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Recommended loan limits

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Replies to: Recommended loan limits

  • VladenschlutteVladenschlutte Registered User Posts: 4,329 Senior Member
    Google salary is only 100K but all-in compensation is 150K starting. That's pretty damn good in my book. Though of 'course, it's the Bay Area where that's worth half as much as it is in the rest of the country but still.
  • cptofthehousecptofthehouse Registered User Posts: 28,094 Senior Member
    How much someone can reasonably take out in loans varies greatly. How much are thinking of having him borrow? As a freshman, he can only borrow $5500 on his own. Sophomore year he can borrow $6500. Junior and Senior years $7500. Beyond that, unless your family qualifies for financial aid and he gets, say Perkins loans offered, that's it without you or other credit worthy cosigner involved. If YOU, the parents are willing to borrow for him, go on ahead. I don't recommend those Co-loans as the terms are not as good, not much flexibility, and the tie both you and the student in financial shackles. With PLUS, if either parent or student dies, loan is forgiven and the terms have been flexible. I 've yet to see much lower interest rates on those co loans either.

    You can't count on your other student going to a full need met school, and it's no sure thing your son gets into MIT. If he's a great student, he might get into something like CMU or Georgia Tech, and those schools do not guarantee to meet full need so the relief you see to be counting on in year 3 might not happen.

    Kids change their minds a lot, and the STEM majors tend to make changes out of that field. I have a close friend whose talented brilliant daughter changed her mind about a program mid way through, and that quashed a lot of plans and assumptions, including the investement that the parents thought would be easily repaid. NOpe. It's been a disaster.

    When a graduate gets a great job out of college, all well and good. Most of my kids' peers are barely making it. Even those who got what are considered great jobs have found that those start up expenses really cut into the paycheck, and any school loans are a tough go. My one son needs a reliable car , for instance. This year of car trouble has really set him back. The economy can easily tank, and jobs can be scarce. In such times, and we saw this in 2006, even some grads with degrees that should have made for lucrative job offers, didn't get much action in that department. It's wonderful when it happens. COunting on it , counting on a teenager to perform that way in the next 4 years is a pretty danged heavy load to put on a kid.

    If you want to bet on this, YOU can take out the loans. Don't put it on a recent high school graduate, a teenager to make this decision. If you can afford to take out these loans and repay them, and want to spend your future earnings on this, do it. I did with one of mine. I just repaid those danged loans and it was 14 long years with each payment painful. And I 'm only done now because I opted to start repayment immediately rather than waiting until after graduation . I could feel the pain of each loan as my payments increased each term. If PLUS operated that way as a requirement, fewer parents would find themselves in so much debt.

    Often, we get kids posting here wanting their parents to cosign or do anything so that they can borrow outrageous amounts. I oftnen ask them if they really want to risk their parents' financial future that way. In this case, I'm asking you, the parent, fi you really want to risk your kid's financial future sticking him with loans he may not be able to afford.
  • WyanokieWyanokie Registered User Posts: 33 Junior Member
    Lots of food for thought from everyone - thank you for all of the comments and please keep them coming. To cptofthehouse I hear what you are saying. We wouldn't stick him with loans he couldn't afford. The risk would be on us and an impact on our potential to retire when we would like to if he weren't able to pay... We have essentially told him that we can afford to pay about 40K per year so he is applying to some schools w merit aid and to our state school. But, junior year and standardized testing went very well so I think he does have a shot at a "top" school (and believe me I know very well that you can get a great education at many, many colleges around the country - but with his interests, personality, competitive nature etc he is very focused on shooting for a "top" school for the opportunities it could provide).

    So, I'm trying to figure out if I should offer him the option of applying to some of these schools with the understanding that he would have to take on a higher debt burden. And would this make sense if he seemed pretty clearly heading towards a high paying right out of college job like engineering or finance…. Amounts like 50K, 75K sound like huge amounts of loan debt clearly. But is it entirely manageable to a grad of MIT or Cornell CoE etc?
  • colorado_momcolorado_mom Registered User Posts: 8,893 Senior Member
    Wyanokie - Ah, your thought process is familiar to many of us here ;) It's good you are thinking this through now.

    My thought is that $75K debt is too much... even if you are certain that DS will stick with a lucrative major and finish his degree. As you think it through, make sure you have a varied list that includes schools where scholarship is obtainable. In the end, we opted to let DS apply to MIT.... with the disclaimer that even if he got in we would maybe need to say No due to finance. Ditto for Harvey Mudd if he didn't get a scholarship.
  • calmomcalmom Registered User Posts: 20,552 Senior Member
    Wyanokie, I have two kids. One went to a "top" school, graduated near the top of her class, and got a job right away after graduation. But she had friends from college with weaker GPA's who had a hard time finding jobs -- I think that over time they all eventually found jobs, but it wasn't easy for all of them. By "weaker" GPA, i don't mean bad GPA's -- I just mean weaker than my daughter's, which was in top 5% of her class. (I am assuming that 95% of her classmates had weaker GPA's -- I know the percentile simply because that's the criteria/cutoff for the level of honors she graduated with).

    My other kid went to college for 2 years, dropped out, worked for 3 years, went back to school at an in-state public, graduated with a B+ average, got a job right away, with about the same starting salary.

    It's very easy for people to post about what starting salary is at Google, but I know something about their hiring process, and it can be very long and also somewhat unpredictable.

    I don't know percentages. I don't know what percentage of kids who enter MIT with high hopes are graduating 4 years down the line and getting those coveted jobs, and what percentage are "settling" for less.

    Here are some figures from a year ago:
    http://www.forbes.com/sites/susanadams/2013/04/12/25-college-diplomas-with-the-highest-pay/

    Keep in mind that the figures quoted in that article are averages. In other words, if the average CMU computer science graduate was earning $84,400, that means that a lot are earning less. Also, the sources of data for average or median salaries are often based on surveys which exclude students who have not been able to find employment.

    As a parent I would not have allowed my kids to borrow $50K for an undergrad degree. I did take PLUS loans, and so if you count my borrowing along with my daughter's, I think that came to around $40K - but the PLUS loan was my way of financing, and my upper limit in my mind was based on assets. That is, I came to a decision about how much I could borrow based on looking at my own net worth, including home equity and retirement accounts.

    I agree that a STEM - technical degree potentially leads to significantly higher salaries than a liberal arts degree, but there are no guarantees.

    I think that if you are in position to pay $40K a year for college, then have your son apply to schools that will be affordable. If he wants to study engineering and has the stats to get into MIT, then there are also some excellent schools that are known for offering strong merit aid. (But keep in mind that the "stats" are a lot more than test scores -- and 800 on the math SAT is not all that unusual. The kids who get into MIT typically have a set of ECs or awards that back up their GPA and SAT.

    I agree with @cptofthehouse -- if the school name is worth borrowing for, then the parents should be doing the ones borrowing any amounts above and beyond what is offered via the federal student loan program.
  • calmomcalmom Registered User Posts: 20,552 Senior Member
    @furrydog
    . However, IMHO, the chance is fair if you have an OK GPA. (yes, I did turn down bunch of kids with 1+ GPA - that is just way too low)
    What guarantee does the OP have that her son will have an OK GPA? Some kids have a disastrous freshman year -- for all sorts of reasons.
  • Mom2aphysicsgeekMom2aphysicsgeek Registered User Posts: 4,513 Senior Member
    edited July 2014
    I know nothing about finance, but for engineering I can share our family's IRL experience. Where did not matter. What mattered was ABET certified program, work experience, and high GPA. (Co-oping is definitely a good decision.)

    Our oldest graduated from a small unknown to the general public state tech university, but it is a university that industry likes. He had multiple job offers from corporations around the country. He had a high GPA. (The only grads who had job offers at graduation had 3.5+ GPAs) His salary after 2 yrs matches the published data for tippy top engineering programs. We paid for his college out of pocket (in our world, that tells you his degree was low cost. ;) ) He graduated debt-free, spent the past 2 1/2 yrs saving, and just bought his first house 2 weeks ago. (He didn't graduate until Aug of 2011, so it hasn't even been 3 yrs.).

    He has had multiple promotions since he graduated. Work performance, once hired, is all that matters. No one cares where you went to school. Knowing how industry views a programs grads is more important than what the general public thinks of the school. Find out what companies actively recruit grads. (Should be easy to get answers from a coop/career center of any good engineering school. If they don't have on campus recruiting and are not open with that sort of info, that is a program I would avoid. Having companies look for you is definitely an easier scenario for employment than you having to look for companies.

    HTH
  • ClassicRockerDadClassicRockerDad Registered User Posts: 6,365 Senior Member
    This is a hard question to answer.

    We pay interns well also in EE and CS. Starting salaries are in the high 70s.

    Statistically, it's probably a risky proposition, but if he gets into a top school, he's already blown away the statistics, and I think it's far less risky. Like any successful business enterprise, making it work involves dedication, persistence, and yes risk. I think investing in one's career is a good investment for someone driven.

    I think if a kid is mature and dedicated to his chosen profession, I think borrowing what you need is fine.
  • greenbuttongreenbutton Registered User Posts: 2,719 Senior Member
    edited July 2014
    Everyone's story is going to be different, but OP might also want to visit the learning challenges threads, the disastrous freshman year threads, the decided to take a gap year threads....My point being, the only thing you can control in the financial burden equation is how much you take on, which i encourage OP to think of as "how high the monthly payment will be for 20 years" ( Signing bonus? Seriously? I know plenty of STEM people and nobody with a bonus, barring one CMU grad in Cali.)

    S1 graduated with no debt at all, and had a job in his field before he even graduated (having met much trauma and taken The Long Way). The job is awesome. The pay is wretched -- just above poverty level. I shudder to think of him turning it down because of loan payments. S2 is almost done and we will probably have a 4K PLUS loan to pay back. That's it. The financial Independance of debt free is so much better than a brand-name school purchased with a lifetime of debt. Forget talking to him about debt -- he's so sure he'll have a fabulous job, he's not rational now. Find a really good school that's affordable with little to no debt for anyone.
  • Erin's DadErin's Dad Super Moderator Posts: 36,453 Super Moderator
    I work for a large national company. We don't provide signing bonuses to new college grads. We do make sure our salaries are in-line with the location from which they work. And a $25/hour intern must be working in a large, expensive metropolitan area (with commensurate expenses).
  • ClassicRockerDadClassicRockerDad Registered User Posts: 6,365 Senior Member
    Signing bonus? Seriously?

    My D, a new grad, just got one at her company with a BSCS.

    My company gives them out all the time if the market suggests that we need to. It currently does.

    Statistics are funny. You can take the average graduate in the average job in the average company, and sure, they make less and don't get signing bonuses.

    If you strive to be average, by all means avoid all debt.

    The average professional baseball player makes less than the poverty line.
    The average professional baseball player is in the minors, perhaps at the A or AA level

    I would argue that attending MIT or other top schools already puts the student at "AAA" equivalent.

    If you take the median salary of professional baseball players at "AAA" and higher, and you thought you were good enough to be there, you'd definitely borrow money to make sure you made it to the "show". You also wouldn't spend all of your time lollygagging, partying and putting it all at risk.

    Statistics are funny, but people aren't statistics.
  • thumper1thumper1 Registered User Posts: 76,168 Senior Member
    My company gives them out all the time if the market suggests that we need to. It currently does.

    Above regarding signing bonuses. So the rub is...no way to predict IF the market will suggest these signing bonuses when the OP's kiddo graduates.
  • megpmommegpmom Registered User Posts: 3,114 Senior Member
    edited July 2014
    If you take out large loans, there is no GUARANTEE that you will get a high paying job right out of college, no matter where you get your degree from. However, there IS a guarantee that you will have high debt repayments. So, how much of a gambler are you?

    Oh, and H has a PhD in CS, works for the largest software firm in the world, and barely earns in the six figures. His new employees (recent Masters degrees or PhDs) earn about $65,000-$75,000 in the US (less overseas). So, there is wide variance in pay - even in great industries.
  • Mom2aphysicsgeekMom2aphysicsgeek Registered User Posts: 4,513 Senior Member
    @Erin's Dad
    Our ds was actually salaried during his co-op job. (He cooped for 12 straight months and lived in a corp provided apartment.) He earned full benefits until college graduation plus a scholarship for each semester he had left in school.

    If you broke down his salary to an hourly wage, it was somewhere around $21.50-23/hr. (I'm not positive how many weeks his salary was based on) His place of employment? A small town in TN.

    No bonuses when he started his job after graduation, though.
  • ClassicRockerDadClassicRockerDad Registered User Posts: 6,365 Senior Member
    If you take out large loans, there is no GUARANTEE that you will get a high paying job right out of college

    Hence the term RISK. Just because something is risky doesn't mean you shouldn't do it. I take a lot of calculated risks and usually come out ahead, but sometimes I don't. That's life. There is risk involved in not taking any risk.

    The expected lifetime salary of a new graduate in EE or CS right now is probably between 3 and 4 million dollars, but the standard deviation is significant too. To me, borrowing 30-40K to maximize the potential is an easy no-brainer. Borrowing 80-120K gives me pause, but under certain circumstances, may also be worth it. Clearly the risk is even higher.

    People do become astronauts, movie starts, professional athletes, and Fortune 500 CEOs. None of them avoid risk completely.
This discussion has been closed.