Terrified of student loans

<p>Some background - I am an independent student who just transferred to UC Berkeley. I have a full time, soul sucking emotionally draining job that I plan to leave in July. I am married and have two kids. My husband works part-time but does not make very much. I make over 20 dollars an hour and hour plus overtime. When I graduate I will get a promotion (not sure I want to stay with the company but this prospect is a sort of "safety"). I have been on the brink of a nervous breakdown the past two years because I am so overwhelmed and feel great about the possibility of not working. </p>

<p>I did get a large amount of financial aid. According to Berkeley's budget I will need $5500 in loans this year (possibly less next year as my efc will most certainly be 0 since I won't be working). Because my budget is slightly higher I may have to take out a little bit more than they assume.</p>

<p>The problem is I am TERRIFIED of debt. I keep going back to my offer letter and just can't bring myself to accept the loans. We are a frugal family and we manage our money VERY wisely, and part of that has been avoiding debt. I understand that a lot of people take out student loans but a lot of people are in over their heads with them . . . I watched that CNN clip about the 24 year old NYU grad who owes 275,000 and has no job and I just about fainted.</p>

<p>I am set on Berkeley though (it has always been my dream school), so . . . what do you think of my situation? Sorry to be so whiny, but I am really scared of loans but don't know what else I could possibly do come July!</p>

<p>Thanks!</p>

<p>I think you're wise to consider debt seriously but the Stafford loans are a fairly reasonable amount of debt to take on and certainly everyone must make an investment in their education (or have parents who are willing to do so). The horror stories usually occur when private loans are involved since the payment plans that the government offers are generally manageable for everyone. You might do a quick return on investment calculation, if your decision is largely based on financial factors. How long would it take you to earn back your investment through increased wages? Or, if you had to save up enough money to pay it out of pocket instead, how long would that take and what would it "cost" you in terms of lost earning opportunity?</p>

<p>My advice would be to follow your dream, borrow what you actually need to get your education, and pay the interest charges on your unsubsidized loans every quarter while you're in school.</p>

<p>How many years will you need to borrow? 5 or 6 K won't be bad compared to what you will be making. Years ago, I graduated with a $5 K loan and a salary of $11.50 an hour. It was no big deal, and because the interest rate was low at the time, I paid it off in 5 years rather than paying early. If you are not working, maybe your hubs can get more work?</p>

<p>I don't think your loans will go down when your EFC does, I believe they will go up each year. Berkeley's Blue and Gold program gives grants for the low income, but loans are part of the package--Stafford and maybe Perkins. The Stafford amount goes up every year.</p>

<p>I would estimate total loans and run calculators to see what the montly payments will be. Then look up average salaries for the jobs you want. That will give you a clear picture.</p>

<p>If you are showing income from full time work on your FAFSA, contact financial aid at Berkeley and ask your rep if there is a form you can submit to show that you will no longer have that income; some schools will consider this under special circumstances and remove that former full time income, allowing your EFC to be lower and potentially allowing you to obtain more grants.</p>

<p>Borrowing around 10% of the total cost seems reasonable, as long as it doesn't exceed around $5,000 per year for four years. If this is what enables you to get the degree, I wouldn't hesitate, but this usually applies to younger students without any other significant debt.</p>

<p>Debt is just a tool, only for your money instead of pounding nails.</p>

<p>There is no need to be afraid of it. Are you afraid to use a hammer because you might hit your thumb?</p>

<p>You are wise to be responsible about it, and there is some good advice already here. But you have to get over your fear of it, or many doors in life will be closed to you.</p>

<p>You are going to Berkeley so you are obviously smart; just be smart about managing your debt.</p>

<p>Don't know what to advise you. With two kids, a husband who is in a low paying job, you may be in tight circumstances for a while after college. You are not going to be in the same shoes as many kids who really just have themselves to support and often still have one foot in the family home and a hand in the family cookie jar. They can afford to go home and live with the folks, live off the folks and put their pay towards their school loans for a while since they don't have other responsibilities. Or they can live in some low rent flophouse, sharing the expenses with others in their situation.</p>

<p>Would it make that much more difference for you to get your degree somewhere cheaper or on a part time basis? Does that option exist? How did you even get that kind of financial aid from Berkeley when you make $20+ an hour and also have a spouse earning money?</p>

<p>A young girl we know who recently married thought that she would get a windfall in aid when she married and is now independent for fin aid. To her chagrin, the way they calculate aid for independent students and spouses is far more rigorous. That's why I am curious.</p>

<p>It is like everything in life: moderation.</p>

<p>Take the student loans, it will relieve you of the problem of working and that is worth the price of admission alone. Lower stress means a happier you, happier family and you reach your goal. Then get your degree, get your promotion and move along. </p>

<p>The kid with 275k in loans was doing something wrong. That is over 100% financing of the cost of NYU for four years....so he was using the money for other purposes and clearly used outside loans. Something VERY wrong with THAT picture. So ignore it.</p>

<p>Most kids graduate with 20-28k in loans. Very manageable for a 10 year payoff at 4.5% FIXED interest. That is better than a car loan. And your education wont wear out and depreciate like a car.</p>

<p>Relax. Be reasonable in how much your borrow. Take the Berkeley degree and soar. Congratulations.</p>

<p>Thanks everyone . . . I'm still totally nervous though! </p>

<p>I guess I just keep playing all these horrible what-ifs in my mind . . . I mean, you can't go back on student loans! Even when buying a car you can always consider selling it back for something (even if it's less than what one paid).<br>
I know that a Berkeley degree with drastically increase my earnings potential - coupled with my leadership and managerial experience, I honestly don't have concerns about finding a job I want (plus I always have a job at my present company).</p>

<p>I also have to admit that my fear of not working (and taking out loans) stems from other elements of my life and that graduating from Berkeley with 10 or 15 thousand in government loans would not be the end of the world.</p>

<p>@cptofthehouse</p>

<p>I think having two kids has something to do with it. Plus my spouse is technically my dependent. If we didn't have the kids I think I would hardly qualify just being independent because of marriage.</p>

<p>Marriage alone would qualify you. And you either are or are not qualified, not barely, or hardly. Yes, it would be the kids,</p>

<p>Excuse my sentence structure. I know that marriage alone would always equal independent status. What I meant was that I would hardly qualify for any aid (even with being independent) were it not for the two children.</p>

<p>In fact, my EFC went down for the 2010-2011 school year compared to the 2008-2009 school year despite making more because of the additional dependent. </p>

<p>That's too bad about the young lady you knew! I had a friend in a similar situation - both her and her boyfriend were students, so they decided to get married in order to be eligble for more aid but that didn't work out as planned and they also ended up taking out massive loans.</p>

<p>According to Berkeley's budget I will need $5500 in loans this year (possibly less next year as my efc will most certainly be 0 since I won't be working). Because my budget is slightly higher I may have to take out a little bit more than they assume.</p>

<p>Your EFC will be based on your past year's income - even if you quit your job. </p>

<p>Have you filled out a FAFSA yet?</p>

<p>Can your husband earn more money? How is your family supposed to live when they lose your full time income and must rely on one low income?</p>

<p>Hi mom2collegekids:</p>

<p>I will make less in 2010 than in 2009 because I am not working the whole year (stopping in July) which will definitely lower my income for 2010.</p>

<p>I already filed my 2010-2011 school year FAFSA.</p>

<p>Hub can probably work a little more. He has been applying for higher paying jobs but they are not looking very promising right now.</p>

<p>As of right now, between my gift financial aid, his income, and subsidized loans are income would be just slightly less than with both working. I'm just having a lot of concern over taking the loans.</p>

<p>Also, FWIW we do have a decent savings (not huge but more than just an Emergency Fund) which we could use if anything unexpected comes up. But then I get nervous about tapping into that!</p>