The amounts matter as well as the “where/what for”.
IIRC, there was a lower/middle income student recently who wanted to know whether borrowing 40k a year to attend GTech v.attending UTennessee totally debt-free was worth it and pretty much everyone said no. Even if GTECH is objectively better, it’s not such an experience or magnitudes better so that it’s worth that amount of debt for an undergraduate degree. Same thing for I think UDel v.Rutgers. now if it were a bit less - say, 30-40k total in parental loans- things could be different; or if we’re talking sth really different (Williams or Bryn Mawr or MIT v. SUNY Bing or UIowa) that also doesn’t create unsustainable debt, it can be a consideration. But a lower or middle income family that needs to borrow 25-40k a year to make NYU or an OOS flagship happen is a recipe for disaster.
A very good, short novel to read is Very far Away from Anywhere else, by Ursula K LeGuin (whereby we learn that tuition at MIT was $3,000 in 1976, sidenote). Owen’s situation is poignant and would likely be compounded nowadays, though nowadays FA would be different too.
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In reality, parents typically borrow to send their kids to the least expensive schools available to them. I know because I have spoken to many, many parents during my years working in financial aid. MOST parents have not saved enough to pay for school … and based on the many tax returns I have reviewed during verification, it’s not because they squandered money on vacations and snowmobiles, but rather that they needed their money to pay for basic needs. They borrow with the hope that it will give their children a better life than they had. A lot of people on CC are privileged, and many are unaware of their privilege.
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We did everything we could to avoid having the kids take loans. We were fortunate that we could save in 529s for decades, then we saved some more!!, we made sure to have lots of affordable options, we hunted merit schools, we made sure the kids compared expensive schools and cheaper ones.
But in the end, my older two were allergic to loans themselves and that’s what made the choices between S16 with loans at dream school GW vs ~none at UConn, and S18 with loans at RPI/Fordham vs none at Pitt. They had a mindset that paying off loans was going to be painful. And they had merit to get the public costs down. Without our salaries and merit, even those schools are costly and in-state flagships or CC are important - or taking the target schools down a notch.
Now that they have graduated and see people around them struggling with loans - both friends and girlfriends - they really appreciate the decision that they made. Having a $500 monthly loan payment would have meant they would have had to magically get a job paying almost $10,000 a year more pretax or get by on $10k less which is HARD.
For S24, he is going into a narrow field where real loan forgiveness is possible plus we want to try to drag out the spend, so we are opting for max subsidized loans to amortize the cost and give us options 5-10 years from now. Maybe we just pay them off right away or maybe not. But this is a rare situation so not recommended.
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Our family viewed loans as a useful tool. Our kids got very little need based aid but had the maximum amount of unsubsidized federal loans in their package. As part of our commitment to them, we are subsidizing their payments. We also have parental Plus Loans that we took to even out cash flow. The payments for all of this are reasonable. We were also helped by the COVID pause where every payment we made went to principle.
Both kids are teachers and are eligible for teacher loan foregiveness so I suspect we will finish paying off most of this next year.
All this being said, too much debt can be awful, so real care has to be taken before incurring it
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We are pretty frugal and are not high earners, but I think there is a scale of loans - if my kid ends up with 40k of loans, that’s what some people borrow for a car that can be wrecked, repossessed, and will at some point need to be replaced. An education is none of those things. I would not finance a mortgage’s worth of education, but a car is reasonable in our math.
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When it comes to taking out new loans, borrowers should be aware that there’s no guarantee that PSLF and other types of loan forgiveness will continue. Doing away with PSLF entirely would require an act of Congress, but there are proposals out there to do exactly that. The availability of PSLF and other forgiveness programs is written into the promissory notes on existing loans, so I don’t think it can be retroactively eliminated for existing loans but new loans are a different story. Could Trump Repeal PSLF And Other Student Loan Forgiveness Plans?
Since this isn’t the Politics Thread, I”m not expressing a position on whether repealing PSLF would be good or bad but just pointing out that one should be cautious about counting on it in taking out new loans,
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There are other loan options as well, one that my kid got is through our state for future educators - fully subsidized, and for every year she teaches in the state, a year’s worth of loans is forgiven, and that doubles if she is high need or title 1 school (which is basically all of them) so she could get 20k erased in 2 years. And, if she ends up NOT teaching, it reverts to typical subsidized loan with a rate not exceeding 5%, which is a much better deal than private or PLUS. It did require an application like a scholarship - essay, GPA, had to apply by June 1, I think, etc - but it is a great deal for her. That and the fed loans are the only ones being taken for this year.
For future graduating classes or for future years, it’s definitely worth looking at what your state (or in some cases, the state where your student attends, if that’s different than where you live) offer for specific majors or fields.
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I was a financial aid director, and I always cautioned students that there are no guarantees - decisions to take out loans should be independent of any hope for forgiveness. Of course, if it is an option, one should pay attention to details so that they meet qualifications.
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