Hi, we just reviewed our financial aid package that consisted of one item - the student direct unsubsidized loan of $5,500. Are there any other loans out there where the student - not the parent - is solely responsible to repay?
The $5,500 loan has been around for decades and has not kept pace with ever increasing tuition costs over that period of time. So, as a proportion of total cost, the current day student is only responsible for a small portion of the overall debt incurred to pay the bill as compared to his predecessors. I’d like the responsibility to be shared a little more “old school like” between student and parent. Thanks.
Nope, students don’t generally have high enough credit ratings or enough assets to back thousands and thousands of dollars in loans. If you have to borrow to pay, the school isn’t really affordable.
How much can you pay without borrowing? If your child works summers they can raise ~$3k. With the ~$5500/year federal student loan that gives you ~$8k to start. Are there schools where your child will qualify for merit aid? If not, they may have to start at a community college. Most kids don’t attend residential college, so they’d be in good company.
@austinmshauri “If you have to borrow to pay, the school isn’t really affordable.”
If you are coming from the perspective that the parents should pay the entire cost of their children’s college, then I can see your point. If, on the other hand, you believe that the student should have some skin in the game (more than 5500 out of 35000), then borrowing is one way to achieve that, especially if their contribution from part-time work is insufficient.
Oh, I’m not sure I’m following your latter logic but I think your point is if you need to borrow then you should go to community college. Why?
This calculator will show you what a disadvantage student debt can be after graduation. Pay close attention to the salary needed to avoid default listed in the paragraph after the monthly payments on the results page. Student loan rates are very high and the debt can not be bankrupted away. http://www.finaid.org/calculators/loanpayments.phtml
I mentioned cc’s because you’re posting in the Penn State forum and I know PA schools are expensive and the state doesn’t offer much aid. Our schools in NY are affordable for students. Tuition and fees are ~$9k/year. Students can pay that by working summers and taking the federal student loan. It doesn’t sound to me like PA residents are as fortunate. So if you can’t, or won’t, pay full freight for your kid then 2 years at a cc may be a good starting point. Your child may not be able to borrow thousands of dollars, but by starting at a cc they can prevent your having to spend it. It’s the same net result for you.
I think all kids have built in skin in the game. If they don’t do well in college, they won’t be able to get the jobs they want. My children love to learn and they understand college is a privilege not everyone gets, so we didn’t feel the need to make them borrow to try to guarantee they’d take it seriously. I wouldn’t depend on loans having that kind of power anyway. Most kids don’t have a concept of what the $27k federal loans look like. If you double it by adding another $5k/year I don’t know that it would make any difference. Your kid either will appreciate the opportunity or they won’t.