want to take out $60K in loans to go to Carnegie-Mellon and study computer science? Hmm. Well, you’d get a great education in a top (the top?) CS program and have an education at the end that would make you competitive for jobs in a field that pays well. Is $60K in debt for a Carnegie-Mellon worth it if your other options are going to Case Western or Big State U. for half that debt or free? That’s a judgment call. I’d say no, because I know how big a pain it would be to have $600 in loan payments every month. That’s even if you landed a pretty decent job with a good starting salary. </p>
<p>I would categorically declare that six-figure debt for college is a bad idea, regardless of the school or the hoped-for career. The rule of thumb I’ve heard is that you shouldn’t borrow more than you can reasonably expect to make in your first year of employment. (Or something like that. Maybe that’s the formula for how much guys are expected to pay for an engagement ring. I get mixed up sometimes.) Regardless, I would be shocked if more than a teeny-tiny sample of college grads nab six-figure salaries after graduation. Someone’s going to pop in and tell a story of this or that person who did. Good for them. But I won’t be convinced my position is wrong unless someone shows me reliable data indicating these kinds of salaries are reasonable to expect for a typical graduate in any field.</p>
<p>As a personal philosophy, I prefer everything debt-free . . . if it’s possible. Given the choice between free and loan, go free. Ask me if you should pay cash for a car or borrow to buy a different and I’m going with the cash one, but that’s just me. </p>
<p>As a group, I don’t think you’ll find advice to go free public over highly selective private if you can keep yourself at or under the stafford limits. That is reasonable debt. You will notice, as ucbalumnus said, the debt people are asking about is often well above the federal limits. We also are concerned, when students ask the question, that the student cannot grasp how 10 years of large loan payments will affect his or her life. Brain maturity, like physical maturity, happens with time and has nothing to do with IQ. The ability to thoroughly and realistically conceive future events just has not developed yet in an 18 year old. Anyway, we try to spell out just what those large loans mean and it may be percieved as us saying it’s “a crime to take out loans for college”.</p>
<p>Because kids tend to be risk seekers and don’t get that it takes a lot to repay these loans.</p>
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<p>In a lot of these threads, it’s between very good stateU and higher USNews-ranked fancyU. Just because fancyU is ranked higher by USNews doesn’t make it worth the debt or necessarily better. Given a choice between a free very nice car and going into debt for the fancy sports car, I think most of us would be very happy with the free car.</p>
<p>Because it really sucks to have your entire paycheck accounted for before you even get it. The less loans, the more you get left over from that paycheck.</p>
<p>Btw, most people are not getting $40k loans for cars. If they are, they have the income to cover it unlike 18 year olds. I have only a $6k loan on my car and while I can easily afford it, I can’t wait til it’s done</p>
<p>Taking out any loan for a car is going to that much more painful when you have that college loan payment to make as well. Paying for the expenses of having a car is tough enough when you don’t have loans for school AND the car. Just as you feel now that you want the best options available to you, you are going to feel the same way when you graduate, and these loans are going to a weight on you even more at that time.</p>
<p>Are you talking about $40k of debt total or every year?</p>
<p>It’s hard for me to understand how many people look at “only” $40K (or fill in whatever number fits your particular situation) in student debt but consider that amount in a vacuum…as if no other expenses will exist in their world once they graduate. The whole “it’s the same amount as a car loan” argument is great…as long as you don’t need a car before the student loan gets paid off. Or need to make a rent or mortgage payment, or purchase insurance, or buy furniture, or put a little money into savings, or…you get the point.</p>
<p>If every college graduate had the luxury of moving back in with their parents rent free after finding a good paying job in the same neighborhood, there wouldn’t really be a need to ask this type of question would there? </p>
<p>I’ve said before in other threads, if our high schools want to do these kids a HUGE favor, offer a class on realistic modern living in a variety of settings (rural, suburban, urban). Teach them early on just how quickly a $40-$50K per year salary goes away after taxes and “normal” obligations get taken out. It might actually open a few eyes.</p>
<p>Student loans should be used as a last resort. I had a relatively modest amount of loans when I graduated from college and was in a marketable field (IT). Nevertheless, I was starting out in life, supporting a wife and a baby on the way. Having student loans meant driving modest cars and struggling to buy our first home. If you can avoid them, do so! Believe me, I graduated from a relatively good private school, but I worked alongside with graduates of “lesser” schools, all of whom had the same starting salary and growth opportunities at a well known, “top” employer in the nation.</p>
<p>It’s a tough go when you get out of college. My son needed money for clothes, car and accompanying expenses, deposit for an apartment plus first month expenses and a whole lot of other things. He did not get his first pay check for a good three months after working. We had to lend him some money for him to get started, and that was even though he had a pretty good summer job to launch him. He wanted to do some last chance travel, had some bills, bought some stuff for his apartment, going in with his roommates for a number of items. His first few months checks were gone in a flash. He had to learn to pace his spending. Working in NYC is not cheap. He needed a car, train pass and metro card which meant his transportation expenses were about a third of his paycheck with his apartment costs being another third, and he had found a very cheap living arrangement. His job paid much better than most starting pay levels and had good benefits, but he has been flat broke for years. If he did had had student loans, he would have had to live with us the entire time, and if we did not live near enough to the city, he would not have been able to take that job. Most of his peers who are not being subsidized by their parents are back home, limited by finances–both their own and their parents’ from striking out on their own. Very limiting. Even without loans, he’s moved back home to save some money in a 2 year plan to build a nest egg. It’s been very difficult for him to do so, after 7-8 years of living on his own with people his own age. Difficult for us too, but he was just not able to get ahead and do things in the city that he wanted to enjoy. Something had to go. Now with a new job, he’s thinking of selling his car which has no loan attached to it, but still has a cost. His brother who lives in NYC has no car which frees up money. Neither kid has student loans, but neither feels rich right now either.</p>
<p>My D chose to pick a free education at StateU over FancyU with loans. The truth is that a lot of State schools can give you just as great a start as the FancyU. I know that when I graduated from StateU I made very little money, even though I easily found a job in my chosen field. When I married a year later, My DH and I were able to afford a house payment. If we had been dealing with student loans we never could have bought a house at that time!</p>
<p>Graduating debt free(if at all possible) is a gift you are giving yourself for your future. Some day you will appreciate the gift.</p>