Community: Student Loans

Last week, I confessed to a big pile of college student loan debt. Did you have debt? How long did it take to pay off? Will your kids have debt?

16 thoughts on “Community: Student Loans

  1. I didn’t have any college debt–I had an Army ROTC scholarship that covered tuition and fees, and my parents paid room and board. The Army also sent me to grad school (in English, to teach at West Point)–I incurred a service obligation of several years for each of these, but it worked out. I got the scholarship in part to reduce the burden on my parents and in part because in 1969, when I started, I could have been drafted. I was hoping that during the four years of college, the war would end, which it more or less did.

    My wife had no college or dental school debt, either, in part due to parents but mostly because the state subsidized higher education far more than it does now. We are the same age and went through college in the early 1970s–my wife graduated from dental school in 1977, the only woman in her class. That’s the real issue with student debt, I think–it replaced state higher ed appropriations because legislators decided education was a private rather than a public good. In a way, debt relief is simply a way of resetting the pendulum back to considering education something our entire society benefits from.

    Our daughter graduated from college in 2017 debt free, mainly due to us and to a small 529 set up by her grandparents. She went to a community college and then a state college that accepted all her credits. Sending her to a community college saved us thousands, and she was well-prepared for the rest of her undergraduate work in geology. She was not one of the 50% who start at a four year school and never complete a degree, luckily.

    Not everybody can join the service to go to college, though many do–the GI Bill is just one of the ways to do that–but almost everyone can go to a community college first and then transfer. Some states make that easy, some hard; private schools don’t have to accept any transfer credits (though many do, especially now that demographics have reduced the number of traditional-aged college students), but 75% of college students attend a public college.

    I do think the financial aid system, if we can call it that, needs much overhauling. I also think that taking out large loans to attend a prestige college is not a good idea. That’s more about status, it seems to me, unless there is some very specific program offered that can’t be found in a public college.

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  2. I think I had less than 10K total loans, through the National Direct Student Loan program (for undergraduate, and I believe this is now known as Pell Grants) and a $2500 Guaranteed Student Loan (GSL, now I think Stafford loans). These loans were deferred (and interest deferred) until I finished graduate school. I didn’t consider the loan burdensome to pay off.

    Elder attends a school that purports to meet full need without loans, and younger plans on attending such a school. A quick look suggests the undergraduate institution I attended still includes loans as part of the aid package (as they did when I was a student).

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    1. But, kids won’t have debt because we pay for everything, not because they are getting aid. We’ll pay for grad school, too, though we do advise that if there are programs that might not advance their careers.

      I have a slightly different list of degrees I think worth paying for than you do, though. Say, for example, I think a masters in teaching is worth it for the requirements in teaching (even if it doesn’t result in a salary bonus, I think many jobs are easier to get if you can check that box). Also, I’m pretty much going to pay for a pandemic bonus for the kids if they want to hang out learning even though it isn’t economically worth it. The don’t show signs of wanting to go to film school or learning puppetry, but if they did, I’d pay.

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    2. I received substantial financial aid (at a private university) in addition to the loans and my parents paid the rest. I rejected scholarships at other comparable private colleges that would have made my parents cost lower because I had that kind of privilege (as well as rejecting the state U my parent taught yet, which made my college costs there negligible).

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    3. Is paying for college spoiling my kids? I don’t think so, because of who they are, but they certainly have financial resources I wouldn’t have been able to imagine and it is hard not to have that warp their world view a bit.

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  3. My experience is soooo not comparable. I had an effectively free ride through uni – though I did have to pay tuition for my Masters – which I did part-time while working.

    This has now changed in NZ – where university costs are around 7K per year + living expenses (still fairly cheap compared to the US)

    I do think that having to pay has changed some of the demographics (fewer of the people like my sister who went for 2 years, failed all her papers, but had a wonderful social time); and more focus on vocational degrees (more science and engineering, fewer Latin and music students).

    We do have lots of scholarships for the bright-but-poor, and even more for Maori (indigenous people) – which can reduce your tuition costs substantially (also reducing entry-level qualifications for hard-to-get-into courses – but that’s another story).
    Anecdotally, I hear that it’s the living expenses (especially in ridiculously expensive-to-live Auckland or Wellington) which rack up most of the student debt. Those who can live with family are much less affected.

    Loans are interest-free while studying, and interest-free while you’re in NZ (you have to start paying back a percentage when employed). If you go overseas (apart from a short holiday), interest starts kicking in and compounding.

    Periodically we hear of someone who’s debt has blown out – and has no prospect of paying loans back. Often these are people who’ve studied at totally unsuitable/non-cost-effective subject (aviation was one of the big ones), have failed their courses (still have to pay the bills) or gone overseas (and then been ‘surprised’ when the debt has compounded)

    However, that has to be compared with the statistical fact (in NZ) that a degree increases your life-time earning power (to be fair, so does an apprenticeship – being paid to learn a trade).

    Some degrees have a big bang-for-buck tradeoff (it’s hard to lose money as a doctor, dentist or veterinarian) and others require the degree as price of entry (nursing, library science, social work); but some are surprisingly marginal (some lawyers struggle, and traditional arts degrees (unless you want to teach) are hard to ‘sell’ to employers – though happy-clappy degrees in cultural studies can get you a surprisingly good job with the government)

    In addition, there are lots of business jobs which don’t need (or even want) degree qualifications. Being a salesman or an entrepreneur is not something that uni can teach you. And most IT jobs (at least here in NZ) don’t want uni degrees – though they do rely heavily on certification in a variety of languages/products – which are usually paid for by the business and done in business time.

    There are lots of pathways to economic success which don’t require a degree, and for which you don’t need to accumulate debt.

    I’m on the fence over this one with my son (14) – he’s not strongly academic – but a vocational degree in food science is on the table for him. Cost won’t be a major factor – though I’ll be encouraging him to stay in Auckland, rather than go flatting in another uni-town!

    If he goes down that pathway, he’ll get the debt – because interest free – then we’ll discuss whether it’s worth paying it off in a lump sum at the end (still interest free – so may not be)

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  4. USC was $25k a year when I went in the early 90s. I had good financial aid the first several years and finished up with $6k in loans. The loan payments were about $65 a month. I deferred a bunch (Peace Corps, graduate school, etc.), so the student loan stuck around crazy long. It was also something like an 8% loan. We didn’t kill it off until a few years before we bought our house. I didn’t have any student loans from grad school (free tuition and $10k a year fellowships and TA-ships in low cost of living area), but I have to confess that we did wind up with some consumer debt from those years before my husband got his first “real” job in DC. It didn’t seem important at the time, because we were going to make more later!

    Of course, once we had the first of our kids and were living in DC suburb, it turned out that it wasn’t going to be any easier in a high cost-of-living area. We “cheated” in a couple of ways–got 4 years of free on-campus housing in DC, moved to Texas, and then bought our house in TX after the 2008 housing bust but before the current boom.

    My husband spent his teen and early young adult years in Canada. He lived at home with his parents for undergrad and his first PhD and also got a (more) generous Canadian STEM fellowship for his grad study. He did his second PhD in the US in a low cost-of-living area and with a (slightly less generous) Canadian humanities grad fellowship.

    Thanks, Canadian government!

    What fixed our finances was the combination of moving to Texas, doing Dave Ramsey, and living in a $1,000 a month rental from 2007-2012. Rents have gotten more expensive since then…

    Our oldest has just finished her second year of college at Hometown U, which is where her dad teaches. She is living at home and walking to class. Her first year, our costs for her were about $8k and she had $6500 in scholarships. Her second year, she had $2k in costs and $2k in scholarships. She probably won’t have scholarships for the rest of her college, but our college costs for her will be about $2k a year (textbooks and some lunches). She won’t have any college debt.

    Our second kid is also going to Hometown U., but he wants to live in the dorm. We have a small college savings account that we haven’t touched yet and I believe it will almost cover room and board for two years. His other costs will be about $2k a year. If he wants to live away from home for the rest of college, he is free to work for it and pay for it, as we will have burned up our college savings within two years.

    Our kids have gone to a private PK-12 school where the high school costs about $11k a year now, so we are pretty thrilled when our kids move on to college.

    Our big kids should not have any undergraduate debt. Our oldest won’t go to grad school unless she is funded. Our second kid might do grad school (if funded) or medical school. I’d be happy to help with living expenses for medical school just to keep the debt level under control.

    By the time our third kid graduates high school, we would be able to afford a non-Hometown U. college, but I think she should go to Hometown U.

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    1. The plan is that our big kids will be working this summer.

      This is uncharted territory for us, but I’d like to make sure that our big kids have a car and/or savings by the time they leave the nest.

      I’ve told our oldest that she needs to make enough to provide her cat the lifestyle that kitty has become accustomed to.

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      1. Cars can really make a difference in family comfort in our more car dependent lives these days. We grew up in an inner ring suburb of Cleveland so the bus system was pretty useful and I was able to combine it with borrowing my parents’s cars. But my sister lives further out so she offered to help her daughters buy cars. They had to each come up with $3K which the middle daughter did at the beginning of 11th grade. She was born in November so she could start working during 10th grade at the golf course where her coach gets his team jobs. Not having the constant juggling of vehicles to get to everyone’s job has cut down on stress. She is SUPER picky about her (used) car and no one is allowed to leave any trash or dirty it. My sister gets irritated because she doesn’t necessarily extend the same courtesy to her use of the house.

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      2. Marianne wrote,

        “Not having the constant juggling of vehicles to get to everyone’s job has cut down on stress. She is SUPER picky about her (used) car and no one is allowed to leave any trash or dirty it. My sister gets irritated because she doesn’t necessarily extend the same courtesy to her use of the house.”

        Funny!

        Husband and I both learned to drive in our 30s after we moved to Texas, and it was quite an ordeal in terms of learning to drive and getting our first car, so I feel pretty strongly that we need to make an effort to help our kids get that piece of adulting figured out before they leave home.

        (My mom had cancer my last year at home before college, so a lot of normal stuff just didn’t happen.)

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  5. Elder has had paid internships every year since she started college and worked at a summer camp (the other two remote and research, so not much oversight). This summer she’ll be onsite and we’ll see what that feels like.

    Younger has deliberately claimed his pandemic freedom summer and has had made no plans for the summer. School ends late and college starts early, but, nine unscheduled weeks will be different than anything he’s had since he was about three (or maybe one, since he did attend daycare/preschool).

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    1. bj said, “School ends late and college starts early, but, nine unscheduled weeks will be different than anything he’s had since he was about three (or maybe one, since he did attend daycare/preschool).”

      Yeah, nine weeks is not a lot. It’s going to go by really fast, especially since you guys will have various going-to-college chores to do.

      Our 19-year-old needs to read through a book list this summer and work. The work is mostly for life experience purposes. She’s never had an outside job before.

      Our 17-year-old is taking one semester of college bio in person this summer (he’ll be able to walk to class). He also wants to work and learn to drive, and he should put in some volunteering time at the lab he helped at last summer. It’s a lot, but he really wants to do the work and the driving. Such is the life of a rising high school senior…He’s also never had an outside job before.

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      1. Oh, yeah, and the 17-year-old also needs to start his college application in early August. He’s applying early decision to Hometown U.

        Busy, busy, busy!

        He won’t have as much to do for summer 2023, though…

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  6. My tuition in eastern Canada was $1200/year in 1989-1992 – I thought I had it bad because my friend’s tuition in Montreal was $595. I had a scholarship that covered it up until my last year. My books and dorm/meal plan were covered by my grandfather, who set up trusts for my sibling and I that covered essentially undergrad, and a bit of help from my parents – under $1000. I worked summers and on-campus jobs with a bit of waitressing and some tutoring and came out with a few bucks in savings. I also had a scholarship for a summer in Italy studying the very useful Roman Art and Architecture, so I consider that I came out really ahead.

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  7. This set of comments reminds me so, how the “we are all in the same storm, but we are not all in the same boat” is true.

    I just found an xl spreadsheet on my computer with a budget (expenditures, really) from 1993 with our salary, taxes, and expenses. There’s loan interest for 1993 and not in subsequent years, so, presumably, I paid off my loans in 1993. We never had credit card debt, but that’s because we always had a little bit of savings for essential purchases (say, if the car broke down, or our computer or for a rental deposit). We didn’t rely on my parents for these savings, but, I’m guessing my kiddos will, before they use credit card debt.

    So, we all went to college and graduate school and our kids are going to college, but we are all not in the same boat. And, I’m not in the same boat as the students who went to school after our loan systems changed (including Laura, though, I am of the same age).

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  8. I had no loans as an undergraduate, partly because we didn’t get awarded any aid. I saw my FAFSA from 1984 when I cleaned out my mom’s house after she passed. We were too affluent on paper, due to my dad being 62 and having worked in an era before 401ks shielded your retirement money from being counted. Plus my dad was a frugal miser – he was unbelievably tight with money except when it came to education. So even though we drove cars with squares of aluminum riveted over rust holes he paid for college- tuition, room and board. He told us he didn’t want us taking out loans. College was a big deal to him – he was too poor and too poorly educated to take advantage of the GI Bill after serving in WW2.

    I paid for my MBA with a combination of savings, a 12K loan and 20K in tuition reimbursement from my employer. My employer gave $5000 per calendar year so I stretched my degree to 3 1/2 years. When my mother passed I used what I inherited from her to pay off the loan.

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