The Financial Aid Handbook, Revised Edition by Carol Stack

Author:Carol Stack
Language: eng
Format: epub
Publisher: Career Press
Published: 2017-04-04T04:00:00+00:00

Step 2: Understanding student loan burdens

When we outlined this step for your child, we encouraged the child to go online to Finaid.org and use the Finaid student loan calculator to calculate what the monthly payments might be, and then discuss those with you. Although it may seem premature, the one drawback of FAFSA4caster is that it automatically calculates an estimate of your federal loan eligibility, and in that sense, it’s front-loading the conversation with an assumption of student loan debt. So before you start making decisions about how much funding will come from loans, you should have a basic conversation about loans with your child and calculate the repayment. The college, and the federal government, will do this as well—but after your child has applied and been accepted. At that point, it’s too late to change your mind. What is your child going to do? Withdraw the application 10 days before class starts and spend another year at home? Of course not. So it’s good to have this conversation now, and it will allow you to understand the various aid awards you will receive from colleges much more efficiently. So ask yourself and your spouse the following question: How much do you think your child should take out in loans? Although tuition costs have risen enormously—faster than healthcare and any other section of the economy—that doesn’t necessarily mean that the value of a degree has risen enormously. Before you commit to a final answer, if you’re encouraging your child to take on more loans (we consider anything more than $32,000 in total debt for four years, or roughly $320 per month on a 10-year repayment plan, to be truly unreasonable for any college graduate) and perhaps to attend a college where he is not in the top 25 percent of applicants (a more competitive school where they may receive significantly less aid), please think about the following.

An undergraduate degree is not the same as medical school or law school; that is, there is no guarantee that upon graduation your child will have a high-paying job. To put it bluntly, undergraduate degrees are no longer a money-making enterprise; they have become as requisite as a high school diploma (and in some fields, about as valuable). And if your child is interested in a career in business, law, medicine, science, mathematics, or any other traditionally high-paying field, she will likely need to go to graduate school for an MBA, a JD, an MD, or a PhD. That means your child will need to have some borrowing capacity when she graduates from college; if she takes on too much in debt for undergrad, she won’t be able to afford graduate school.

We’ve each been in the business of college admission and financial aid for more than 40 years. We’ve worked with nearly a hundred colleges and universities, and personally hired at least several hundred employees between us. The previous statement we made about the value of a college degree is our opinion, and we’ve formed it from our experiences in both the industry of higher education and as employers.

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