about to take out my first loan for college

JasonRox

Yes, that is a big loan. Trust me. Lots of people ignore it after graduation too. They simply just pay the payments with maybe a bit more on top of that and that's it without realizing that with those payments it will take like 15 years to pay it off. Then they're like, even after paying my loan payments, I have enough money to buy that fancy car I deserve because I worked so hard (yet you literally worked very little which is why you have that big debt) to get my degree. Then you buy the car, then rent a place, then buy furniture... and next thing you know the interest rates go up say a mere 0.25% then you're like... hmmm... I just have to be a bit frugal now and 6 months later you're on the brink to bankruptcy.

That's the plan?

JasonRox

He's not going to have debt. His parents pay for school and such. I don't understand why he is telling us how to manage debt when he ain't going to have any.

dontdisturbmycircles

The difference is income earned during the summer is at a rate of $15/hr whereas income earned after graduation may be $30/hr so its much easier to pay off. I agree that $60,000 is pushing it(my loan will be about 1/3 of that.) but if you work hard in school you should get some of that back in the form of scholarships/bursaries right?

It all depends on how you are going to live after you graduate. If you are serious about paying off your debt it really shouldn't take you more than 2-3 years to do as long as you don't but a new car / house.. But thats obvious :)

cristo

Just out of interest really, is there no financial assistance available in the way of loans to go to university in the US? The only reason I ask, is that you're all talking about the interest on the loans, which makes me think that these are standard bank loans. Over here, the government provide student loans (in the range of £3-4k per year) which are low interest loans (i.e. the interest is capped to bank of england base rate), and one can normally obtain about £2k interest free from the banks.

When it comes to repayment when one is working, it simply gets taken out of your wages as another form of "tax."

dontdisturbmycircles

I am not 100% sure about the US but in Canada you do not pay interest until 3-6months (I forget the exact time) after you graduate or drop out.. So while you are going to school you don't pay(or accrue) interest.

It is probably similiar in the US

edit: And yes they are contracted by the government... but I think the government just arranges deals with a bank for you or something, but yea you don't pay interest til you are finished.

edit again:After a short rethink, if the person does not walk out of uni making more than $60,000/yr then a $60,000 debt would be quite hard to deal with. But its only 3x what a average car costs so it can't be THAT hard with some scrimping here and there.

JasonRox

But it is hard. I think those who have over like $35k of school debt, will have that debt for atleast for 5-10 years and the bigger the longer. Why? Lifestyles. Habits. Personality.

Remember, we live in a materialistic world where lots of people will have a hard time focusing on paying off their debt for longer than 3 months of working after graduation. Why? Because paying down debt is naturally boring when the debt is soooo huge, but it's fun when it's small because you watch it go to zero. So, what happens? Again, they buy a car and stuff just keeps going downhill from there.

Also, dontdisturbmycircles, I live in Ontario and the interest on the government loans is like 10-11% which is REALLY high. So, that's $300 a month on interest for only a $35k loan and gets higher fast if your debt is bigger. Also keep note that they start charging interest right after you graduate. They just don't require you to make a payment until 6 months after you graduate, so if you choose not to make a payment for 6 months, but your debt will now be $37k at the end of the 6 months. My girlfriend just graduated and she had to transfer her money to a bank with 7% interest right away to save 4%. It's under her mom's name, why? Anything bigger than a $10k debt, the bank will hardly want to have you unless you make lots of money and are living on your own. Banks won't like it if you still live at home because they see that as unstable because you may move out. What's the problem with moving out? Banks know moving out cost $$$, and if you don't know what you're doing it costs even more $$$. What happens there? You accumulate more debt and probably can't make payments on the school loan. Banks obviously won't like that.

Therefore, you're stuck at leaving your debt at 10-11% (which is going higher by the way and you know if you read the business section). You have an option though and that is to find a co-signor. Hmmm... looking for financial independence... ouch! Personally, I would go the co-signor route because of the massive savings allowing you to pay your debt quicker.

Anyways, it sounds easy until you pay it all back. I'm going in my senior year and I had my loan at the bank the whole time. When it first started the interest was 5.75% and it's now 7.75% because the prime rate went up. But it's all under my own name and because I had a cap on my line of credit, it forced me to keep my debt down.

Also, choose to work a lot or atleast put aside $5000 during the summer months.

Beeza

There are subsidized (or ubsubsidized I forget which term) loans available in which the government pays the interest while the student is still in school, but the amount of these loans is very limited. These loans are also based on how long a student has been in school, and income.

I began school at a community college with an education roughly equivalent to a high school freshmen (MAYBE a sophomore in non-science classes). I received about 2600$ per year in government-sponsored loans. My total tuition at community college was roughly 6000$ per year. Back then, I had money and paid the remainder out of my pocket.

2.5 years after I began community college, I'm now moving into my junior year at a university. I just got my financial aid package with a total of 10,000$ (5500 in government-sponsored loans, 1500 scholarship, 500 grant, and 2500 in work-study) in aid. Total yearly tuition is roughly 13,000. If I take the work-study (likely not as I already work 30 hours a week), I'm still looking at taking 3,000 in not-so-great interest rate loans from a bank.

This is the first year I've been bumped up to 5,500 in government loans, and also the first time I've been awarded a scholarship by the Physics Department here. My current debt is around 23,000 total. I fully expect to graduate with 45-60k in loans, which varies based on whether or not I spend an extra year for a Mathematics degree.

Also mind you I do not live on-campus and pay my own living expenses out of pocket. I budget my money in a sense that I need to make atleast 1000$ monthly to avoid being homeless, and while living and spending rather conservatively. If I make more, great I can actually go out for a change, but the minimum is 1000$.

As for living at home and paying off "large" loans, well, that option isn't always available. I've been financially independent for a long time.

The way I look at things is that even if something absolutely catastrophic happens, people can take away all of my posessions and ruin my credit, but they will never ever be able to take away my education. That is all that truly matters to me.

JasonRox

You're right about the fact that they can't take away education, but they also won't take your student loan either. You know that right?

This is why I want to go do my Master's part-time and not full-time. I don't want to be living on the edge for another 2-3 years and still possibly finish with debt. No thank you.

Beeza

It comes down to either taking the student loans, or going back to an old life on a fast-track to nowhere.

As for graduate school, I have no idea. I'll find out if I'm smart enough after this year.

InbredDummy

here is the run down for most PhD programs in Math and Physics for the United States: they usually offer 5 years of guranteed support. the support usually means they waive tuition and fees and give you health insurance in exchange you become a TA/RA or teach a Calc I class and pay you around the 15-20k range for 9 months of work. However, i don't believe NYU PhD Math gurantee support. But I am heavily researching which grad schools to go to and almost all of them gurantee support to at least 4 years. Some of them even have nice little niche benefits like you don't teach or grade in your first and fourth year, some require you don't even teach period. (yes believe me this is true, i've been looking on 30-35 different school math webpages and looking up their grad info)

Now for a masters, you usually pay out of pocket, however remember that a masters degree is a professional degree and is better compensated than a really BS/BA. an NYU Masters of Financial Mathematics will run you over 50k, which unless you're wealthy, you're going to get reamed in loans. But it's also an ELITE financial math masters degree, so I'm sure you will be well compensated, 80-90k + starting salary.

Cyrus

First of all, cut out that mommy and daddy crap Jason. I said if you live at home with your parents. Second, if your parents charge you rent to live at home, you have some scumbags for parents and I feel sorry for you.

If you make starting salary at $30-40K a year, you have one sh*ty job my friend. A typical engineering salary starts at around $50-60k a year.

Also, student loans are low interest, and if you get good grades and a scholarship, you wont be paying full tuition anymore.

You mean to tell me car insurance, food, gas, and "going out" costs $50k a year? Where are you going out for dinner every day, a 5-star restaurant?

Try not to be so green that some of us have families that care for their children.

Cyrus

Yeah, you're right. If I get into grad school and get paid $30k a year for two years, Ill be finishing up school with a surplus of $60k. But what do I know about managing debt?

JasonRox

Not all parents can afford the luxury to let their kids live rent free and food free. And you're already judging them as scumbags? Man, get real.

Cyrus

Yes, charging your kids to pay rent is wrong. Asking them to help pay the rent because they cant make ends meet is a different story.

I said if you can live at home. Everything following the if was conditional.

Now, I dont have any loans to pay off. But if someone does have loans and they get into a grad school for their masters, why cant they use THAT money ~40k to pay off their undergraduate loans?? Then they will have a small loan to deal with after school and a higher paying job b/c they have a masters.

cristo

What do you think someone will live on though, if they use their income to pay off their loans? I don't know many people who's parents will let them live at home, rent free, after their undergraduate degree. I know that my parents would kick me out, or at least charge rent, not that I would still want to live at home at this age anyway. Then there's the fact that one would be tied into going to one university, so that one can stay at home. It all doesn't seem practical to me.

Cyrus

I am middle eastern. In the middle east, you're parents dont kick you out of the house. This is a western thing I have noticed. Asians live at home, my greek friends live at home, all my ME friends live at home. None of their parents would dare dream of kicking their kids out the home. Living at home is very common among these cultures because they are centered around the family.

What kind of family values do you have to kick your kids outside your house as soon as possible or charge them rent?

If I was living at home and my parents were having trouble making ends meet, I would help them with the bills. They would not have to ask for help though, I would help them without hesitation. In most other cultures, your parents pay for your upbringing/college but you help them when they become older. My parents both send money to my grandparents each month. Similarly, I will take care of my parents.

My grandparents busted their asses for my parents, and likewise my parents busted their *** for me. What you describe seems very self centered and not much of a caring family.

Its probably very hard to go anywhere in life when your family does not do things together to better the whole.

Astronuc

I think there is some expectation in the US that once one's children become adults, they take off on their own, i.e. leave home and become self-sufficient.

In my case, I left home at 17 and came back during brief periods during two summers to work and save money. I also helped my father re-roof the house during those times. Otherwise, I lived on my own or with room-mates.

I think that has changed in the last two decades. There are a lot of 20- and 30- somethings living at home, particularly after the internet bubble burst.

As for the OP, read the terms of the loan, look at the interest rate, and shop around. Educational loans are really unsecured. I co-signed for two loans for a foreign student so she could get lower interest rate. She didn't realize that the loans charged interest during her undergrad, so when she left school, the principal on two loans had increased about 20%. Don't take out big loans - and calculate how much must be payed back ($200/mo, $350/mo, $500/mo . . . and over what time (e.g. 10 years, 15 years, . . . after graduation). Loans can be a significant burden.

Instead of loans, I worked to pay my way through school.