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Thread: College loans

  1. #1

    Default College loans

    Hello everyone

    As written in the title, i want to know more about (especially US,others are welcome too) college loans. What is it? How are the term and conditions to borrow the money?

    And why are you borrowing the money? Can't you borrow that money from your parents, instead?

    And finally,it is good for your prosperity? (okay, that's too much,but i can't find other words describing that) as we know, that debt is not good to your financial matters..and especially, we in Indonesia doesn't have that kind of loan here ..


    P.s: i'm an economic major student, and i'm doing a personal research here, pure curiosity
    And for the parents thingie, i'm seeing this using the point of view of eastern people , and i'd like to see it from western sides of view.

  2. #2

    Default

    The government will lend a certain amount of money each year to students, which has its advantages ($5,500 to freshman, $6,500 to sophomores, and $7,500 to juniors and seniors, I believe). Some of these are subsidized (this depends on your family's income), meaning that the government pays the interest while you are in school. Others are unsubsidized, which means they do accumulate while you are in school. The rates are decent. Anything past that has to be covered by a private lender. College loans are becoming kind of problematic in the US. I believe that college loans are now larger than credit card or auto loans (not sure what the statistic is exactly, but there is a lot of student debt in America). There are some students who take out loans that they shouldn't, certainly.

    I am borrowing money because I don't have access to the money elsewhere. I am receiving some financial aid from my college. My parents are paying for what they are capable of paying. I have taken out loans. And I contribute a small amount from my own earnings (which are very small, although I will be earning more this summer). To answer your question... I am borrowing money from my parents, and I can't borrow more, so I am borrowing from other lenders.

    I think that you have to think carefully about how much debt you are taking. I have heard rules of thumb like, don't expect to take more out in loans than your starting salary. I am going to a good school and am studying employable and even lucrative subjects, so I am not that worried about my loans. They will affect my life after I graduate, but I believe they can be managed.

    I believe that the benefit I will gain from taking them out will enable me to pay them off and in the end, so my "prosperity" will be improved in the long run. This is something that has to be determined on a case-by-case basis, based on how much money you can expect to make, whether (or to what extent) it is necessary to worry about employability, and the size of the loans. For some, it might be wise to go to a state college instead of a private one. For others it might be better not to go to college at all.

  3. #3

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    Quote Originally Posted by Dyml View Post
    As written in the title, i want to know more about (especially US,others are welcome too) college loans. What is it? How are the term and conditions to borrow the money?
    A university education in the United Kingdom used to be free on the simple premise that whilst the government paid for your education you would probably be more economically active and would therefore repay the cost of your education many times over through taxes and so on. However, times change and that's no longer the case.

    These days we have a system of means-tested student loans and grants. There are loans for tuition fees and loans for living costs. The amount of loans and grants that each student is eligible for is calculated based on a number of factors. For undergraduates the main consideration is their parents income. Everyone is entitled to the basic loan though.



    Quote Originally Posted by Dyml View Post
    And why are you borrowing the money? Can't you borrow that money from your parents, instead?
    The majority of parents in this country don't have anywhere near the amount of disposable income that would be needed to put their offspring through university. In my opinion the family circumstances and finances of a prospective student shouldn't be a barrier against them going to university if that is what they want. University should be for the those with the ability, not just the money.



    Quote Originally Posted by Dyml View Post
    And finally,it is good for your prosperity? (okay, that's too much,but i can't find other words describing that) as we know, that debt is not good to your financial matters..and especially, we in Indonesia doesn't have that kind of loan here ..
    The current student loan system in the United Kingdom is reasonable. The interest rates are favourable (tied to inflation) and the repayments are taken via the tax system. It also doesn't appear on credit reports and so on. The loan is even written off when you reach a certain age. It's basically one of the few 'good' types of debt.

    However, I agree that having a huge amount of debt, no matter how favourable the conditions may be, isn't a good thing. The alternative though is to not go to university. This can be a good choice for some trades and careers, especially where apprenticeships and similar schemes are available, but for some other career routes a degree is effectively mandatory.

    It may also help to look at taking student loans as an investment in the future. There is a lot of evidence that having a relevant degree can increase your earning power. The initial outlay now might be worth it if it means you can earn significantly more over the course of your life than you would if you didn't take the loans and go to university.



    Quote Originally Posted by Dyml View Post
    P.s: i'm an economic major student, and i'm doing a personal research here, pure curiosity And for the parents thingie, i'm seeing this using the point of view of eastern people , and i'd like to see it from western sides of view.
    I hope my answer helps. I know our system is different to the United States and other countries, which makes this a very interesting topic to discuss.

  4. #4

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    My studies are covered by a government supported loan scheme that I will have to pay a portion of back through the tax system later on. But only when my income reaches a certain level. I can also get some govt assistance for living, but there are no other loans that I'm aware of in Australia.

  5. #5

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    Quote Originally Posted by Dyml View Post
    And why are you borrowing the money? Can't you borrow that money from your parents, instead?
    Ahahahaha. I need about $25k/yr to live, and the same amount more for tuitions costs. My parents don't have the capacity to loan me $50k/yr for multiple years, particularly considering that they won't realistically live for the amount of time it's going to pay me back my loans. Plus, federal loans will qualify for debt forgiveness after, IIRC, 20 years. Not the same with personal lending.

    Also, I'm in an academic program that has me working in a lab 60 hours a week for my thesis. There's not time to take an additional job beyond my academic program. Furthermore, when I applied to MS programs, I wasn't a strong enough applicant to warrant financial support. Loans areliterally the only way to pay for my education.



    Quote Originally Posted by Dyml View Post
    And finally,it is good for your prosperity? (okay, that's too much,but i can't find other words describing that) as we know, that debt is not good to your financial matters..and especially, we in Indonesia doesn't have that kind of loan here ..
    It's not optimal, but when I went back to school, my prosperity couldn't be worse. I had a BS in Biology which is so common a degree that you'll never get a job without a MS or PhD. I was 100% unemployable. So, I can't say that my $85k or so in educational debt is something I was happy about. But I wasn't going to make more than minimum wage without borrowing to advance my education. My standing certainly got no worse.

  6. #6

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    Ay ay ay! Don't get me started.

    College in general has left me very jaded as well as sardonic to these types of questions.



    And why are you borrowing the money? Can't you borrow that money from your parents, instead?
    I'm borrowing money because my part time job of 20-25 a week at 10 or so an hour can't pay for it all. Granted it could, if I didn't have any other bills to pay or a social life to keep me from going crazy. Funny enough I could for community college (as I paid all out of pocket) some scholarships helped. After they ran dry, it was 200-300 a month if I remember from a previous 160.

    I wish the parents were loaded, but it's not their responsibility.



    And finally,it is good for your prosperity?
    My cousin right now is at the university of Texas with over 120k in debt I'm 95% sure he will never be able to pay back. If he were to graduate, his loan paybacks would be nearly 900 a month--a mortgage payment.

    I've played if very safe, last year will be my sixth. After six years, I will be only 14k or so in debt, all from the University. That's chump change to me. And the payments at only a 100 month.

    It depends, honestly. The Gov or that fancy bank that lent to you being a very large factor.

    I'd only be 10k or less at the moment if MI didn't screw me out of "Promise Scholarship" I was owed, but not even the dems could hold out on that.

  7. #7

    Default

    i see ...
    before we go any further,i would like to thank you for all of your answer . i really , really appreciate it

    anyhow,
    when I see Cgh's comment, this bolded quote:


    Quote Originally Posted by cgh View Post

    The majority of parents in this country don't have anywhere near the amount of disposable income that would be needed to put their offspring through university. In my opinion the family circumstances and finances of a prospective student shouldn't be a barrier against them going to university if that is what they want. University should be for the those with the ability, not just the money.
    I started thinking , is that true that living expense in western country is so high,that even students at college can make a loan or something ?
    I mean , i really know that living in eastern country is so much cheaper (except for Japan.) and that is one of the reason that westerner often come to eastern countries to have holiday (well, in indonesia we have Bali island,and i had seeing many westerner at there) but i guess the difference wouldn't be too high ... until i saw this.




    Quote Originally Posted by Geno
    My cousin right now is at the university of Texas with over 120k in debt I'm 95% sure he will never be able to pay back. If he were to graduate, his loan paybacks would be nearly 900 a month--a mortgage payment.

    I've played if very safe, last year will be my sixth. After six years, I will be only 14k or so in debt, all from the University. That's chump change to me. And the payments at only a 100 month.
    and this.


    Quote Originally Posted by AEsahaettr
    Ahahahaha. I need about $25k/yr to live, and the same amount more for tuition costs. My parents don't have the capacity to loan me $50k/yr for multiple years, particularly considering that they won't realistically live for the amount of time it's going to pay me back my loans. Plus, federal loans will qualify for debt forgiveness after, IIRC, 20 years. Not the same with personal lending.
    okay , now i'm guessing that college loans are happening because the living costs are SO high (as a matter of comparison, in my country , the tuition fees ranges from 510USD/semester (state owned,and you can still get scholarship, i'm here)to around 2500USD/semester(private owned, usually that major that costs this high are medicine)) the main reason is maybe the minimum wage at there is so high (can you at US or UK please clarify your min. wage?), comparing to my 220USD/Mo.

    and then, i'm calculating my costs of life..
    i get 20USD/week , so multiply it by 52 and i'll get 1040USD.
    assuming i went into some leisure park with my gf/friends, i'll spend 15USD, and i will done it twice per month , so adding 390 USD. (okay, that's too cheap .. let's add some luxury restaurant that i occasionally go (sushi. yum, i love sushi.), adding more 30 USD/month. 750 total per year, that's so much with the leisure. 1040 + 750 : 1790.
    and .. diapers? one pack of 7USD can lasts about 2 months, assuming i buy only one brand .. 42 bucks a year.
    ( that's utterly impossible , as i now already have 4 brands costing about 10~18USD/pack LOL,but let's just make it simple)
    so, 1790+42 : 1832. and lets add my tuition fee : 510x2 = 1020. makes it 2852 bucks. and that's nearly ALL along the year expenses (except for buying some fixed asset , like, my audio gears,new gadget.. but let's just make it simple , again.)

    and it's still barely exceeds tenth of AEsahaettr 's yearly costs ..

    so we can conclude that college loans comes from the high living costs at there, huh?

    - - - Updated - - -

    anddddd let's move on to the fun part.

    the billing system of the loan (or should we say mortgage , according to the amount you've been charged, and the long of the terms? lol)

    if you have a debt that high .. (120k -cousin of Geno , 85k - AEsahaettr , and much other students that have a loan) how do you do to pay it? i mean , the methods of payment.
    some country (or is this different for each states in US?) have some like-tax system collector ,like in australia (Ozbub) , and i would like to know how about the others? is it the same?

    and i'm now are concerned in the same way as NeverKnow. If what he write is true, that college loan > credit card/auto loan in US, and PLUS, there's a system that is said, here


    Quote Originally Posted by AEsahaettr
    particularly considering that they won't realistically live for the amount of time it's going to pay me back my loans. Plus, federal loans will qualify for debt forgiveness after, IIRC, 20 years. Not the same with personal lending.
    so , if all of the students , like borrowing too much from the states and they can't or doesn't pay it back .. the country will be doomed for sure.
    with amount of payment that high , and considering our quality of educations right now (i hope i was wrong that the quality of education was decreasing and decreasing more every year), and then they don't get a good job and can't pay even 50% of it .. well , bruises .

    ---
    and AEsahaettr, i have read your grammar thread .. and i'm sorry about my bad grammar english are not my native language

  8. #8

    Default



    Quote Originally Posted by Dyml View Post
    okay , now i'm guessing that college loans are happening because the living costs are SO high (as a matter of comparison, in my country , the tuition fees ranges from 510USD/semester (state owned,and you can still get scholarship, i'm here)to around 2500USD/semester(private owned, usually that major that costs this high are medicine)) the main reason is maybe the minimum wage at there is so high (can you at US or UK please clarify your min. wage?), comparing to my 220USD/Mo.
    Minimum wage varies by state, but it's usually in the range of $10/hr (ish). Note that many times if your skillset is in low enough demand that you don't command more than minimum wage, you'll often be worked less than 40 hours/week (that's the gold standard here) so that you don't need to be paid benefits. With the economy still rebounding, there's a glut of minimum wage employees on the market. Hiring another employee and cutting everyone's hours to the point you aren't legally required to pay them benefits is, sadly, not an uncommon practice.

    As for tuition, first off, many academic programs don't charge by the semester. They charge by the credit. My PhD program will have me taking up to 16 credits per semester- up to 32 per year- and charges around $1,000 per credit. Then there are fees as well which come up to another $1,000-1500/yr. Moreover, every good school in the US will require you have health insurance. At one of the schools I went to, that was $3,600/yr.

    Do note that tuition per credit is often higher for graduate programs than undergraduate programs. For undergraduate, $300/credit is cheap, $700/credit is extortionate. Undergrads usually take 15-16 credits per semester, or thereabouts (so 30-32 per year).

    Now keep in mind that's only tuition, fees, and health insurance. You also need to pay for all the other things that students (books, pens, etc) and adults (rent, groceries, etc) need to pay. Some people have a day job and do school part time at night over a long time. Some people take loans to cover these expenses and can hold a job to defray how much they need to borrow. Some people, like me, aren't able to and need to use loans to pay for the full cost of living.



    Quote Originally Posted by Dyml View Post
    and then, i'm calculating my costs of life..
    i get 20USD/week , so multiply it by 52 and i'll get 1040USD.
    assuming i went into some leisure park with my gf/friends, i'll spend 15USD, and i will done it twice per month , so adding 390 USD. (okay, that's too cheap .. let's add some luxury restaurant that i occasionally go (sushi. yum, i love sushi.), adding more 30 USD/month. 750 total per year, that's so much with the leisure. 1040 + 750 : 1790.
    and .. diapers? one pack of 7USD can lasts about 2 months, assuming i buy only one brand .. 42 bucks a year.
    ( that's utterly impossible , as i now already have 4 brands costing about 10~18USD/pack LOL,but let's just make it simple)
    so, 1790+42 : 1832. and lets add my tuition fee : 510x2 = 1020. makes it 2852 bucks. and that's nearly ALL along the year expenses (except for buying some fixed asset , like, my audio gears,new gadget.. but let's just make it simple , again.)

    and it's still barely exceeds tenth of AEsahaettr 's yearly costs ..

    so we can conclude that college loans comes from the high living costs at there, huh?
    Depends, but this is part of it. About half of my debt was for school expenses (tuition, fees, etc) and half was for living (rent, groceries, etc). School expenses weren't negotiable. For living, my school was downtown in a moderately expensive city. I paid $900 a month for a studio apartment in school's student housing. I looked into roommates to save money but it wasn't worth it. I could have gotten a roommate and brought that down to about $500, but the savings would have disappeared when you added in the cost of using public transportation and needing a car. The $900/mn apartment was a three-minute walk from my front door to my laboratory and a fifteen minute walk to the supermarket. So it was more expensive, but I could live carless and with only occasional use of public transportation.



    Quote Originally Posted by Dyml View Post
    anddddd let's move on to the fun part.

    the billing system of the loan (or should we say mortgage , according to the amount you've been charged, and the long of the terms? lol)

    if you have a debt that high .. (120k -cousin of Geno , 85k - AEsahaettr , and much other students that have a loan) how do you do to pay it? i mean , the methods of payment.
    some country (or is this different for each states in US?) have some like-tax system collector ,like in australia (Ozbub) , and i would like to know how about the others? is it the same?

    so , if all of the students , like borrowing too much from the states and they can't or doesn't pay it back .. the country will be doomed for sure.
    with amount of payment that high , and considering our quality of educations right now (i hope i was wrong that the quality of education was decreasing and decreasing more every year), and then they don't get a good job and can't pay even 50% of it .. well , bruises .
    All loans in the US have insurance. Say that Big Corporate Bank (BCB) gives out lots and lots of car loans. Inevitably, some people will default on these loans. The way that BCB deals with this is that they have actuaries determine how many people should be expected to default on their loans, how much this will cost, and everyone's repayment is increased accordingly. This is usually around 3-7% depending on the type of loan and how much risk you personally present. In other words, if you take out a loan for $1,000 with 0% interest, you'll need to repay (say) $1,030.

    All education loans in the US are either public or private. Public loans are generally better, but aren't really public money (actually they are, but I'll address that in a minute). The money for both private and public loans comes from private banks. However, the US Department of Education pays the insurance on public loans, which makes public loans extremely safe for banks. In turn, there are very strict guidelines for banks to deny someone a public loan, and some public loan products you can't be denied at all until you hit a personal lifetime aggregate limit. Then there are private loans, which are subject to no more public scrutiny than car loans or personal loans.

    Until a few years ago. The Obama Administration signed an fantastic bill that ends this system. Now, if you want to take out a public loan, you borrow directly from the US government. It turned out that the amount the government was paying private banks to insure public loans and repay the ones that defaulted (generally bigger loans) was something like $80B/yr. Someone had the great idea of having the US just use that money to lend directly to students rather than using it to subsidize private enterprise.

    As for repayment, it's a lot like a mortgage but you have safeguards built in to public loans. Your loans are deferred (sit around collecting interest) until six months after you stop being a student (which is defined as dropping below half-time status at your current school). You choose a term, I believe offhand the options are 10 years and 25 years (of course, you can choose 25 and pay enough each month to have it paid off sooner). You can choose a graduated schedule where you pay less now and dramatically more as time passes (and, presumably, as you earn more money). You can apply for forbearance if you have financial hardship, and you can apply for further deferment I believe in a few cases. You can also apply for forgiveness after (IIRC) 25 years where the government forgives any money you still owe, but you then have to report that amount as income on your taxes. Not all of these features are universally available for all loan types, but they're pretty frequent nonetheless. Also, these features only apply to public loans. Private lenders can set any terms they wish.

    You can read the US government's information page on public loans here. I find the page exceptionally well organized for a government website, as well.



    Quote Originally Posted by Dyml View Post
    and AEsahaettr, i have read your grammar thread .. and i'm sorry about my bad grammar english are not my native language
    No prob. I was specific to exclude people who don't speak English natively. That was directed at people who don't expend the effort to type correctly, or just don't have the brainpower to type a proper sentence.

    If you'd like a constructive critique, pay more attention to your spaces and capitalization. We capitalize the first letters of sentences, and almost universally we put a space after a punctuation mark but not before. Also, paragraph breaks are your friend. Also also, use the dollar sign (eg, fifteen dollars = $15). If you need to specify US dollars, the convention is to put US before the dollar sign. Fifteen US dollars is US$15. Fifteen Canadian dollars is C$15. Etc. In general, though, this board is primarily North American, and the Canadian and American dollars are similar in value. Typing "$15" will have the inherent assumption for the majority of the community that you're referring to American/Canadian dollars.

  9. #9

    Default

    Let's get out of topic for a while, as I'm creating this tread to make comparison between some people, and I'm still waiting for others to comment here
    but seriously, I really don't know that graduate student's tuition fee was just that high in US.. And I'm just planning to going there after my graduation,oh well.

    About that constructive critique.. I'm sorry about my spacing. I actually have been knowing this since many years ago, and even my girlfriend is warning me about it. spacing before punctuation mark has been my habit since my childhood, when we were like to change our cellphone's fonts (nokia.)to some cool fonts, ignoring that it will be readable or not. and my font at that time, if I want to use some punctuation mark, i have to use space before it, otherwise it would not be readable (at my cellphone. And yeah, im ashamed). As for the others, it is genuinely,honestly, my laziness Sorry about that.

    Oh, and thank you so much for the critique. I'm glad that you're not talking about my grammar,but talking about my technical writing instead.
    and I see that there's some people who still care about their writings.. in Indonesia, we don't have that kind of person.
    ---
    And my brain is getting hot again. you're all amazing.

  10. #10
    professorbock

    Default

    Hi, Dyml. Those are some good questions you have.

    In the U.S. at least, we have federal financial aid through government programs such as FAFSA.

    This includes federal and state grants toward university education. This system, along with my dad's half-off university employee discount, allowed me my education where I graduated the University of Nebraska-Lincoln with zero debt.

    (The average tuition for a 12 credit hour semester at my university was close to $10,000 per semester. Remember, you can also apply for housing aid, too, of which I was offered but declined at the time so I could live at home and open up a spot for a student who actually needed housing.)

    This result of a "free ride" certainly can be relieving.

    The catch for me was that I had to, as a resident of my state, attend an in-state institution, and thus receive much lower tuition costs compared to out-of-state students.

    Also, I had to be a full-time student, meaning at least 12 credit hours of classes per semester.

    The idea behind whole or partial coverage is that by investing in a student's future the U.S. will benefit as a whole.

    Essentially, such subsidized students will achieve an education, get hired at a higher wage bracket in the future, and multiply the number of dollars in not only more taxes paid, but in economic stimulation and investment.

    However, federal aid usually only covers part of your tuition, and you may need to seek other avenues of financial help, such as loans.

    College loans are a risky borrowing game if you just up and go to your local bank branch or national chain. The interest rates are high, with harsher collateral requirements.

    What you want to do is set up a low-interest easy terms loan with the Feds. A fine and common example of this is the Perkins loan program, which you can select on the online FAFSA menu as an option while entering your information.

    You can negotiate a monthly payment plan that's more reasonable, say, $100 a month for 20 years on a big loan, or $50 a month for 5 years on the small.

    But here's the benefit: You might need a co-signer, but you don't need large collateral like a house or car. You can negotiate to start paying your loan AFTER you graduate or drop out.

    Finally, it isn't always wise to borrow money from your parents, because co-signing financial assistance can put them in debt and strain your relationship to no end.

    And if you borrow money directly through cash and checks, there may be no guarantee of you being able to pay them back. What do I mean by this?

    Some parents are so distraught with the need for their children's education that they've dried out quick during the first two years of university. That's right, they tapped into retirement funds and market savings early, cashing out and paying huge penalties. Ouch!

    I mean, you DID call home, and you DID plead for more college money, and you DID promise to pay them back by X-date on the calendar. But the money fades away and time passes quickly with little resolve or consistency of repayment.

    So your parents dig deep, crash and burn. For example, you know how the cancellation fee for a cell phone contract can be as much as $300 or more?

    Think 20 percent in fines from $100,000 liquified from a retirement fund paid out over four years. Some parents or students have gone so far as to file for bankruptcy.

    I know many times the burden must be shouldered by family, but this is one of the few areas that requires critical consideration and planning.

    In any case, if you fail to make your money loan payments on time and are delinquent more than three months, bad things happen.

    For example, the popular student loan agency, Nelnet, will not only send a collections agent to your doorstep, but you will be reported to the big three credit bureaus, which can trash your credit score.

    The worse your credit score, the fewer and riskier the loans and credit cards you can get. And the cycle can keep repeating.

    SO! Get good grades, take advanced placement classes, apply for FAFSA after your parents tax information is back in either March or April and select your chosen institution of education. Get grants, apply for and win scholarships based on your background (math genius, student of color, athlete, etc.) and keep in touch with your institution's financial aid office.

    Take low interest loans from the government if you need to. Work a job through school to pay for those textbooks.

    Best of luck with your education. Graduation to a better future can absolutely happen.
    Last edited by professorbock; 14-Apr-2013 at 04:58.

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