klpawl

I learned in business school not to fear debt, oas long as you manage it properly. S I look at it as a source of funds, not as something evil.
There's no reason to summarily knock out private lenders. It depends on what they are offering and what your kid anticipates doing after school (the same consideration as should be made for Stafford loans). Way too many factors to weigh before saying "no way." There are ample information and tools out there for you and he to make confident decisions up front.
As for whether the school matters, I generally agree that it doesn't. For example, when you're competing for that finance job in Oklahoma City, your degree from Harvard isn't likely to give you enough of an advantage over a degree OK State. Having said that I've read lots of excellent articles recently that rank schools based on their return on investment. They make a strong argument that the school can indeed result in a greater payoff (on average).

annasdad

Do those article cite studies that control for the entering characteristics of the student body? If so, can you provide references?

momofthreeboys

Oh really? I'm not sure I've ever seen any claims like this or data collected that would support a return on investment theory over the ten (or more) year pay back rate on student loans. Starting salary bands are very narrow by position by industry and not even calibrated necessarily in line with cost of living by region so any claims on return or college expenditure would have to be predicated on job placement by industry...NACE collects probably, in my opinion, the best data but it's by subscription and even that would be difficult to parse and make ROI claims.

mom2collegekids

Starting salaries have more to do with REGION than undergrad choice. A new-hire engineer in Huntsville, AL may start at $60k, while the same engineer may start at $65k in another region with a higher COLA. The $65k salary does NOT mean that the employee now has an extra couple thousand per year to put towards student loans. The higher pay is just a supplement to cover the higher cost of housing/taxes/etc for that region. The employee ends up with about the same discretionary income. The undergrad the student attended makes NO DIFFERENCE.

Some debt shouldn't be feared. I don't fear my home mortgage. I always have some concerns about the mortgages on my investment properties. All debt is not equal. Some types of debt are fine. Some is necessary. Some is risky - but justifiable. Some is risky and avoidable. And some debt is outright crazy. Most private student loan debt is avoidable.

Klpawl...you may think that cosigning private loans so that your son can attend American Univ, is going to result in a higher paid salary (not influenced by COLA), but there really aren't any facts to support that. How much is your child borrowing each year for Stafford loans and private loans?

UKgirl23

A lot of people are suggesting that a parent, if they can afford it, should pay their child so they don't have to take on debt, but I don't see why they should, or in some cases how they can. I'm intending to study medicine in the US, which will lead to around 240k of debts, just from the fees alone. My dad has a very high salary, but I have three brothers and that would be all the families expendable income gone just for one of us.
More to the point, Once you're 18 and the education you're getting is optional and will help your future, I don't think it's your parents' responsibility to pay for you anymore, especially when you can, through loans, pay for it yourself.

On a different note, I don't understand why there isn't a better loans system in the US, as we have here in the UK. Shoudn't there be the provision for all students to go to whatever college they like, then pay back the fees with a very low interest rate, but only when they're earning enough, my mum's never payed hers off. It just seems like a very basic service that has been neglected.

annasdad

Perhaps then you should stay in the UK for your schooling, borrow it all, and pay it back whenever?

Because the government isn't willing to subsidize higher education to that extent ...

... probably for just that reason.

mom2collegekids

I'm intending to study medicine in the US


Good luck with that. American med schools rarely accept internationals because the purpose of our med schools is to educate American doctors. Many SOMs refuse to accept ANY int'ls. The ones that will accept a few int'ls are very picky about who'll they'll accept....typically you'll need a significant hook and/or be a PhD/MD student.....and generally you have to show that you have funding for all four years. Will Britain loan you $250k all at one time? I find that hard to believe.

UKgirl23

I'm a US citizen, so it isn't such a problem to get into med schools, however I have decided only to apply for schools in the UK, for cost reasons. Luckily I have this option, but I'm wondering what I would have done if I lived in the US and was in the same situation, it just seems like a strange system of payment to have.

And no, we can't get loans as high as $250K, but we don't need to as fees are capped at £9000 a year, but that's something completely different and this isn't the place for me to rant about it.

mom2collegekids

Well if you go to undergrad in UK, then it's a good idea to go to med school there as well. US SOMs don't like to accept students who didn't go to undergrad in the US. At a minimum, usually the premed prereqs have to be taken here.

cptofthehouse

My friend is looking at schools in Britain for her son, and the costs are no big savings over there. Are there loans available for foreign students there? What loans are available for the undergrads there?

For medical school, it's a whole other story. THere are loans available to students. There was a time undergrads were able to borrow a larger proportion of college costs,but the payback rates were unacceptable. As you mention for England, that seems to be what is happening there.

buenavista

I think the amount and reason for the private loan are more important considerations than a blanket rule.

Students who post on CC that they plan to finance the bulk of their education with private loans, and whose parents have low incomes or won't contribute, are wisely told to consider other options.

On the other hand, S1 has a small private loan from his first year that we cosigned because the rate was much better than Parent PLUS, with no origination fee (yes, I know the rate can go up). It was a one-time thing due to some cash flow issues right when tuition was due, and it made sense for us. He also has Staffords so we intend to pay off the loan for him, and it's small enough and we're financially stable enough that we can.

We also have a home equity line in place (though we haven't used it yet), but again, this is a financial strategy meant only for a small portion of costs, and obviously not suitable for everyone. Yet I know of families who've put entire tuitions and costs on home equity (and this is a high housing cost area, so I'm talking hundreds of thousands once all the kids are through, with little left). Others do that with 401(k)s. I think both of those strategies are nuts. I wouldn't put an entire tuition on Parent PLUS, either--but that's the bulk of our "financial aid" packages. Our little loan is small potatoes compared to that offer.

cptofthehouse

Because the magnitude of the financial disaster that can occur when things don't work out as planned, and a private loan was taken out, is why I don't like them. Both parties get hit with the loan on the credit report.

My friend who cosigned the loans with her daughter had all the right reason. She did not consider PLUS because she truly believed that cosigning was a better way to go than to take the loan out entirely in her name. She also equated it with the familiar undertaking of cosigning for a car loan. Her DD was majoring in engineering, was always a good student, and they were told that female engineers were "golden". She lasted one year in the engineering program, and switched to pre dental, again something that has good paying jobs fairly readily available. She had started out as a chemical engineering major, so she already had the chem and physics. I have no idea how long she kept those plans on the table, but she graduate as a Philosophy major, took an extra summer and semester to get that degree, went a broad for a term, and had a very full, fun college experience except that her grades were mediocre. She and her mother owe over $90K in loans with no prospects of paying on them. The debt has a chokehold on both of them.

NovaLynnx

This depends on whether your kid is likely to receive merit aid or not. Personally, I screwed myself by going to CC first. I was valedictorian of my class, lots of clubs and leadership positions. Considering I was not interested in Ivy league and many schools in my area give full tuition scholarships to val's... *sigh* I did not know any of this at that age and received no feedback from my school counselor. My parents and most of my family did not attend college, so the only option I was allowed was CC to "save money." Transfer aid is usually nowhere near as good as first-year aid when you are in that kind of situation. Oh well.

As for the question of this thread...it depends. My mom co-signed quite a heap of private loans for me. But she also knew I would NEVER let myself get into a position where I defaulted and left her with the costs. Even if I had to work 3 jobs to make a go...I'd make a go of it. Some parents hope their kids will do well in a "promising" major, and then they don't. Or they graduate and sit at home on the couch doing nothing. So it really takes a whole lot of faith in your child's abilities and motivation to make the decision to co-sign anything.

Also, all of my private loans take my co-signer (mother) off after 24 months. That was the best deal I saw (and was the one thing my mom was concerned with) when looking at providers, aside from interest rates, of course.

Olymom

Please be aware that the "deal" that works for another family may not reflect your values or your realities or current events. This is one of those times when the devil is truly in the details.

As a parent, I'd go further for a computer science or nursing degree than for a General Studies degree. I'd also try to be shrewd about the maturity of the student.

It can work well to "Front load" expenses -- instead of saying "We have $20,000 set aside for your education, so that's $5K a year for four years" go ahead and pay full freight the first year because a) the student can start off strong without squeezing in a job and b) spending down assets may make for a better Financial Aid application and c) Congress may (or may not) make things easier for students over the next year or so (there certainly is some pressure for them to do so).

I ditto the earlier poster who mentioned term life insurance. It is horrible to think of loosing a child -- but loosing a child and being on tap for $100K in his/her loans would be even more horrible.

You really have to do some work to think thorough the student's plans, your value set and the details of your situation. Good for you for starting the process -- I hate it when we see parents posting here who are in denial of how hard it is for students these days. We get some who refuse to fill out the FAFSA or contribute because they hold the (convenient for them) belief that a kid should be able to pay the whole ticket the way Grandpa did in 1948.

redeye41

Never co-sign for anything you aren't prepared to pay for yourself.

Not saying your child would not pay his loans, but things happen in life.

If you think it's a good deal for him to take out these loans for his education, and are prepared if you must pay, it's worth it. Like some one suggested, a life insurance policy for the amount wouldn't be a bad idea, but most co-signers that end up paying for others loans aren't because of a death, so just be prepared.