You aren’t borrowing as much as you think - given fees. You have to pay interest so you are paying more (often lots more) than you borrow.
Sure, in some cases, it’s your only path to attending college. But when you have other alternatives you can afford, then borrowing, while making you happy today, may cause you unnecessary harm tomorrow.
I hate to see so many people, so desperate to attend a certain name, take on debt that many of them will not be able to pay back - when it was highly unnecessary to create success in their lives.
Here is the advice from IU alum and billionaire Mark Cuban.
Great idea if you’re from a state with good community colleges that are within commuting distance. Cuban grew up in a state that has this … sort of. There are many, many rural kids who can’t get to a community college in that state, either because it’s too far or they don’t have transportation. And of course, there’s the final two years to finance.
This is one solution for some students. Touting it as an answer to our country’s college affordability problem is not responsible, though, because it pretends that the problem is students not choosing an affordable option … while this may apply to a subset of students, it ignores the reality of a lack of affordable options for far more students than this subset.
I think a modest amount of student loans can sometimes make sense. A college education is, among other things, a capital investment, and financing a capital investment with loans is not inherently a bad idea.
But I agree some people take a lot more out in loans than can really be justified in this way.
I think the overall message from that article is OK with some good food for thought ideas.
But I rarely take advise from those that have not actually lived what they are preaching
From other articles- Cuban “chose [IU’s] Kelley School of Business sight-unseen because it had the least expensive tuition of all the business schools on the top 10 list,”
He was able to attend a T10 for his desired program and during a time when college was way more affordable.
He was able to have that experience and benefit from it- but now tells other to not do that.
My D22 will have roughly $14,000 in loans. These are all subsidized meaning there is no interest accruing while she is in school or for 6 months after she graduates (the one unsubsidized loan - about $1200- she took the semester she was abroad since work study doesn’t apply when you’re abroad we were able to pay back the following summer so the interest was minimal, and worth it for the peace of mind that the money was available if she needed it). In retrospect we probably could have done it without loans, or with fewer loans, but it was ALOT easier not to have to come up with another $350 every month ($3500/10) or to take more of my daughter’s summer earnings. Happy to help her pay them off - at worst I figure it will take us 3-4 years and at best about 2. The interest paid each year is tax deductible. For us taking those loans was absolutely the right choice and I’m grateful the option was there.
That was grad school. Back in the day, most people I knew didn’t go to grad school right after undergrad - most worked and saved before going. Actually, though, most of my friends got corporate fellowships or went part time while working so the company paid for tuition. Older folks (Cuban included) need to realize that those options don’t typically exist in the way they used to.
Not to mention, that by the time you run the gauntlet from the 1 in 40 chance that you won’t change your sights; Organic Chemistry; LORs; the MCATS, all the way to a 1 in 14 chance of gaining admission - you’re kinda stacked for taking out loans for med school!
The article is one sided. I agree huge loans for undergrad school are best avoided…if possible. With the new federal loan limits, this is happening. Parents would need to either take out loans or co-sign just about anything above the federally funded college loan limits.
Let’s face it, loans are essential for some students. If we add professional schools and grad schools to the mix, there are some professions that will only be available to wealthy families…and I have a bigger issue with that.
All of my kids had/have loans. My two oldest are under 30 and have them all paid back ($65,000ish?). My 23 year old graduated in May and started paying them back 6 months ago, $30,000 paid so far. Her twin just graduated and commuted, did do a semester abroad, but his are very manageable. My 25 year old has a ton, DPT, but is very aggressively paying them while also working at home, crossing her fingers for a forgiveness program (she works in a hospital and has been crossing her t’s) but is prepared to pay them all. There really isn’t an inexpensive way to get a DPT, she could’ve saved $ by staying local, she got into 3 programs both under 10 miles away, but chose to go to Boston and live home after. She got to live in Boston and Brooklyn, which so far were the best times of her life. She was also one out of two in her cohort who also worked nights and weekends (which she also absolutely loved). All of them had very employable majors and had jobs lined up before graduation. They also know that we are set for retirement and can always help financially if they get into a bind. So far no regrets.
And some pay them off at the first chance. It doesn’t mean they are good btw - they are a necessity.
Someone buying an $800K home that can only afford a $500K home is the same thing.
Someone buying a BMW when they can only afford a Hyundai - not a great thing.
Sure - someone will lend you money - that’s how banks earn their living.
But - in general - know, they’re not good - especially if you can find something comparable that you can afford - or that won’t take future choices away from you.
Funny - I have a loan - on my son’s car - has another year. Why? I pay 3.9% and invest in bonds at 4.25% or a bit higher - so making the spread. So there’s a case where it’s ok.
But in general - not a fan.
There are many that pay off their home ASAP - they simply don’t want the sting of loans.
But the topic I created here is related to college.
I struggle with absolute statements. IMO, there is nothing wrong with taking the federal student loans amounts to afford college and for some families, taking on additional debt can make sense too. It’s an individual family decision.
I have never had a car loan before, except maybe when I was 20 and bought a 2 year old car and my parents lended me the money interest free and I paid them monthly. Only had one new vehicle and it was only because it was literally the only minivan with 5 shoulder belts at the time, and I was pregnant with #4 and #5. Our newest vehicles are 2020 and 2016. We have a mortgage that we could easily pay off today, I think our interest rate is <3%. Before changes we used to be able to itemize. Everyone has different priorities.
Anyway, I posted the article because I found it interesting - so to spur discussion but also in case any non-regulars stumble upon, maybe it will give them something to at least think about.
People mention borrowing money like it’s a nothing burger and no matter where one stands on the borrow / no borrow pendulum, I’d assume we would all agree - it’s not a nothing burger - that it at least needs thought.
College education means different things to different people.
For some, attending a well-known college is about prestige and personal pride - and there’s nothing wrong with that.
For many others, the decision is more practical: they weigh the return on investment and choose based on cost, career prospects, and financial outcomes. There’s nothing wrong with that either.
A smaller group goes on to do very well without attending college at all.
What these groups have in common is intentionality - they are clear about what they want, make choices accordingly, and often find success on their own terms.
The real concern is for those who don’t yet have strong or clear aspirations. They can be easily swayed by articles that are strongly for or against college as an investment, and may end up making decisions they later regret.
This thread is in the “Paying for College” sub; I’ve updated the threads title to reflect that the loans are student loans. Let’s keep responses focused on that, as any further posts about mortgages, car loans, debt consolidation loans, etc, are subject to deletion.
Both of our kids took part of the Direct Loans offered to them for undergrad school. We paid the interest off every year (self subsidizing). We were paying for college out of current earnings, and this helped our cash flow.
For both, their graduation presents…we fully paid for those loans which were far less costly than even one semester of costs at their colleges. It really was a perfect graduation gift and a nice surprise for them.
My kids don’t have loans (so they are lucky) as we are fortunate to be in the position to cover everything. However, I don’t see any issue with taking the federal loans ($27k) as it is less than the price of a new car and you get 10 years to pay it off. I had to borrow $7k for my undergraduate and it was a pretty easy lift (that represented about 10% of the cost of my undergraduate degree at the time). I think you get into a grey area when the total loan amounts get to be really big because it can be life limiting - impacting where you can live, what kind of job you can take, the ability to save for other priorities etc. And while CC isn’t a bad idea it isn’t practical in all cases - not all CC are created equal, not all offer a wide array of majors (or prep for certain majors), not all are accessible (meaning students can’t get there) and not all are cheap. Kids whose parents can’t or won’t contribute to their college education are in a tough spot - especially if family income is too high for them to qualify for any need-based aid.
