Friend thinks $100,000 college loan is reasonable - help? (schools, careers, scholarships)
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Depends. If that is for everything, and she's going to a private college, it isn't far from "reasonable." However, many of the elite privates are doling out great finaid (many won't make you pay if you make below 100K nowadays!). If she's just going to a regular public school, then yes, that is excessive.
It will take me about 7-9 years to pay it off, at the rate I am paying it now.
Paying off 100 grand in loans in 7-9 years is pretty good since loans are calculated to be paid off in 20 years. You must be making bank. I know people who are still paying off $15,000-$30,000 loans form 10+ years ago.
To the OP, why are you hanging out with a 17yo? And, to put it bluntly, it is not your life. If she has her heart set on an East Coast school, $100,000 won't be enough for four years if she is going to pay her own way.
I find it funny that so many people are against paying large amounts of money for something that has the potential to help them earn more money but yet have this notion that paying $30,000 for a new car (that will not grow in value, let alone even retain its value) or $300,000 for a house (on top of paying property taxes, municipal utilities, other utilities, insurance, and repairs/upkeep - not to mention that you do not actually own the home until your mortgage is paid off...hmmm...what, 20 years?) is somehow worth it. Everybody has different opinions on what they consider to be financially worth it. Granted, at 17, she probably doesn't have a solid grasp on the situation, but whatever the outcome may be, it is her life to learn it.
I find it funny that so many people are against paying large amounts of money for something that has the potential to help them earn more money but yet have this notion that paying $30,000 for a new car (that will not grow in value, let alone even retain its value) or $300,000 for a house (on top of paying property taxes, municipal utilities, other utilities, insurance, and repairs/upkeep - not to mention that you do not actually own the home until your mortgage is paid off...hmmm...what, 20 years?) is somehow worth it. Everybody has different opinions on what they consider to be financially worth it. Granted, at 17, she probably doesn't have a solid grasp on the situation, but whatever the outcome may be, it is her life to learn it.
Not me. I rent and drive two clunkers I bought for $1500 each.
I wouldn't get into $100k of student loan debt either. That is more evil than car loan/mortgage debt in that you can't bankrupt it. I'd look to spend less than $20k.
I think this student needs a reality check. Here is what FinAid.org estimates repayment to be like:
Monthly Loan Payment: $1,060.66
Number of Payments: 120
Cumulative Payments: $127,278.45
Total Interest Paid: $27,278.45
Note: The monthly loan payment was calculated at 119 payments of $1,060.66 plus a final payment of $1,059.91.
It is estimated that you will need an annual salary of at least $127,279.20 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.8. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $84,852.80, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 1.2.
The following table lists the minimum income necessary to repay the debt without encountering a partial economic hardship. Partial economic hardship is defined as having annual education loan payments in excess of 15 percent of discretionary income, where discretionary income is the amount by which Adjusted Gross Income (AGI) exceeds 150 percent of the poverty line. This figure is shown in the Minimum AGI (IBR) column. The Minimum AGI (ICR) column uses an alternate definition of economic hardship, based on 20 percent of discretionary income which is defined as the excess of AGI over 100 percent of the poverty line.
Wow! You're borrowing a lot of money to pay for your college education. Maybe you should think about attending a less expensive college? A good rule of thumb is that your total education debt should be less than your expected starting salary. If you borrow more than twice your expected starting salary you will find it extremely difficult to repay the debt. Live like a student while you are in school so you don't have to live like a student after you graduate.
These results assume that the student is paying the interest charges on any unsubsidized loans and is not capitalizing the interest while in school. If the student is capitalizing the interest, the cumulative payments and total interest charges will be higher than shown here.
Extended repayment would cut the monthly payment by $523.84 (49.4%) by increasing the loan term to 30 years but would also increase the total interest paid over the life of the loan by $65,976.75 (241.9%), a factor of 3.42 increase. FinAid recommends sticking with the shortest loan term you can afford. After all, do you really want to still be repaying your own student loans when your children enroll in college?
To the OP, why are you hanging out with a 17yo? And, to put it bluntly, it is not your life. If she has her heart set on an East Coast school, $100,000 won't be enough for four years if she is going to pay her own way.
I hang out with 17-year-olds because I'm a creepy old witch of course
As for the fact that it's not my life - I take it you've never tried to help anybody out who was completely clueless about something that was a huge decision. Young people here do not get enough financial advice before they take out massive loans and I was trying to break that trend.
Until recently one would never hear of that kind of money being borrowed for college. What happened to living at home and going to a community college for 2 years ? Then 2 years at a recognized state school do get the big diploma. Ten years after you graduate it doesn't really matter in most cases where the diploma is from as long as you have it.
Along with some good part time work and living a very modest lifestyle there is no reason to borrow that kind of money.
The argument that money borrowed for degree-obtaining purposes is "more evil" than the same amount of money borrowed to puchase a non-asset like a car is absolutely asinine.
Well debt is what got us into this hellhole mess that we are in now and a lot of people are still in a hideous amount of denial about. Who cares? Just spend into eternity. You can always pay it back!
Except when the assumption that you can always pay it back doesn't hold out. Then what? At least with a car or mortgage, there is recourse. With student loan debt, you are hounded for the rest of your life, a slave to a mistake you made when you were not even old enough to drink yet.
It's an absurd amount of money to borrow, even if she could get it.
Nice to be far from toxic family, but if I were her (and in a similar situation at 18, except there was no family money) you just leave the household. Live modestly anywhere you can near a state school, shine/excel/borrow as little possible, maybe a community college if need be, and then apply for a transfer, where she's more likely to get aid. If she is so academically promising, she should be able to do that.
A poor guy I know who went through Harvard said the thing to do is to go to a state school, four years if desired, and SHINE. Then grad schools will throw money at you. There is no need to take freshman courses at some overpriced name school and owe that much money.
Also, if she was hoping to be a neurologist or some presumably high-paid person, the undergrad costs must be even more modest.
If your friend is illegal, that's the only reason I can think of that she'd be ineligible. Oh, the other reason might be that her parents have too much money but won't share it. In that case, she needs to be emancipated from them. I believe that is defined as one year that she is not declared as a dependent on their federal taxes. She could do this by living and working out of their home and filing her own taxes. Again, likely something modest and in-state.
"Getting far from family" should only be a priority if she is in physical danger from them (and I know that is sometimes the case, especially in conservative cultures).However, simply moving somewhere won't necessarily end that danger, and she needn't borrow buckets of money even if she could to go to college, like running away from home.
Barring physical danger, she could do a lot worse than living and working in Albuquerque for a year and then going to UNM and acing everything.
Best wishes. She is fortunate to have you for balance and support.
Well debt is what got us into this hellhole mess that we are in now and a lot of people are still in a hideous amount of denial about. Who cares? Just spend into eternity. You can always pay it back!
Except when the assumption that you can always pay it back doesn't hold out. Then what? At least with a car or mortgage, there is recourse. With student loan debt, you are hounded for the rest of your life, a slave to a mistake you made when you were not even old enough to drink yet.
With student loan debt, if you have managed your loans properly, you have the option of going into deferral or forbearance for instances of economic hardship, and those loans will not go into default. You will not be hounded unless you just opt to skip payments and don't bring the matter to the lender's attention, versus applying for the economic hardship deferral or forbearance. If I lost my job tomorrow, I'd drop the Dept. of Ed a line letting them know this, and they'd send me the paperwork in the mail to postpone my payments the very next day.
The U.S. Department of Education has a system in place for student loan repayment that allows borrowers to repay student loans on a variety of repayment plans, some of which can be tailored to fit situation and your income. Try doing that with a car note payment, or credit card bill. Reputable educational lenders do work with you to help you avoid default, unless you screw it up.
I think you're confusing being slave to the mistake of not paying your debts with being slave to the "mistake" of borrowing to obtain a degree. Two totally different things.
I find it funny that so many people are against paying large amounts of money for something that has the potential to help them earn more money but yet have this notion that paying $30,000 for a new car (that will not grow in value, let alone even retain its value) or $300,000 for a house (on top of paying property taxes, municipal utilities, other utilities, insurance, and repairs/upkeep - not to mention that you do not actually own the home until your mortgage is paid off...hmmm...what, 20 years?) is somehow worth it. Everybody has different opinions on what they consider to be financially worth it..
Maybe some of us really question whether certain degrees are actually worth the price tag.
Last year, an 18 year old neighbor talked to me about culinary school. I am a CPA and worked in the food industry for years. He wanted to go to a for-profit program with a tuition of $52k for a 17 month program. In this area, a sous chef makes about $30 and a chef for a country club or a hotel may make $50k with several years of experience. (I know as I was helping a client recruit a chef.) That is STEEP debt for a program that will get you a $12-15/hr job. I directed him to a community college affiliated with a state university where he could get the same experience for $17k over two years.
$100 for MOST undergraduate degrees is a complete waste of money. You are putting yourself in a financial hole that will take you MOST of your career to dig out of.
One reminder. Student loans are NOT DISCHARGEABLE in bankruptcy except in death and extreme circumstances.
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