70% of college students/parents don't consider income when borrowing

[disneysteve]

I read in this month's Kiplinger's that a study by Sallie Mae done in 2008 showed that 70% of college students and their parents don't consider future income potential when deciding how much to borrow for college.

No wonder so many people get into debt trouble. They give no thought to their ability to repay the debt.

How can anyone borrow money blindly without having some type of plan to repay it?

[Joan.of.the.Arch]

Geeze, neither my kid nor his parents have taken out loans for college, yet I still think often and nervously about what his earning potential might be and how he will handle those first years out of college. Will opportunities expand or contract in the next few years? If the economy is dampened for a long time or radically changed, what are his prospects? If he takes route A on his career, will that effectively block his ever being able to go back down route B?

Avoiding college debt was something I talked to him about well before college. I compared it to having a mortgage payment without having the house or the job.

I tried to teach my kid to evaluate his choices, but I tried not to pass on the basic pessimism and insecurity that was my own basis for being so careful. Instead I tried to pass on confidence and optimism with objective realism. (Enough' isms for ya there?) Now I have happy confidence in my kid, but it might be a different sort of confidence than the parents who take out or recommend the offspring take out loans unrelated to what they can handle paying back.

[wincrasher]

Very few look at college as a business transaction or investment.

It's often about the "experience" of college. That's why you see people spending on Ivy League educations to be social workers or teachers. Yes, they get a great education. But to spend $100k to get the same job someone who went to State U for free or for little money? It's just not sensible.

I think it's the same mindset as people who care about how big your house is, what kind of car you drive, and what label is on your clothing.

As sad as it is to see these young people saddled with tens of thousands of debt they can't repay, it's just as sad to see those that squandered mom & dad's hard earned savings doing the same thing.

Looking out from your cubicle now, do you think it matters much now where you went to college?

[disneysteve]

Looking out from your cubicle now, do you think it matters much now where you went to college?

I think it mattered at the time though it certainly doesn't matter now, 20+ years later. At the time, where I went to college mattered because I wanted to go to medical school after college. I needed a school with a strong pre-med program and a high med school placement rate at good med schools. I could have gotten a BS in Bio from a local community college but getting into med school would have been a lot tougher. It was tough enough coming from a good private school. I don't think there was a single person in my med school class who had graduated from a community college.

[wincrasher]

Well didn't run and ROI calculation, but it's not much of a stretch to figure that spending on a medical degree, law degree or engineering degree would have a certain payoff.

Could I have made more money going to MIT? Maybe if I had sought a job at a big out of state company. My local degree played well in my home state and opened plenty of doors.

I think it really comes down to you as an individual - how you carry yourself, your ambition and you attitude.

There are plenty of great doctors that went to medical schools off-shore too for cheap. So it must not all be schooling, there may be some natural talent in there somewhere.

[disneysteve]

it's not much of a stretch to figure that spending on a medical degree, law degree or engineering degree would have a certain payoff.

True, but even then, there needs to be some thought about the future before taking on the loans. I borrowed about 100K and went into family practice, the lowest paying field of medicine. Some people borrow a lot more but go into higher paying specialties. That's fine. But then there are those who borrow 250K and go into family practice. Those folks will be in debt for their entire career. It took me 12 years to repay 100K and we were very frugal and aggressively paid extra every month. If not, it would have taken 25 years as scheduled. Had I owed twice as much, I would never have paid it off.

There are plenty of great doctors that went to medical schools off-shore too for cheap. So it must not all be schooling, there may be some natural talent in there somewhere.

Also true, but those are people who were willing to do absolutely anything to become a doctor. Honestly, I don't think I would have done that. Had I not gotten into a decent US school, I probably would have taken a different career path, so I needed good grades from a good school. I doubt that anyone went to some off-shore medical school as their first choice. They usually do that after failing to get into any US school.

[wincrasher]

I agree.

Just what is a "good" school is what is highly variable to people. To some it's the number of programs, to some it's size, to some it's reputation (which could be largely from past accomplishments), to some it's the current staff, to some it's publication volume, etc, etc.

Back in the day when I was looking, all my choices were about the same money - there was not much disparity of cost or the programs. So it was a matter of "fit" for me.

I have a co-worker who's kid is looking at colleges. Some of them are $40k a semester! One of the smaller schools offered a 100% scholarship including room & board. But they are considering paying to go to a different school that is closer to home. And they are not rich either! This is for a liberal arts education.

[ScrimpAndSave]

What about when kids go to school with an undecided major?


I do agree with this though...just wondering...

[disneysteve]

What about when kids go to school with an undecided major?

I think if someone is really undecided and starts college with just general liberal arts courses, they need to be very conservative with any student loan borrowing since they have no way to estimate future earnings. That fits right in with this study.

[am_vanquish]

it's not much of a stretch to figure that spending on a medical degree, law degree or engineering degree would have a certain payoff.

I disagree ... to a point. I was lucky enough to be offered some great scholarships to about half the schools in the SEC conference, so undergrad student loans weren't an issue for me, but what profession to pursue (and specifically the impact of grad school debt) was a HUGE decision. I had a lot of pressure to go after an "advanced degree" ... but I just can't see how someone goes to school until they're practically 30 & graduates with 6-figures of student-loan debt by the time they even START GETTING PAID!!!

I graduated in 3 years & started out earning more than $50k at age 21 (and $0 in student loans). I expect to be near/at 6-figures at age 30. To this day, you cannot convince me that it would have been worth it to be in school racking up student loan to become a doctor/lawyer/dentist/pharmacist/whatever - rather than working to build a decent career & net worth.

[red92s]

I graduated in 3 years & started out earning more than $50k at age 21 (and $0 in student loans). I expect to be near/at 6-figures at age 30. To this day, you cannot convince me that it would have been worth it to be in school racking up student loan to become a doctor/lawyer/dentist/pharmacist/whatever - rather than working to build a decent career & net worth.

Eh, point of contention here: there are rewards above and beyond those of the financial type in every career choice. Some people might get more satisfaction out of being a doctor than buying a house at 25.

[am_vanquish]

Eh, point of contention here: there are rewards above and beyond those of the financial type in every career choice. Some people might get more satisfaction out of being a doctor than buying a house at 25.

Agreed - teachers & nurses are amazingly dedicated people in the world. I didn't mean to imply that anyone should "sell out" to a career based on financial potential. It's just a little pet peeve of mine that people over-value careers that require expensive graduate degrees that take forever to get.

I agree that students who can't decide on a major should be conservative in taking out loans. If it were my kid, I'd suggest they take very light class-loads with general pre-req's and spend time working to get a feel for what they enjoy. Hopefully that would help them pay toward the student loans & pick a major.

[disneysteve]

To this day, you cannot convince me that it would have been worth it to be in school racking up student loan to become a doctor/lawyer/dentist/pharmacist/whatever - rather than working to build a decent career & net worth.

As a physician, I agree, but as red92s pointed out, I didn't do it for the money. Anybody who goes into medicine for the money needs to have their head examined.

I didn't start earning a real salary until I was just short of my 29th birthday. Lots of my friends were well established in their careers by then and had 7 or 8 years of income and retirement contributions and pension earnings under their belt. That's hard to catch up with. Add in 6-figure debt and it is even worse.

[m3racer]

To this day, you cannot convince me that it would have been worth it to be in school racking up student loan to become a doctor/lawyer/dentist/pharmacist/whatever - rather than working to build a decent career & net worth.

Your comment has some merit to it. But keep in mind there are many professionals that you mentioned that are making more than $500k annually.

[MonkeyMama]

No kidding!!! (To OP).

Just as people don't consider their incomes when buying a home, or a car, etc., etc.

Since I live in Cali, the homes will slay you. But I bet for MANY, education will be the biggest purchase they ever will make.

I would lump lawyers and doctors in a league of their own. There are Engineers in my family that paid cash for EXTREMELY low-cost degrees. OF course, they make good money, but it's not quite as lucrative as law and medicine.

Of course, even doctors and lawyers should be damn sure that is the field they want to pursue, before they shell out six figures on an education. Too many people just don't *think* these things through, on any level.