student loan as "skin in the game"

[Sunshine State Sue]

A relative says that his dds have student loans so that they will have "skin in the game".

 

By this, I think he means they will take their education more seriously than if they did not have student loans.

 

If this is a practice in your family, do you think it has benefited your student?  In what way? 

 

Thanks!

[FrogMom5]

My aunt did this to my cousin but, only after he flunked out of the university due to partying.  A couple of yrs. later, when he decided to go back to college, she refused to pay for it.  She felt he would accomplish more if he wanted it bad enough to spend his own money on it.  She was right.

 

In that situation, I agree that the student should take on some or all of the cost of attending school.  I would not start off w/that attitude, though.  Each person is different.  Some kids feel a heavy burden knowing they will graduate w/debt, which can negatively affect their education.  Others will study and do well no matter what.  It really depends on the student's personality and attitude.

 

In the end, the attitude of the parent you describe bothers me the most.  Maybe they feel this way b/c they know their children and know they might take college for granted.  In that case, they are correct to make the kids share some of the financial burden.  Otherwise, no, I would not convey that kind of thinking to my children.  It shows a mistrust of the student, in my opinion.

 

Good topic.  Thanks for bringing it up.

Denise

[Crimson Wife]

My family paid for 3 years of college for my brothers and me for this reason. I used AP credits to shorten the time required to graduate to 3 1/3 years and scholarships + PT/summer work to cover the one term that I had to pay for. My brothers took the full 4 years and graduated with a small amount of debt.

 

I know in my own case, knowing that the 4th year was on my own personal dime motivated me to earn those AP credits and stay on track to graduate early. OTOH, I did pass up some opportunities like spending a term abroad because I needed to make sure I got in all the required courses for my major in time to graduate in 3 1/3 years. My youngest brother did decide to spend a semester in Japan and that was one reason he needed the full 4 years to complete his degree. To him it was worth taking on some debt in order to have that experience. That's a judgment call that we each made for ourselves and I don't think either of us regrets what we chose.

 

What I've seen cause big problems is overly generous parents basically giving a "blank check" to their children in paying for as many years of college as it takes to graduate with no strings attached.

[bettyandbob]

I'd only do this if I saw my dc "blowing it", like the pp describing a dc who previously failed out. 

 

It was always my plan to fund my dc's educations to the extent my finances allow. If my finances allow for full funding the the dc is doing well, I would not force them to put a mortgage on their post graduate pursuits. Having a loan drastically alters a persons decision making towards career choices to follow. Sometimes the risky opportunities or at least the unusual choices are really the best choices, but a person who has the responsibility of debt will not likely have a chance to follow those choices. While I expect dc to be on their own when finished their BS/BA, I want them to have the freedom to pursue what they want at that point. Debt is not a good way to start life. 

[Scarlett]

A relative says that his dds have student loans so that they will have "skin in the game".

 

By this, I think he means they will take their education more seriously than if they did not have student loans.

 

If this is a practice in your family, do you think it has benefited your student? In what way?

 

Thanks!

How could hurt the student? And it will for sure help the parent.

[8filltheheart]

My parents didn't pay for my college education, but not for that reason.

 

We have paid for our older kids' college expenses (though they have had scholarships/etc and we have only paid a portion to begin with) and not one of them has not taken their school work seriously.   They know it is a very real (as in truth/reality) hardship on our family to pay for their education and I can't imagine any of them taking it for granted.   But, that is how we function as a family.   They know that every expenditure is a give and take from the whole.   If they ever did take advantage of it and were partying/flunking, then we would stop funding it immediately.

[Sunshine State Sue]

How could hurt the student?

Not all student's graduate with lucrative employment allowing them to easily repay student loans.

 

A student who graduates without debt will have an easier time saving for a home down payment.  Not that a home is any great investment these days.  I don't wanna get started on that one...

 

But, maybe I am misunderstanding your question?

[Crimson Wife]

They know it is a very real (as in truth/reality) hardship on our family to pay for their education and I can't imagine any of them taking it for granted.

This is where the family's personal financial situation comes in to play. My folks were certainly not rich but given the cost of college at the time, they could've picked up 100% of the tab for my brothers and me without too much of a hardship. They chose not to because they wanted to add incentive for us to graduate quickly.

[8filltheheart]

nm

[regentrude]

I have heard from families who let the student pay the tuition and refund him at the end of the semester if the results are satisfactory.

Seems to me a great way to keep a student focused and "skin in the game", without added stress (of course, always with the caveat that family finances permit this).

 

We are planning to pay for our kids' education, as I do not expect them to slack off and party.

[OneStepAtATime]

I knew that the college I chose was difficult for my parents to afford so we discussed options together.  I did a work study program and a limited student loan and they agreed to cover the rest.  I appreciated their honesty about cost while also not automatically slamming the door in my face of the possibility of going to the school I really, really wanted to attend.  They helped guide me through various options and we chose the one that best fit all our needs.  I was also allowed to live at home right after graduation so I could make a significant dent in my student loan payments before moving into my own apartment.  I helped maintain the house, etc., and used a lot of my income to pay down that loan.  I was definitely more invested in my education because I wasn't given unlimited funds for college.

 

Although this is not a college scenario, this next story is sort of related to the mentality you speak of:  I have a friend who's parents agreed to match whatever she put in for a car while she was in high school.  If she put in $1, they would put in $1, etc.  She worked hard over the course of a year and half, saving as much money as she could so that when her parents put in their half she could get a car that was in good shape and would hopefully last her all the way through high school and college and at least a little of her young adult life if maintained properly.  She told me that because she paid for half, she made certain to follow the maintenance schedule for her car, was careful when driving it so as not to cause damage (which also made her a safer driver) and managed to keep her used car running well for over 10 years.  She attributes that to having to put so much of herself into the purchase of it.

[Crimson Wife]

I honestly don't see how it adds incentive to graduate quickly.   I was the dorm -health campus coordinator for our very large state university (basically, I was responsible for setting up health talks focusing on drinking/drug/date rape awareness in the dorms around campus, got sponsors for a drinking awareness concert that was given on campus, plus worked Y-kids (after-school care in afternoons and bused in kids from the projects at night at the YMCA) on top of taking classes full-time.     All it meant for me was that I was exhausted all the time and hated school with a passion b/c I didn't have a minute to breathe.   It is also one of the reasons dh and I got married during school b/c it meant we were both independent and actually qualified for aid which we didn't before even though we were both putting ourselves 100% through school.   (my parents definitely could have afforded to pay for my education....not to mention that I was the youngest and all my siblings were long gone and independent by the time I graduated from high school.)

Picking up 75% of the costs rather than 100% is a different situation than picking up 0% instead of 100%. I didn't feel resentment towards my parents but rather gratitude that they did pick up the bulk of the tab. I was an adult and they were under no obligation to help me fund any of it. They chose to help me with 3 years and I very much appreciate them doing so.

[Sunshine State Sue]

Well I had lots of loans.  My parents had NO skin in the game "so to speak" because they didn't take any loans and didn't have any money to contribute.  Did it make me take things more seriously?  Honestly?  No.  I was a pretty serious student always, but I can't say that I even thought much about it because it was years before I saw a bill.  KWIM?  A real skin in the game is taking money from one's weekly paycheck and paying for school.  Not saying one should do this, but really that would be a REAL skin in the game.  You don't feel it with loans that you don't get a bill for until years later. 

 

I would absolutely do that with a student who flunked out and still wanted to go to school though.  He would be on his own at that point.

These are exactly my thoughts.

 

Taking out a student loan has no immediate consequences, so I don't see how it provides any "skin in the game".  During school,the debt is an abstract idea.  During repayment, it's a reality.

 

Earning the money to pay upcoming tuition, etc. would be REAL "skin in the game".

[SKL]

I think it is helpful.  I financed my entire education with student loans (and a little money from low-level jobs), and I do feel I took it more seriously for that reason.  Not that I was ever a screw-up.  But considering that I was 16 when I started college, it could have been a disaster if I didn't have some grounding in reality.

 

As far as having to pay it back, I think that's also a good experience - having bills helps young people to focus on financial management and get a better feel of wants vs. needs.  And also, to be more serious about holding a job even though they might sometimes want to flip off the boss and leave.  ;)  I had some rough years in my 20s and 30s, but it paved the way to a low-stress adulthood, so I'm kinda glad for it.

 

I really don't know how I'll handle my kids' education.  I certainly don't want them to be slackers.  I believe most people can work and go to school successfully, if they care to.  I sure don't want to pay college tuition for someone who may or may not throw it away.

[Sunshine State Sue]

Although this is not a college scenario, this next story is sort of related to the mentality you speak of:  I have a friend who's parents agreed to match whatever she put in for a car while she was in high school.  If she put in $1, they would put in $1, etc.  She worked hard over the course of a year and half, saving as much money as she could so that when her parents put in their half she could get a car that was in good shape and would hopefully last her all the way through high school and college and at least a little of her young adult life if maintained properly.  She told me that because she paid for half, she made certain to follow the maintenance schedule for her car, was careful when driving it so as not to cause damage (which also made her a safer driver) and managed to keep her used car running well for over 10 years.  She attributes that to having to put so much of herself into the purchase of it.

This is similar to dh's idea.  Grandpa put X amount aside at birth for you.  It has increased to Y.  We will match Y.  COA - 2Y is your share.  But, we will also match whatever you earn towards the remainder.

 

Of course, we expect the 2.5 GPA to be maintained for the scholarship.  GPA drops below that and it's a new game.

 

[Jane in NC]

There are so many variables.  Many schools now only give credits for a maximum of three AP courses and may not recognize dual enrollment. Some state unis are so strapped for cash that courses are limited.  Students may need an extra semester to graduate through no fault of their own.  Some students enter fields that require internships for which they might not get paid--or are paid a paltry sum that barely covers books for the year. 

 

What troubles me are people who think that there is a single path to success in college, that what worked for their oldest at Rah Rah U will work for their youngest--or the kid down the street.

 

All kids need "skin in the game" academically--but through loans?  I don't see it.

 

 

[Annie G]

Dd is taking out small loans for her last two years of college. She's working to save money for her exchange program in Japan next year so she already has some 'skin in the game'...but honestly, we cannot afford to pay all of her college costs and needed her to pitch in. In her case, it's working out well. She's already cutting expenses and doing what she can and hoping to not need the loans for all of next year.  I'm not opposed to her coming out of school with a smallish amount of debt (we're talking $10,000 or so).  We still have her brother's schooling to help pay for and we receive no federal money- the kids have to rely on scholarships and school grants to pay as much of their tuition as possible. And they're doing a good job with that. But I didn't work for the 20 years we homeschooled and financial decisions have been difficult. 

 

Each family knows their kid and knows what would work best. We've seen dd work hard to get our matching money when she needed to replace her laptop- and it clicked with us that having her pay for some of her education was a motivator for her. Doesn't mean it's the only way or that it works for every kid. But it works for our family. 

[Barbara H]

I agree it is not one size fits all. Some kids naturally such hard workers and have so much "skin in the game" they need to be encouraged to calm down, take a break, and realize that if they get a B in college the universe doesn't end.

 

For students who need to get skin in the game here's one exercise I suggest... Before they start college sit down with a calculator and figure out how much every class meeting costs the student (including tuition, room and board because they wouldn't be living there if it wasn't for classes). That average cost per meeting class is absolutely shocking to a lot of students. If they bought an $80 ticket (that they might be paying $120 for since they bought it on credit) would they throw away that ticket and decide to sleep in instead?

[regentrude]

For students who need to get skin in the game here's one exercise I suggest... Before they start college sit down with a calculator and figure out how much every class meeting costs the student (including tuition, room and board because they wouldn't be living there if it wasn't for classes). That average cost per meeting class is absolutely shocking to a lot of students. If they bought an $80 ticket (that they might be paying $120 for since they bought it on credit) would they throw away that ticket and decide to sleep in instead?

 

I like that!

I've never worked out the cost per class period, but I am constantly amazed that students will choose to fail my 4 credit hour course which costs them well over $1,000 in tuition alone (and I say choose because every.single.student who has failed this class had multiple absences and missed assignments which directly contributed to his failing).

If they had any other asset that is worth $1,000, would they not treat it with care?

 

[kiana]

FWIW, I took out loans the first time I went to college and still blew it off and flunked out. The money just didn't seem *real*.

 

What made me have skin in the game was working a dead-end job and realizing how incredibly dumb I'd been to skip my classes. I went back and went to every single one and did every single homework assignment.

 

I am absolutely not saying every child will be this way, but it did not work for me.

[8filltheheart]

FWIW, I took out loans the first time I went to college and still blew it off and flunked out. The money just didn't seem *real*.

 

What made me have skin in the game was working a dead-end job and realizing how incredibly dumb I'd been to skip my classes. I went back and went to every single one and did every single homework assignment.

 

I am absolutely not saying every child will be this way, but it did not work for me.

 

My best friend and college roommate was the same way.   She went out partying all the time and was furious with me when I wouldn't.   We had been best friends from 2nd grade and our response to college life was polar opposite.   So, while I was studying and working and graduated in 3 yrs, she still hadn't achieved jr status.   It took her over 6 yrs to finally graduate.   She embraced college/partying/loans as a lifestyle.  I viewed college as a means to an end and wanted to get to the end as fast as possible b/c I didn't enjoy college life.   She didn't "feel" the debt and was having the time of her life.   It wasn't real b/c she didn't have to pay for any of it as long as she was a full-time student.  

[creekland]

My kids have basic student loans, so do have some skin in the game.  The reason they have those loans is due to our personal economy coupled with the desire to see them go to the best school for them (rather than any free ride school they may have been able to go to - all three have had that opportunity, but those schools just weren't "the best" for their major/situation, etc). 

 

When totaled, the basic loans are near the range of a new car loan - hardly stifling to start life with - so we're not concerned.  That said, they know if our economy changes (it has improved as the economy has improved), we'll help pay off their loans as I, personally, feel getting all three through 4 years of college is part of our parental duties.  Hubby feels the same way.

 

When I think about my college experience and peers, those who had a blank check from mom & dad (or grandma, etc) were those who tended NOT to take college seriously.  However, I think it was more of a mindset that came much earlier through more of life than just relating to college.  Those kids knew mom & dad also had connections to get them their first jobs, etc, as long as they graduated - sometime - with some sort of degree.  Those who knew they NEEDED their degree often worked harder to actually get it.  These are generalizations as I can think of exceptions to both situations (esp when mom & dad provided the $$, but not the connections and for some first gen students who didn't really have a good understanding of how things worked).

 

In any case, we've (hopefully) raised our guys to value the actual educational experience no matter who fits the bill.  It worked with oldest until he got serious about his wife (see my siggy about the brain).  He's still graduating, but there's been a big difference in pre vs post "serious girlfriend."  Middle is currently hoping to take advantage of U Rochester's Take 5 program - where students can get free tuition their 5th year IF they want to study something totally unrelated to their major - just for fun.  That REALLY matches our educational philosophy, so I'm hoping he gets to do it.  He's hoping to study either Spanish or Latin American studies along with his Brain & Cognitive major + American Sign Language & Chem minors (all while being Pre-med). It doesn't matter at all to him who's paying.  He's enjoying his opportunities and I'm really glad he HAS the opportunities.  Time will tell with youngest as he'll hopefully start next fall.

 

 

[Annie G]

 

If they had any other asset that is worth $1,000, would they not treat it with care?

 

 

You have raised responsible children. But there are MANY out there who do not take care of cars, laptops, smart phones, etc.   It's as if these young adults think this stuff grows on trees!! I'm fortunate my kids haven't been that way but they have a LOT of friends who do not see $1000 as a big investment.  It's pretty frustrating!   Dd knows how much a week at school costs us-I thought about breaking it down more but then the number gets too small- she needs to hear a shockingly large number. 

[Pawz4me]

I really don't see how a loan where the payments don't start until some very distant later date is going to make kids feel like they have "skin in the game."  The only kids I can see it influencing are the already mature and conscientious ones.  But those kids would also work hard and take their studies seriously w/o "skin in the game."

 

Our plan is to fully pay for at least four years of college for our boys.  If they want to continue their education beyond that they may have to pick up the tab themselves (or at least part of the tab).

[Jane in NC]

Another thought:  my son had "skin in the game" before college when he realized that attending a private LAC meant earning a merit scholarship.  Renewal of the scholarship is grade/credit hour dependent.  This seems far more real than some nebulous loan repayment plan of the future.

 

My son also started college with a nice nest egg accumulated in a variety of ways. Birthday and Christmas gift money often went into his money market until a CD was purchased.  This nest egg allowed him to attend a European field school one summer instead of working.  Some may say it is a life of privilege (and ultimately I will agree) but we made it clear from an early, early age that we expected him to contribute to the cost of college--but while in school we want his job to be school.

[dirty ethel rackham]

We wanted our kids to be able to graduate with minimal debt.  I don't want that hanging over their heads when they look into grad schools and beyond.  That said, I do believe that the student needs to have a vested interest in doing well.  For my oldest (and likely my 2nd child now), that will be in the form of scholarships that have GPA requirements.  If they don't keep their grades up, they lose their scholarship and may have to drop out. We simply can't afford to send them to school without scholarships. 

 

If I had a student who would not take a college education seriously, I would make them pay for more of it and they would probably have to do that living at home. 

[Julie in MN]

Interesting topic. 

 

I pretty much agree that delayed debt doesn't necessarily affect kids today, so I wouldn't personally require debt for teaching purposes. 

 

My experience is that my parents had various rules about college costs.  And we kids were just in general raised to know that their money was earned by them and would be spent according to their own rules and plans.

 

My sister and I were perhaps atypical because we wanted to get out of the house ASAP, and only later decided to attend college.  I actually moved out before I graduated high school, and when I came home to save for a summer and go to college, my parents said they would pay my tuition, but would only help with living expenses after I supported myself for a year, did well in college, and generally showed them I was serious.  So year 1 was parents pay tuition only, and years 2-4 were tuition plus a small living stipend (I think it was enough to cover rental of a small room during the school year only, and I paid for food, laundry, etc).  Dorms and food plans and such were not in my family's vocabulary; college was a grown-up thing and not a social experience.

 

My sister, on the other hand, didn't get any help from our parents because she was over their magic age of 25, when they stopped offering support to a new college student.  I guess they figured she was an independent adult by then (not to mention a single mother).  It didn't totally make sense to us, but again we were raised to know that their money was theirs.  And in the end, she got into a short-lived program for getting mothers to work and she became an R.N. with debt for the 5th year she required to make up for goofing off/lack of confidence in high school.

 

With my kids, I don't necessarily have an age limit but they know I have a reasonable price limit.  My oldest went to school out-of-state so it was expensive.  We agreed to pay for that first year but may not have much more to offer after that.  After year 1, he considered stopping school for a while to earn money, but after our appeals to the school, ds's jobs, Army Reserves grants, good grades scholarships, and student loans, he was able to continue straight through.  My youngest may be in a similar position and we are considering moving him out there for a while before he starts college, not sure yet, but everyone definitely has always known that money isn't endless at our house (this was all true even before illness and such made it more obvious).

 

I just share those situations to show that a variety of situations can work and not ruin the kids by it - including situations where the parents could pay but choose to set limits.  I know kids don't always get it yet, but parents taking care of their own finances, retirement, etc., are still doing their children a favor.  And even though my siblings and I might not always agree with my parents' rules, we now notice that our parents' financial rules resulted in more self-supporting adult children than some of the other families we grew up with.

 

Julie

 

[Luckymama]

For years we have told our kids that we would pay the full COA for the state flagship toward any college or university they wished to attend, and they would be responsible for the remainder of the cost through scholarships and/or loans. We have raised pragmatic children who do not want to graduate from college with loans to repay. (And one's an English major!)

 

Their "skin in the game" comes from maintaining their scholarships and graduating debt-free.

 

My contribution to the plural-of-anecdote-is-not-data discussion:

 

My parents paid for all of my college education and that of my two sisters. We all took it seriously.

 

My in-laws paid for my husband's tuition for four years and his room and board for the first year only. He worked hard and graduated from a top LAC in four years. They did the same for his one-year-younger brother. He did not take it seriously, was asked to leave one school, and graduated from a second university on the six-year plan. Because "bil screwed up" my inlaws decided to not pay a single penny toward college for their three daughters. All three married by nineteen. The eldest took 15 years to get a BA through an extension branch of their state university system...because she had hit a pay ceiling where she was happily working (a nonprofit). The two much younger daughters have taken no college classes (despite easy access to community college in their respective states), have married men with no college or trade skills (one bil has just started school as an electrician-so proud of him), and are struggling to support their children. Fil now complains that he has to pay the utilities and food for one family and has the other family living with him and dmil.

[Beth in OH]

The only thing I know for sure about financing my 3 dds' educations, is that everything I thought I knew and believed suddenly became muddy.  I found my own experience to have been of a vastly different time.  I was faced with 3 very different children with different dreams, different challenges, and different opportunities.  Requiring loans in order to have skin in the game was never part of our strategy.

[swimmermom3]

How could hurt the student? And it will for sure help the parent.

 

My sister and BIL encouraged my nieces to go to college and encouraged them to take on significant debt. My oldest niece has not enjoyed her college experience and worries incessantly about the debt. She has worked hard and gotten good grades, but doesn't look forward to graduating either, because it will be a long uphill slog to pay off that debt. She is very fluent with her Spanish and has dreamed of joining the Peace Corps in the first years after college, but the debt makes that dream unattainable.

[Scarlett]

My sister and BIL encouraged my nieces to go to college and encouraged them to take on significant debt. My oldest niece has not enjoyed her college experience and worries incessantly about the debt. She has worked hard and gotten good grades, but doesn't look forward to graduating either, because it will be a long uphill slog to pay off that debt. She is very fluent with her Spanish and has dreamed of joining the Peace Corps in the first years after college, but the debt makes that dream unattainable.

I think I am not understanding something on this thread.

 

What I am saying is that if there has to be debt why not have it in the students name vs the parent. That doesn't stop the parent from paying off the debt if they so choose.

 

Also, students don't have to take on debt if they don't want. Certainly not huge amounts.

 

I certainly wouldn't encourage any kid to take on debt just for the sake of having debt.

[Julie in MN]

. She is very fluent with her Spanish and has dreamed of joining the Peace Corps in the first years after college, but the debt makes that dream unattainable.

Don't Peace Corps and Americorps give some kind of student loan assisstance? We have family and friends who made it work. But I suppose each situation is very different.

http://www.peacecorps.gov/volunteer/learn/whyvol/finben/instructions/

[8filltheheart]

I think I am not understanding something on this thread.

 

What I am saying is that if there has to be debt why not have it in the students name vs the parent. That doesn't stop the parent from paying off the debt if they so choose.

 

Also, students don't have to take on debt if they don't want. Certainly not huge amounts.

 

I certainly wouldn't encourage any kid to take on debt just for the sake of having debt.

 

Federal law limits the amt of student loans to between something like $5500-$6500/yr.   That is why it is so easy for the stats to say that students are graduating with around $25000 in college loans---it is the max that students are allowed to take out.   Parents are expected to sign on the line for any loans beyond that amt.  

[Scarlett]

Federal law limits the amt of student loans to between something like $5500-$6500/yr. That is why it is so easy for the stats to say that students are graduating with around $25000 in college loans---it is the max that students are allowed to take out. Parents are expected to sign on the line for any loans beyond that amt.

Well who are the people who have 50-100k in student loans?

 

Either way, regardless of how much debt is incurred, I see nothing wrong with making the kid legally responsible for it.....if I have the means and desire I can pay the kids loans off.

[G5052]

I haven't seen that at all at the community college where I work.

 

Just one professor's opinion, but the students who have loans tend to do *worse* than those who don't.  I can see on my roll sheet who does and who does not because the reporting is different.  The rate of failure is much higher among those with loans.  Why?  Are they under a lot of financial pressure in general?  Working too many hours?  Unrealistic with their goals?

 

This is one thing that I don't like about community colleges.  It is an open door (i.e. very few turned down), but a percentage shouldn't be there too.  But they sign them up and load them up with loans anyway.  

 

Mine will get tuition help from us, but will work for their books/supplies, gas money, and incidentals.  I'm hoping that will help them stay committed, although dropping out is a very complex thing.  Student drop out for many reasons of course.

[G5052]

Well who are the people who have 50-100k in student loans?

 

Either way, regardless of how much debt is incurred, I see nothing wrong with making the kid legally responsible for it.....if I have the means and desire I can pay the kids loans off.

 

There are private loan companies that will loan that much.  

[Jane in NC]

Well who are the people who have 50-100k in student loans?

 

 

 

There are private loan companies that will loan that much.  

Or those with high debt have attended graduate or professional schools.  In some cases, the loans from undergrad are accruing interest from the year borrowed so that the actual amount borrowed vs. amount owed can be significant.

[Scarlett]

Don't Peace Corps and Americorps give some kind of student loan assisstance? We have family and friends who made it work. But I suppose each situation is very different.

http://www.peacecorps.gov/volunteer/learn/whyvol/finben/instructions/

I was thinking this might be like the loan forgiveness program my mom took advantage of. She taught in a poverty school district so her loans were gradually forgiven over a 7 year period.

[swimmermom3]

I think I am not understanding something on this thread.

 

What I am saying is that if there has to be debt why not have it in the students name vs the parent. That doesn't stop the parent from paying off the debt if they so choose.

 

Also, students don't have to take on debt if they don't want. Certainly not huge amounts.

 

I certainly wouldn't encourage any kid to take on debt just for the sake of having debt.

 

I read your original post to mean "How could it hurt the students to have loans?" For some students, it's fine. For others, it may actually be detrimental to their academic success or to their own emotional well-being. My niece's parents are comfortable with heavy debt-loads and my niece grew up under that strain. Young people count on the adults in their life to give them good advice. Sometimes the adults in their lives have their own agendas. At 18, it seems like everyone is going away to college and taking on debt to do so. At 21, living at home a year or two to attend CC or the state school in town may look like a much better bargain.

 

Don't Peace Corps and Americorps give some kind of student loan assisstance? We have family and friends who made it work. But I suppose each situation is very different.

http://www.peacecorps.gov/volunteer/learn/whyvol/finben/instructions/

 

Julie, thank you for the link. I will be sure pass it on to my niece as I would love to see her have that opportunity.

[Jane in NC]

I was thinking this might be like the loan forgiveness program my mom took advantage of. She taught in a poverty school district so her loans were gradually forgiven over a 7 year period.

Debt forgiveness programs usually apply to Stafford or Perkins loans (those from the feds).  Private loans would not qualify. 

 

In my own family there is a medical doctor who had some loans forgiven for working on an Indian reservation.  But it was just a slice of her debt, not all. 

 

Some of the debt forgiveness programs use income to determine who qualifies; others offer debt forgiveness to fill positions in geographically challenging areas.  The average college grad will not qualify for such a program though.  I would not start college with the assumption that my loans would be forgiven since the programs themselves are subject to the whims of politicians.

[Scarlett]

I read your original post to mean "How could it hurt the students to have loans?" For some students, it's fine. For others, it may actually be detrimental to their academic success or to their own emotional well-being. My niece's parents are comfortable with heavy debt-loads and my niece grew up under that strain. Young people count on the adults in their life to give them good advice. Sometimes the adults in their lives have their own agendas. At 18, it seems like everyone is going away to college and taking on debt to do so. At 21, living at home a year or two to attend CC or the state school in town may look like a much better bargain.

 

 

Julie, thank you for the link. I will be sure pass it on to my niece as I would love to see her have that opportunity.

Oh I see......no I didn't mean how could it hurt students to have debt....I'm very much against debt. :). I just meant if there has to be debt why not make student put it in their name, all precautions about too much debt still apply.

[Jane in NC]

Oh I see......no I didn't mean how could it hurt students to have debt....I'm very much against debt. :). I just meant if there has to be debt why not make student put it in their name, all precautions about too much debt still apply.

 

Every student who fills out the FAFSA (or has parents doing this on his behalf) qualifies for Stafford loans.  The amount of the Stafford is graduated and capped (first year $5500; second year $6500; third and fourth years $7500).  These loans are in the student's name.

 

Tuition, fees and books at most colleges will exceed $5500 during that first year.  Many people do not live within driving distance of a university offering the academic program that a student wants (Commute three hours one way to an engineering university?  I think not!) so room and board must also be considered.

 

Whether parents wish to be held responsible for the cost of their child's education is another issue entirely.  Parent's income is considered when determining financial aid.  Most students will not be able to earn $10K plus annually (or whatever the difference between the cost of their uni and the Stafford).  The loan that is commonly used by those who have not saved is the Parents PLUS loan--a loan in the parent's name.  PLUS loans are given in the student's name for graduate or professional school--not undergraduate education unless the student is older. 

 

I am not the expert on student loans so perhaps someone else can chime in to explain how additional loans would be given in the student's name for an undergraduate education. Anyone with knowledge or experience?

 

[Beth in OH]

Don't Peace Corps and Americorps give some kind of student loan assisstance? We have family and friends who made it work. But I suppose each situation is very different.

http://www.peacecorps.gov/volunteer/learn/whyvol/finben/instructions/

I just did a year as an AmeriCorps VISTA.  The loan assistance is in two primary forms--1.  forbearance of repayment until the service term is finished, and 2.  A repayment amount that is around $5500 for each year of service (it gets adjusted a bit every so often).  The loan assistance helps increase the meager stipend that the AmeriCorps receives during the service year (for a VISTA, it's around $5.00 per hour for 40 hours per week of work, for a 12 month period).  Of course, there are many great reasons that people do these programs.  I loved being a 

VISTA, and it opened the right doors for me.  

 

I want to raise one caveat about the loan forbearance and repayment--it only applies to certain federally backed loans.  Make sure all of your loans qualify.  Otherwise it's almost impossible to pay on the non-qualifying loans while you're in your service year.  Mama's gotta eat.  

[Crimson Wife]

Federal law limits the amt of student loans to between something like $5500-$6500/yr.   That is why it is so easy for the stats to say that students are graduating with around $25000 in college loans---it is the max that students are allowed to take out.   Parents are expected to sign on the line for any loans beyond that amt.

There are typically two components to a student loan package- the Federally subsidized ones and then the private ones. Private banks might or might not require a co-signer for their loans. Some universities have a good track record of their graduates paying back what they owe so their students have an easier time getting private loans.

[8filltheheart]

There are typically two components to a student loan package- the Federally subsidized ones and then the private ones. Private banks might or might not require a co-signer for their loans. Some universities have a good track record of their graduates paying back what they owe so their students have an easier time getting private loans.

The limits apply to both subsidized and unsubsidized Stafford loans. I'm not sure how easy it is for students to get loans w/o a co signer. My kids haven't been able to get even a debit card for their checking accts w/o a cosigner. I can't imagine a whole lot of options for $25-30000 non-collateral loans for 4 yrs let alone 1 for someone unemployed.

[JanetC]

Interesting recent article about lifetime consequences of student loan debt.  This study looks at a household of two adults, each partner with an average amount of student loan debt and an average college graduate salary, versus one where the two adults graduated without loans.

 

http://www.demos.org/what-cost-how-student-debt-reduces-lifetime-wealth

[Caroline]

Thanks for sharing that. I always tell my parents the best gift they ever gave me was my college education free and clear. It wasn't easy for them, but it was important. And it is important to me that we do the same for our kids.

 

 

Interesting recent article about lifetime consequences of student loan debt. This study looks at a household of two adults, each partner with an average amount of student loan debt and an average college graduate salary, versus one where the two adults graduated without loans.

 

http://www.demos.org/what-cost-how-student-debt-reduces-lifetime-wealth

[Sunshine State Sue]

Thank you, JanetC!  This is exactly what I suspected.  It's nice to have data to back up my gut feeling.

[Sunshine State Sue]

Interesting article, especially because this is the kind of thing I studied and worked on in grad school.

Interesting recent article about lifetime consequences of student loan debt.  This study looks at a household of two adults, each partner with an average amount of student loan debt and an average college graduate salary, versus one where the two adults graduated without loans.

 

http://www.demos.org/what-cost-how-student-debt-reduces-lifetime-wealth

 

If anyone else has read this, do you understand why they did this?
 

though the indebted household begins their careers earning more, their income falls behind that of the debt-free household by its early 40s, and earns significantly less during the peak earning years of the mid-50s.

 

I can understand that the indebted household may have debt because of a more expensive school or a 5 year engineering degree maybe.  I don't quite understand why their income would fall behind that of the debt-free household by the early 40s.  Could it be that the graduate's expensive school doesn't matter so much into the 40s?

[Teachin'Mine]

I wonder if some of the graduates with no loans come from wealthy families and don't have to rely on their own earning power in the early years as they get support from their families.  They would then be free to find work that draws them, whether it be charities or the like, without concern for the salary.  Later on, through their connections they might be in higher paying positions.  Just one thought.   Whereas the graduates with loans need to find good paying jobs as they need to be repaying their loans.   Without those connections and with the need to remain employed rather than take on any financial risk such as with start up companies or whatever, their salaries do not match the other groups.  Another thought is that maybe more of these couples may have placed more priority on one of them staying home with their children as this is how they grew up.  Whereas for the other group, it maybe be too hard to turn down the really good higher paying jobs, maybe they grew up with a nanny so that seems the more reasonable answer, so they choose not to interrupt their employment.   No idea if either of this could be the reason.  Of course I'm just speculating about a small percentage of those who graduate without loans.  Obviously some more average families are able to help their students out so they don't have to take on loans, and neither of these possible causes would apply.  Another thought is that maybe some of the no-loan graduates may take a year or more off after graduation for some extended travel, so this would also lower that groups initial average salaries.

 

BTW I think that parents providing their children with a loan free education is a wonderful gift.