Yes, students should get loans if needed. I fall back on my very in depth study of one: me! I did get through undergrad w/o loans. But I had scholarships.
I left with a nothing degree and went to law school. I borrowed essentially a mortgage on my life. I finished paying it back at 37. It had a big impact in my life choices. But it is also the reason I am now able to afford my kids’ tuition. Without those loans, I’d have become management at the local GAP (presuming they would have me;)
Things I wish I could go back and tell myself:
Do the math first. Know what the payment will be, and for how long
Pay high rate loans first!
Don’t borrow the limit, you won’t need it, but will spend it.
Sadly, those loan years would now cost $60k each, not 23-27k back in my day for T, R & B. Would not be worth $250k in debt. Period.
Reading some of these threads on this forum from clueless people wanting to take on big debt for overpriced schools and having no reality on how that debt will impact the rest of their life; I say NO everyone should not get a student loan!
I realize after reading your post how challenging a loan can be for parents. Is it true that federal loan interest rate is a little upwards of 4.3, whereas private loans cost a couple of points more?
I was that poor kid at a cc and I have to disagree. The loans may be the difference between having transportation to get to school and not being able to attend at all. I agree that kids should avoid loans if at all possible, but we shouldn’t cut off access to education to the poorest of our citizens.
However, those private and PLUS loans that run into the tens of thousands of dollars that some parents gleefully assume they can just write off and have the rest of the taxpayers absorb the cost, those I’d love to see reined in. I think people should have to qualify for those based on current income and credit. If their kid has to attend the local cc then transfer to a local 4-year school because they can no longer get the loan to dorm at an OOS college, that’s undoubtedly a disappointment for the child, but it’s what the family can afford. Taxpayers shouldn’t have to fund unaffordable “dream” colleges. I don’t think loans should be made for undergrad degrees based on potential earnings either. Kids change majors, markets change, health changes – there are just too many variables that can affect the ability to repay.
@austinmshauri amen! However, correct me if I am wrong but don’t they already do a credit check for Parent Plus? Even if the parents fail the credit check, the kid can then borrow more themself, bringing their yearly borrowing to almost 10k and thus exacerbate personal debt…If we should reform anything, we should very least cap just to stafford limits so that it puts restraint on options for kids where they can afford to go with loans and not risk having it bailed out by the government. It’s not perfect but prevents these awful stories of parent’s borrowing way more than they should…
Even though I have been critical of “useless” majors in the past and I admit I was wrong for my general criticisms, one thing for sure is that the people know what is best for them when it comes to what they want to become, not the government. The last thing we need is a government bureaucrat dictating who deserves federal aid because some decide to take a more humble or different route of study compared to a STEM major. If we can just say no to Parent Plus and stick with stafford, we can reduce a lot of these nightmare debt stories from happening. However, that may not be enough since the private student loan market exists and some may argue that Parent Plus is the lesser of two evils…sigh.
If anything first and foremost is being more transparent about debt and salary statistics and college selection with students earlier. It’s appalling how bad misinformation is spread by GC’s and peers for financial/college advice…I was ready to jump on the $50,000 debt bandwagon for a “prestigious” engineering degree because I got the thumb’s up by counselors, friends, and teachers…until I decided with a cool head that it wasn’t what I wanted and now I chose a more reasonable and affordable college that I love. The most dangerous thing in this country is an 18 year old with starry eyed ambitions and a credit card from Uncle Sam without limits. Borrowing is not fun and sucks but it can be used responsibly and with moderation. Debt is an unfortunate, but sometimes necessary evil and we as a society just have to reinforce moderation with policy and proper consumer information.
They do a credit check on Plus loans only for ‘major negatives’ like bankruptcy and defaults on prior government loans. They do not do underwriting on ability to repay.
thanks for the insight @twoinanddone! If the government has to be in the student loan business with parents, then it must be more regulated to get these Parent Plus loans and/or not give the extra debt to kids when their parents fail the credit checks.
About 30% of students graduate debt free. Of those who borrow, 67% borrow up to $25,000, which is considered manageable. In total, about 77% of all students have no debt OR manageable debt. It comes down now what we can do to help those in the 23% that graduate with debt amounts that are unmanageable and preventing that share of students from increasing in the future.
I think that it’s a choice to take out loans because grants and scholarships now won’t be enough to cover cost of attendance. There are so many people that are going to college that have parents whom do not contribute because they make little to no money or because these people are dependent of one parent. We need to address to the public how much debt graduates are getting into after college. The interest rates on these loans are high enough to raise a loan of 100 dollars to 1000 dollars, or even higher within a 10 year frame. The idea of Bernie Sanders planning to have free tuition for higher education is great considering these extremely bizarre debts. So in general loans are a given choice and it’s students attending college’s decisions to take it or not. Scholarships and grants on the other hand should be the question asked. “Should anyone get a scholarship or grant?”
So currently we have a practice of freely giving loans to millions of people who don’t understand finances and are poor credit risks (i.e. students), so they can attend college. This has increased the demand of colleges relative to a fairly fixed supply of seats, driving up tuition to the point that very few people can afford it.
So Bernie’s idea is to further increase the demand for colleges, by making it free (i.e. use other people’s money), and this will somehow make the whole system affordable. Bizarro world!