I don’t think anyone’s saying that there’s no place in the world for loans in higher ed for undergrad. For many families, that’s the only way to get a higher education, as the higher income will generally always outweigh the amount of federal loans taken for an education at a nonprofit school. But parent co-signed loans (i.e. all loans beyond the federal amount) are generally a bad idea. Typically, if the parent loans are needed, then a less expensive school should be selected. There are surely exceptions (i.e. student lives in rural Alaska and has to live on-campus because they can’t commute and federal loans are insufficient to cover that), but I feel comfortable in saying that parent loans are a “no” as a general rule.
(I’m also a big proponent of no loans at all, if possible. But for families with low economic means, that’s not always possible.)
There are more (typically rural) places than rural Alaska where commuting to college is impractical, or where the commutable colleges have limited academic programs and majors, or where the commutable colleges are too selective to be accessible to most local students.
There are also states where the in-state publics are relatively expensive with poor financial aid for in-state low-income students, so commuting to college is not debt-free or low-debt in every state.
And to add to UCB’s excellent posts- there are state run programs where kids unwittingly disqualify themselves. GC says “Do Dual Enrollment, you’ll get out of college faster and it will be cheaper”. Except where taking DE means that a kid won’t qualify for a scholarship intended for first year college students.
Sometimes loans are a good idea for middle class kids as well, Austen. A civil servant nearing retirement (cops?) who has a guaranteed pension AND is young enough to have 10-15 years of working as a private detective, doing private security, etc. after retirement? There are cops in my town who earned 100K (base plus overtime) while on the force, but are making over 200K all-in after retirement. Those people are pretty confident that a parent-plus loan is the way to go. There are good strategies for borrowing-- I think being a big proponent of anything is dangerous except that NOBODY should borrow money if they don’t understand the terms of the loan.
Which colleges / states disqualify students with college courses taken before high school graduation from scholarships awarded to first time frosh students?
As a practical matter, high school students taking college courses usually are not choosing college courses to work toward faster college graduation, so “60 college credits completed during high school” does not necessarily accelerate bachelor’s degree completion by two years, often due to sequential prerequisite sequences required for the major.
While I agree that taking on large amounts of debt to fund college is not wise, I must admit that our plan for paying for college does include loans, which I know goes against what many here suggest. However, our plan has evolved to include loans under these conditions:
we prioritize funding retirement first and feel we have a good plan in place for that.
after retirement contributions, we choose to aggressively pay down our mortgage and will be paying that off 17 years early, a few years ahead of when our oldest will enter college.
we pay cash for everything else, including cars, and have no other debt.
we will qualify for financial aid and have familiarized ourselves with the different ways that various schools view home equity and savings to have a good grasp on how that will work with our situation.
we will pay off the mortgage early enough to then take that money to further build up college savings for a few years in addition to what our 529 accounts will already have, so that loans needed will be limited to an amount we can comfortably pay back in the same year we take them out (via HELOC).
we have in state college options that can be funded without loans and aren’t promising any specific amounts to our kids until it is time to choose schools and apply so that we can make sure the loans we do take out are minimal and can be paid back in the same year taken.
I know that goes against what most people suggest, but for our specific circumstances, we feel comfortable with small loan amounts when there is a plan in place for paying them off quickly.
I know this is probably an unpopular opinion for the no debt crowd. But one of the biggest frustrations you see people having is the low dollar amount of the Stafford loans. That loan amount has not kept up with inflation and the rising cost of college. Personally to me, I would like to see that amount raised to $10,000-$12,000 per year. If a student ends up with $40-50,000 in debt on their own, that is still reasonable. It would give many students more freedom and options to afford school, even lower cost schools.
I was a beneficiary of both Perkins and Stafford loans (way back in the 90’s). Those loans allowed me to go to college. But it was a combination of the both together that made it happen. Today’s students don’t even get that option.
Credits taken before graduating from hs do not disqualify you from freshman status. Credits taken after graduation may disqualify you, but often you are allowed up to 15-26 credits ad still be considered a freshman. My nephew entered with 40 credits, all through AP or DE, and he was still a freshman.
One of my kids had 25+ DE credits coming out of high school (3 years ago) and got scholarship offers from 10 of the schools he applied to including 4 full rides. At least from the schools that he applied to, I never saw any school disqualify a student from scholarships due to dual enrollment credits (maybe some do, but I have a feeling that they would be in the vast minority with the number of kids taking dual enrollment today).
In my state (GA), they pay for up to 30 hours of dual enrollment credit (it was 60 hours when my 2 kids were in school), so it is a great deal (along with full tuition paid for Zell Miller scholars and ~2/3 tuition for a 3.0 HS GPA with some future college GPA requirements for Georgia high school graduates). I have seen a Georgia Tech student pay his own way through college without loans (graduated in 2018) because of generous tax payer dollars to fund education along with hard work and some creativity. So I tend to be against loans if a student can plan ahead and be creative, but there are definitely cases when they are necessary.
I used to think this, and it would have been helpful to have that additional amount for my kids when they were in school (2014-2018). Now, I’m very thankful the amount was capped lower. One daughter who only borrowed about $15k total (3 years of the subsidized amount only) could afford her payments which were about $170/mo as she’s an engineer and makes a good paycheck. When the payments resume, she’ll put less into savings each month. The other daughter borrowed about $20k (3 years limit) was struggling to pay the $250k monthly amount before the ‘pause’ in 2020. We are very very grateful for the pause as she’s since returned to grad school and the interest has stopped on the loans.
If her loans were $50K? No way she could have afforded the interest on the loans, never mind the principal. She was substitute teaching and working at Starbucks when covid hit. Still works as a TA and at Starbucks, and makes enough to live in her $400/mo shared house, pay her car insurance, and eat. Barely.
She definitely made all the ‘right’ decisions - went to a very low cost college, did the ultra cheap study abroad program offered by her school, no spring break trips to Mexico or even California.$50k in loans would have meant she couldn’t have gone to grad school as she wasn’t going to take out loans (she has a ‘fully funded’ position but that means tuition, insurance, and $1300/mo). Believe me, she still lives as a poor college (grad) student, but not having a growing student loan balance has given her some breathing room and looking at $20k is a lot better than looking at $50k. Even with a masters (in History), she’s not looking at a salary that will give her $500-$600 extra per month to pay a $50k student loan monthly payment.
So I understand why the Stafford loans are still capped at $27k. They haven’t kept up with inflation or rising college COAs, but neither has the ability to repay the loans by the recent college grads. It is going to be a disaster when all these borrowers have to start repayment after 3 years of not making payments but making other decisions like buying homes, cars, renting apartments, having children, getting a dog! that eat up their paychecks.
Colleges classify students coming into college for the first time as FTIAC, or first time in a college. In their computer systems, the students are classified as FTIAC in one area, which is linked to certain things, and according to class standing (based on number of credits) in another area. Sometimes problems might arise for students with a lot of credits, so it’s always good to question things if they seem to be impacted when you don’t think they should be. One of the students who posted a lot on CC until relatively recently had to go around and around with her school to get a particular federal grant the school incorrectly told her she didn’t qualify for due to credits given for courses taken while she was in high school. That grant no longer exists, but there may be state grants that have rules related to class standing … always good to double check rules if you’re denied something based on too many credits due to courses from high school.
I understand your point, but no one has to take the maximum amount of loans,even though many will. I would much rather see students borrowing from a lower interest government loan than borrowing that amount from a higher interest parent plus loan. People are going to bother the money anyways, why not try to help students with lower interest rate loans. Just read the thousands of comments on here and other websites.
Also, I guess I wonder why students haven’t been paying on their loans during this loan pause. 3 years of time to pay down your loans without gaining interest is a gift every person should have been taking advantage of, even if it was only $50 a month.
Some people do have to take the maximum in loans if they don’t have money saved. Two years of CC and 2 years at an undergrad costs about $50,000 here for commuters. I see so many parents of incoming freshmen ask about how to get loans for the fall semester. Not everyone lives in commuting distance for 4 year colleges.
Getting back to the original linked article:
“She graduated with a degree in fine art and $100,000 in debt.” at an in-state public university! Now she works in a restaurant.
How do you need that much in loans? Did the parent contribute anything? For an art degree? And some want all student debt forgiven to save them and their children from their foolish decisions.
In my state, it would be very easy to need to borrow $100,000 for an undergraduate degree at a state university. Many families do not have savings, but they earn too much to receive any grant aid - and not all students can get merit scholarships. In addition, many students do not live within commuting distance of a college. Our state colleges are quite expensive, and very often students can’t get the classes they need and/or change majors, necessitating more than four years in school. I am not saying that I think borrowing $100,000 for a college degree is wise, I am just saying that I absolutely can understand how it happens.
Which is why I feel the Stafford loan limits are incredibly outdated. At least reasonable higher limits would give students some wiggle room and could help take pressure off parents. As long as colleges don’t use it as a way to raise cost’s because now students have access to more money.
As an example, at our local Penn State branch campus, even if you commuted tuition is almost $16,000. If you don’t qualify for Pell or other state grants, that $5500 loan isn’t going to help you much
I don’t think there is a one size fits all in terms of whether to take parent loans…or not. For some, it’s a way to deal with cash flow. For others, they know that there will be money to pay the loans off each year. For example, we knew a family who took Plus Loans out every year, but also got an annual year’s bonus (but not in time to pay the college bills) and just paid off the loans. Some folks know they will have increased income in subsequent years.
I think if these loans are going to strap parents financially, that needs to be considered. For example…if $100,000 in loans are taken out, repayment will be in the $1200 a month range including interest. I suggest that if a family thinks they have an extra $1200 a month to pay that loan payment, they do a test. Put that amount aside for say…six months. See if it’s sustainable. If not…think again.
One factor (and I may get blasted for this) is the major a student chooses and what their career plans are. If majoring in STEM, business or anything that leads to a career where a student may actually earn enough to pay back the loans it makes sense to get loans. But for the student who majors in art, theater or the humanities and has no idea what they want to do in life then major loans are extremely risky.