Why are parents so reluctant to take out loans?

3togo · November 1, 2013, 10:13am

For me there is NO comparison at all between buying our kid a Civic instead of a Ferrari … and paying for my kid to attend Framingham State instead of Cornell (even if we had to take out limited loans to pay for Cornell). In fact, a core portion of our plan to be able to afford best fit colleges for our kids is to drive cars like Civics instead of more expensive cars. I’ll buy that private schools can be considered a luxury item … but for me there is no comparison of the utility of (IMO) improving my kid’s educational experience to any sort of incremental improvement in our purchasing life (cars, vacations, etc).

QuantMech · November 1, 2013, 10:21am

Yes, absolutely, it is worthwhile in many instances to take out loans in order to help pay for a son’s or daughter’s education.

In this particular scenario, I just don’t see it, though. The parents are nearing retirement and have an income of $80,000 to $100,000. Unless they have somehow managed to save a great deal for retirement, in my opinion, they just don’t have the means to borrow $80,000. Perhaps the OP has never encountered anything that his parents couldn’t afford.

My family could not realistically afford MIT or Some Ivy. I certainly don’t harbor any resentment about it! I have often said on CC that the limitations of my accomplishments are my own, and not the result of the school I attended.

My great, great, great grandfather wrote memoirs, in which he said that he considered it very good fortune to have been born to “loving parents in the middle walks of life.” There is a great deal of wisdom in that statement.

Living in the middle walks of life means that there are some things one might like that are simply unaffordable. Period. I don’t waste time thinking about them.

csdad · November 1, 2013, 11:06am

Great post, the people that bother me are those that have the lake house, the toys, go on the golf trips…but give you “jabs” about how much your kids college is costing you compared to their kids state school cost.

Guitar500 · November 1, 2013, 11:25am

Oh, dear. When I looked at the title I thought it was going to be about parents not wanting students to take out STUDENT loans (which I can understand, some students are too obsessed with going to top schools that they can’t see just how nonsensical it is to take out 40k loans). But it appears I was wrong. You’re telling me that you would want your parents to take out an 80k loan and have them pay it well into their 70’s or 80’s just so you can accomplish a petty dream of going to a prestigious college? Wow. Haven’t your parents done enough for you, offering you education and guidance? Without them you wouldn’t even have a chance to get into top 30 schools! I’d hate doing something like that to my parents. I think they’ve done more than enough for me already.

And what kind of families would be able to take out an 80k loan anyway? If they were able to pay for it, they wouldn’t need such a ridiculous loan in the first place!

EDIT: I just read the “how much do you love your children?” comment. Well, how much do you love your parents, if you’d be willing to let them do something as crazy as that loan?

Nrdsb4 · November 1, 2013, 11:31am

First off, they shouldn’t do that because it’s none of their business.

However, they may prefer to send their kids to state schools because they see them as a great education for a good value. They may think the education received at a pricier school is no better. They may believe that the pricier schools’ reputation is overblown. There may be a strong family tradition tying them to their state school. There may be a whole host of reasons why they would send their kids to state schools which has nothing to do with the fact that they spend money on things like lake houses and golf trips and don’t have enough money left over to give their kids a decent education. Not saying that is necessarily your take, but that sentiment is often expressed here at CC.

We can’t make assumptions about people based on how we see people spend money. DH and I have a lake house. We travel, don’t have toys, and we sent our kids to state schools. What someone on the outside wouldn’t know, however, is we essentially told our Ds they could attend any school they wanted to which seemed like a good fit with our blessing and full financial support (no loans, we had saved the money for that). They got into some very good schools, some private, some public. Both girls chose publics for some very specific good reasons. We do not agree that they are being short changed in any way by attending these schools rather than some of the ones to which they were accepted. Also not directing that at you specifically. But there are a number of people out there who automatically assume a state school is inferior to a pricier one or one higher up on the magazine rankings.

kluge · November 1, 2013, 11:59am

Well, it’s clear that I disagree with most of the parent posters on this thread. In fact, I disagree pretty vehemently. What I see reading most of these posts are spoiled, entitled Boomer parents who feel that their own “pampering” is more important than their children’s futures - and criticizing the theoretical children they hypothesize for exhibiting those exact traits.

In the recent history of our nation the ethnic groups which have collectively attained the highest success are those which have exhibited a parental willingness to sacrifice their own desires in order to allow their children to have a better life than they themselves have had - largely through assisting them in attaining the best possible education. I know that in terms of my own priorities enabling my children to attend the best university they could - and graduate debt-free - was more important than having a new car, fancy vacation, or even - yes - saving more for retirement.

Obviously the calculus is different for people who would be destitute in retirement; but I find it difficult to believe that a family that has had an income of $80-100K per year would have no pensions and nothing set aside in IRAs or 401(k)s. What have they been doing for the past 18 years? College is expensive. UC cost of attendance is $30K per year - yes, the state school. We had the bad timing to have 3 kids in college in 2008 during the worst part of the economic unpleasantness which saw our retirement savings cut in half, the equity in our home all but disappear, and the money we had saved for our kid’s college education shrink. Yes, we borrowed six figures to pay for their educations during that period and did not add to our retirement savings. The payoff I got was that my three kids are all now responsible, independent adults with good jobs who are not saddled with debt, unlike many of their friends. That is worth a lot to me.

The OP may have expressed himself poorly but I think the essence of what he stated is legitimate. I do question the values of people who choose to prioritize the status of their automobile over the quality of their children’s educations.

(On a tangent, I’d note that of my children and my grown nieces and nephews, roughly a dozen all told, the only ones not currently employed are the engineer and a STEM graduate. It can be hard to predict things sometimes.)

sevmom · November 1, 2013, 12:07pm

Well, my kids are both now “responsible, independent adults with good jobs” too and they went to state schools. There is no right or wrong on this and no one path to success. But parents should certainly be able to decide for themselves how much they want to spend on their kids’ education without guilt.

ucbalumnus · November 1, 2013, 12:24pm

A California family with income of $80,000 to $100,000 per year would not be paying list price at a UC after financial aid grants with one college student, much less three.

But I agree about the point of saving beforehand, making interest work for you, instead of borrowing where interest works against you. Parents who save aggressively beforehand are much less likely to be in the position of having to consider huge debt to fund their kids’ college.

Unfortunately, students have to play the hand that they are dealt. If high income parents have had sloppy spending habits to the point that they were not able to save a college fund for them (and such parents probably don’t have much saved for their own retirement either), they are unlikely to be able to service a significant amount of debt to contribute to college costs. While one could argue that the parents should have had better spending discipline in their household finances, it is unrealistic for the student to expect the parents to go into large amounts of debt, since parents in that position probably cannot afford it, especially with ingrained (over)spending habits. But then students who grew up in such households may come to expect unlimited spending on their college, as it likely has been for everything else while they were growing up, so the reality of not being able to afford something very expensive may come as a shock.

Nrdsb4 · November 1, 2013, 12:32pm

I have seen nothing of the sort. Wanting to have sufficient funds on which to retire so that they do not become a burden to society or to their children is NOT trading a lifestyle of pampering for their children’s futures. We are living longer and longer lives. It’s almost inevitable that anyone who lives a long life is going to require significant funds for medical care/nursing home, catastrophic, illness, etc. Just for the basics, not the luxuries of life. The problem is none of us know how long we will live, so we look to maximize our retirement funds. In our case, whatever we don’t end up using will be left to our children, so they will ultimately benefit as well. I know the last thing I would want would be to run out of funds and become a burden to my kids just as they are coming to the age of having to fund their own children’s education.

DH and I were ready, willing, and able to pay for any school which would have been a good fit without borrowing a dime. We were very very very lucky to be in that position. There are multitudes of loving parents who simply cannot do that and are in no position to put themselves hundreds of thousands of dollars in debt for what, in many circumstances, is a product not significantly superior than a more affordable option. Their kids still have access to an education which can provide them with JUST AS GREAT A FUTURE as a more expensive option. There are many routes to success-MANY-which are not dependent on admission to a 240K college.

Just as there is no correlation between how much you spend on “stuff” and happiness, there is no correlation between how much one spends on college and the ultimate happiness and “success” that degree provides.

I am amazed at the attitude that one’s future success and happiness is dependent on the price or prestige of where 4 years of one’s life is spent, that price tag or selectivity is the determining factor of the quality of the education provided.

sevmom · November 1, 2013, 12:42pm

And it was enough of a stretch for us personally to be full pay for 2 kids for 8 straight years at our state schools. Even sending kids to state schools these days is a stretch for lots of family.

kluge · November 1, 2013, 12:50pm

Sevmom, my kids went to state schools too - like I said, all good universities are expensive, and ours ran about $100K per kid for four years at state schools - but I disagree about guilt. If the son of father who earns $300,000 per year graduates fro a state school with substantial student debt, to use one example I’m familiar with, I think that father should feel guilty. If a kid who could get into a top tier university but has to go to a community college while her Mom drives around in a $100,000 car, to cite another, I think that parent should feel guilty, too. A desire to avoid feeling “guilty” after all, is what keeps people from doing bad things, and I’m all for encouraging those feelings of guilt as a way to encourage those parents not to make those decisions. Societal disapproval is entirely appropriate in those circumstances, IMHO.

Nrdsb4, I disagree that there is a complete disconnect between the amount a parent spends on their children’s college education and the success and happiness of that child in the future. Obviously, individual success and happiness varies dramatically from many factors, but attendance at a high quality University does have a significant correlation with higher financial success and happiness in life in general. (I doubt that many folks here would be visiting this site if that were not true.) It is possible to achieve as much success and happiness in life after attending lesser-quality schools, but it’s not probable. The probability is that a son or daughter who attends a top tier University will be enabled to achieve more than one who doesn’t. They can but out of 1,000 kids, most will not.

Nrdsb4 · November 1, 2013, 1:01pm

^^^^kluge, the price tag of an individual school is not directly proportional to the quality of the education delivered or the potential for success in life it imparts to its graduates. Nor does a magazine ranking actually determine whether or not one school will provide a better education than another for a given individual.

I highly doubt anyone on this site who has defended their decision not to go into heavy debt for college is guilty of anything remotely similar to that example. Certainly not to have deserved your comment that most people posting here are “spoiled,” “entitled,” and choosing their own “pampering” over the happiness and future success of their children.

sevmom · November 1, 2013, 1:01pm

My kids came out of school with some debt (less than $20,000) and I feel no guilt at all about it. Older kid had it paid off within a year. Younger kid just graduated but I don’t think he’ll have a problem either. They both worked every summer during school, got great signing bonuses and have good jobs. They paid nothing upfront for their education (we paid all the tuition, room and board, transportation costs,etc.) so I had no problem expecting them to contribute something for their education. And I do know there are people on this site that probably don’t believe kids should have to take out loans but it worked for our family. We did not take out any loans ourselves because we have our own retirement to worry about and are not making $300,000!

csdad · November 1, 2013, 1:05pm

…I know that with the people I was referring to this isn’t the case…they are selfish people who put their enjoyment as their #1 priority.

takeitallin · November 1, 2013, 1:38pm

College help has checked in a few times with very general observations of the responses. I feel like the OP was just trying to ruffle some feathers!

Nrdsb4 · November 1, 2013, 1:59pm

End of life care is very very expensive. As a nurse, I have absolutely shuddered at what I have seen at various nursing homes. Even the scariest, crappiest, most appalling place I have seen was still EXPENSIVE, especially if we are talking in terms of years. These places are critically understaffed and some of the conditions I have observed are just absolutely appalling. It’s no wonder many of us spend so much time and energy preparing for retirement and worrying about how far that fund will take us. This is not a trivial concern and reflects no selfishness on the part of the parents who take this into consideration when planning for college and estate planning.

One of our parents did not plan well for his retirement. We will be responsible for 100% of his care minus some social security. We have a lot of beloved parents between us (divorced and remarrieds on both sides), so it’s fortunate that most of them have planned well for their golden years. I can’t imagine what it would be like to have to pay back hundreds of thousands of dollars in loans on a modest salary, plan for one’s own retirement, and potentially be responsible for a parent’s elder care. To have a child demanding his folks finance a very expensive education in order to demonstrate “love” under those circumstances would be a very stressful situation indeed.

takeitallin · November 1, 2013, 2:06pm

^^^^ Very good point! Many of us are worried about the same thing.

Ruthie58 · November 1, 2013, 2:07pm

Most of my own sentiments have been eloquently expressed here by others, but I’d like to bring up this quote from the OP, post # 143:
“We are not talking about “spoiling” children here. We are talking about leaving the next generation better off than the parents generation”.
I know you didn’t make up this concept about leaving the next generation better off, but for most people lucky enough to be in the middle class (let alone well-off), it’s nonsense. Why does the next generation have to be better off? How long can this state of continuous improvement go on? If my kids do something constructive with their lives and make enough money to avoid pervasive financial insecurity, that’s more than good enough.
Of course the aspiration to have the next generation do better makes sense if the parents are economically insecure and struggling.

lookingforward · November 1, 2013, 2:28pm

Kluge, OP wasn’t talking about selfish boomer parents driving 100k cars. He cited that, because an unattributed “average” family contribution after aid is 12k, it should be easy for loving families to borrow the gap. After all, he assumes a 3% 30 year loan at roughly $340/month.

This didn’t start about the demon parents who earn 300k and forget the kid. It said, don’t you love your kids enough to, in effect, sap the oxygen from the room, for 30 years? It didn’t talk about a modest loan, after revamping the budget, tightening belts, and learning what the loan terms and costs really are. It made a one-one link between love and debt.

To get a 12k FC, at most we are talking roughly a 60k income. Just as Marie Antoinette genuinely didn’t understand how the peasants could be starving- if there was no bread, why didn’t they choose cake?- some here are assuming that, at that 60k, if you want to do right by your kid, you set money aside that does not exist. Or encumber yourself going forward, paying back a loan with money that does not exist. And, assuming that family could get a loan 1st year and then, as the debt mounted, continue to qualify. Or go for a private loan, when there may be no collateral, not even enough income to successively borrow, year by year, to get to that 80k.

We got great aid for a great college for both of ours. We took PP loans (10 year repay) but knew we could pay them back. (And we have.) We knew DH had job security, we had a roof over our family’s heads. We had/have a happy family- we already had evidence of how we prioritized their important needs- and the payback from that.

Just because we could do it, does not mean we love our kids more than the folks who can’t.

And ps: that same immigrant group you note that makes so much of sacrificing for their kids, if you mean the group I think you do, also has (among those I know) a defined tradition that the kids care for their elderly parents, if not living together then with support and care. And, a rep (plenty of kids complain on CC) for driving their kids to success, as the parents define it. That is our example?

ucbalumnus · November 1, 2013, 2:40pm

The problem is, the student has no control over the parents’ spending habits. So while the father who earned $300,000 per year should be able to comfortably save up enough to send the kid to any college with no need for any debt whatsoever (either student loan or parent loan), the kid in the position of having such a high income parent with no money available to contribute to college costs is not in a very good position – and trying to guilt-trip the parent into contributing or taking on debt is unlikely to have a good result.

The problem is that the parents who overspent their income are not likely going to suddenly become frugal when their high school senior tries to guilt-trip them into taking on large amounts of debt for his/her college costs. Societal disapproval against overspending one’s income may work, but it has to start early enough to allow saving up; by the time one has a high school senior and the question of huge debt comes up, it is already too late (and the worst place for such societal disapproval to come from is the kid himself/herself). Indeed, spending habits may have been formed even from childhood and may not be easy to change.

Why are parents so reluctant to take out loans?

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