Many college students doubt they’ll be able to pay off their student loans – ever
https://www.usatoday.com/story/money/2019/05/29/college-students-fear-they-wont-able-pay-their-student-loans/1258761001/
4 Years of College, $0 in Debt: How Some Countries Make Higher Education Affordable
https://www.nytimes.com/2019/05/28/reader-center/international-college-costs-financing.html
Imo, the Direct loans are all the students should take. Maybe, maybe Maybe a bit more if very low interest college loans or federal student loans also offered. These days, if parents don’t qualify for PELL, kids get another $5k or so. Even that is too much.
I have a friend who has a very nice job in Manhattan. She took out $40k in Direct student loans and another $40k for graduate school. She owes over $100k and she’s in her 40s and has never defaulted. But she deferred while in grad school and for a few short periods in her life. The internet keeps on cranking. That and her car are the only debts in her life and those student loans suffocate her. Life goes on after college and there never seems to be enough money. The loans are a ball on chains.
@bester1. Great reads. But like in Canada, I think you are taxed like 50% of income in exchange for Healthcare and education and other services to make this all happen. Not sure how it works aboard. Something needs to change. I never understood why like all colleges, big or small are like $50-65,000,OOS or private. It just seems like the numbers are made up to keep up with the Joneses.
Also the article about financial responsibility. Both our kids in college applied and got their first credit cards through our bank account. Both met with our young looking banker. They only initially got $1,000. She explained to them how to build credit the correct way but most importantly to pay off the balance monthly. She gave then good /bad real case scenarios of building credit. It was great. Both kids are like “why would you constantly buy things you can’t afford to pay cash for”? They both grew up with debit cards not credit cards and learned quickly either you have the funds or you don’t. It’s a start at least of reversing the current thinking.
@bester1 Many Americans, especially CC’ers want affordable college but on their own terms. They want small freshman classes. They want advising and other services galore. Other countries, even Canada, do not provide that.
Another vote for the federal student loan limits as a rule of thumb; I was under the impression that it’s 27k over four years. (Debt for professional school is a completely different conversation.)
@TomSrofBoston…I agree with you in many ways. Many CC’ers promote the best colleges/universities which are often affordable. We parents get caught up in the “Cocktail Party” talks of where is your kid going. Nobody wants to say “Slippery Rock” even though it provides a very solid educational opportunity on may fronts. We even had a Guidance Counselor tell us that my kid could do much better than IUP, even though they provided both academic/athletic money that significantly lowered the cost.
Instead we keep hyping the hype…and borrowing money to pay for the hype - well, you know what I mean.
Who keeps a car in Manhattan, parking alone is more than the cost of a car payment? 
Beyond, that, it’s that COA grad school money that really hurts, as the federal limits on undergrad debt are not unreasonable. Grad debt up to COA is just a moral hazard.
(And that’s why I keep harping on the fact that one should parse the ‘shocking debt’ data obtained from undergrad and that from grad…)
Doesn’t live in NYC. Works there, commutes. Not a really frugal person, but careful and on a budget. I believe took Direct loans at independent student limits because parents got turned down for PLUS. So borrowed $40k principle as UG. $20k a year as grad student for two years. So face amount of loans taken $80k. But with deferrals, a few stunts of unemployment, and the constant churning of interest, she now owes more than she borrowed about 15 years after her masters.
Doesn’t live overly extravagantly. No luxury anything. But not a regiment of austerity either.
She’s not in trouble with these loans. With her income, discipline, they are not likely to overwhelm her. But they are there and bigger than when started.
My son’s roommate is in loan hell. He’s going to have to marry rich to pay off these loans or hit it big. First in family to go to college, borrowed Direct and a bit more all subsidized while in college. Also up to independent student limits so about $50K. Then borrowed for masters and he’s way over his head at age 26. He and my son live frugally, but my son saves what his roommate pays in loans. Also, we do supplement indirectly for things that the roommate had to pay all on his own. His family lives a distance away, and visiting expenses each year are a line item in the budget. His mother needs supplementary income, doesn’t give any to him. Takes because needs. Also siblings in need that he tried to help get through college but didn’t happen. They live in a lower rent , not desirable neighborhood…
Undergraduates staying within the federal subsidized loan limits seems reasonable and maybe even conservative. Graduate students borrowing up to the COA and even more is problematic. That is how we get some shocking stories of graduates with greater than 1 million dollars in student loan debt.
@bester1 people need to learn to stop caring so much what other people think and not get caught up in the “Cocktail Party” conversations!. Easier said then done though
I think a lot of the student loan problem revolves around the accumulating interest. i wish the politicians who are talking about forgiving student loan debt would instead talk about getting rid of the interest. We want people to take on personal responsibility for their choices. I think of student loans without interest as a partnership. We as society agree to eat the interest so you the student can get an education and contribute more to society than you would without the education, and you as the student are still incentivized to limit your borrowing because you are still responsible for the principle. You’d have to put some guard rails on this, but I think it would be worth a discussion. I also think mandatory financial counseling before borrowing (so counseling 18 months before taking the loan so you can still look at other options) would be good. Again have to work out details, but just an idea.
Interest exists on student loans for two reasons.
First, because there is a cost to borrowing for everyone and every organization, including the US government. Think of the government borrowing rate as a baseline “risk-free” rate.
Second, students have a higher rate than the risk-free rate because students default often. In fact, the current interest rate is too low to cover the default rate.
I’m ok with interest; otherwise everyone would just take out the max whether they needed it or not. That being said, the interest is too high, as the ‘profits’ from teh gradplus loans are used to subsidize Pell grants. Better that we just bite the bullet and fund Pell’s, and cut the interest rates on the student loans.
If we just made any loan that is not a direct loan(ie $5500 freshman year) dischargeable by bankruptcy then magically those other loans like plus loans would disappear. No bank would loan anyone anything without collateral. Once that happened then the COA at universities would go down. Because if it didn’t then they would have a ton fewer students.
I am a believer that the COA has gone off the rails more than double the rate of inflation because of access to loans.
That may be more plausible for post-BA/BS professional school (e.g. law, medical, etc.) than for undergraduate.
That is an excellent idea.
And we’d be back to where only the wealty could afford college along with the handful lucky enough to get into a true meets needs school. Seems there really needs to be a happy medium.
Oh, puhleeze. We’d be back to where the less wealthy could not attend a private, sleep-away college, but so what? Isn’t the goal to educate the masses in an economic and efficient manner, not to educate them in a 3-star resort?
So that’s why there’s less than 20% college educated adults over age 25 in my county? Due to not being able to go to a three star resort? Silly me believed stories about not being able to afford even local schools, so having to just get jobs.
Glad you made it clear what the correct answer is.
Sadly some I know who end up having to get a job because the figures aren’t affordable end up drowning their sorrows in cheap escapes. Then some go on to drown. I always wonder what their lives could have been like.
It’s not always terrific for those who go to college/trade school either, but at least they had a chance.
Some students want to get jobs after high school as Plan A. I’m not talking about those kids. I’m talking about those who are accepted and can’t afford to pay for it, often even if they start at cc. In PA, basic loans and Pell don’t cover much.
^^ Except that student loans used to be dischargeable in bankruptcy and guess what - a lot of college grads filed bankruptcy and discharged those loans! I knew student who planned to do just that and bought a stereo after graduation because, well, why not? It was going to be free! Trip to Mexico post graduation on the credit cards? Sure. Don’t scrimp and save during college because it’s all going to be discharged.
Banks started lending to students because the ‘new’ bankruptcy law made loans non-dischargeable. Now, the Dodd-Frank act would severely limit the availability of unsecured lending a bank can have on its books. Student loans are an exception because they can’t be discharged so the banks have more leeway in making them.
If the government wants to make school free then do it. I don’t agree with giving some students the ability to take loans they aren’t going to repay and then expect the taxpayers to pick up the tab when they file bankruptcy. Other students are going to cheaper schools and working their way through, taking less in loans. That’s what I did, that’s what my kids did. - we picked cheaper schools and worked while our friends borrowed more to go to more prestigious schools.
I can’t believe there was $40M in student/PLUS loans to be paid for 400 students at Morehouse. Average of $100 grand per student. IMO, those students shouldn’t be borrowing that much or allowed to borrow that much. Morehouse should be ashamed that its students have that much in debt.