# About to take out my first loan for college

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1. Jun 8, 2007

### Winzer

Ok so I about to take out my first loan for college- a big one.
But I figure that I am in engineering I will be making quite a bit of money and won't have to worry about it.

2. Jun 8, 2007

### Cyrus

how much is the loan?

3. Jun 8, 2007

### Winzer

maybe 15000-18000

4. Jun 9, 2007

### Cyrus

Thats not a lot of money. Is that for one year, or all 4 years?

5. Jun 9, 2007

### Winzer

In your opinion cyrusabdollahi what would be a lot of money to take each year?

6. Jun 9, 2007

### Cyrus

If you are living on campus at an in-state university, 15-18 is about right.

I pay $9k a year because I live at home and go to in-state school. 7. Jun 9, 2007 ### Beeza I take roughly 12k per year, but thats only for tuition as I pay living expenses out of my pocket. 8. Jun 9, 2007 ### JasonRox I thought you said your parents pay for school. 9. Jun 9, 2007 ### JasonRox Yeah, that's what I recommend people to do unless living expenses are sky high. I'd atleast try to pay half of it. My tuition is$5000 a year, but I'm going to be debt free when I graduate. I'll probably have money in the bank or atleast that's what I'm planning.

10. Jun 9, 2007

your first year, take out whatever loan you need, you have no choice at this point. work your butt off the first year and then apply to as many scholarships as possible. my first year i took out the max stafford loan (I go to state school and am low income, so i got 85% of my tuition paid off already). then i applied and got 3 scholarships and an undergrad fellowship that i am applying for right now and will most likely get over my soph and junior and into senior year. i haven't paid for anything except books, in fact my school has been paying me roughly $1500 a semester to attend because i got so much financial aid and scholarships. bottom line is, first year, the cost and loan is usually unavoidable. but you need to be saavy and understand every oppurtunity that is available to you. PS: Especially in engineering, there are a lot of scholarships, specifically school wide. good luck and don't stress out too much about loans. the average student graduates with like$30 in debt. i will be graduatingwith like $5000 in debt. 11. Jun 9, 2007 ### Cyrus I would listen to InbredDummy. Also, if your tution includes living on campus, you can consider living at home to save yourself 5-6k a year in living expenses. Taking your high value, in the end you will have roughly$72k in debt. If you get good grades and get scholarships, you can knock this value down a lot. A LOT. Even if you pay the full $72k, provided your grades are good and you dont mind living at home one year after you graduate, you can easily knock off about$50k in one year if you spend all your money paying off your loan. You will have to live at home for a year, but you will be almost debt free afterwards.

12. Jun 9, 2007

### JasonRox

Easily? Not by a long shot. Atleast be real about it.

13. Jun 9, 2007

### Winzer

Well technicaly this will be my second year in college. I went to a state college my first year to save a bunch of money-my plan originally. I then transfered. I will be livin in the dorms this fall so I will be paying that expense. I was thinking I will give it my all this year so I can get good scholarships for the next.

14. Jun 10, 2007

Yes, it is easy. If you cant pay off $50k in one year living at home you dont know how to manage your money. Exactly what expenses will you have living at home? Are you going to spend your entire paycheck on food? Gas and food are the only two things you will need to spend your money on. If those two alone eat your paycheck up, somethings wrong. Last edited: Jun 10, 2007 15. Jun 10, 2007 ### dontdisturbmycircles I think that taking out a big loan and investing it in your education is the smartest thing you can do. My philosophy is that working hard during the summer is a waste of time. Work one job and study or take a summer course. I am guessing that a$60,000 loan really isn`t that big of a deal once you graduate. (As long as you graduate...)

16. Jun 10, 2007

### Beeza

It's not always that clean cut and easy for everyone. Lots of other factors come into play.

17. Jun 10, 2007

### JasonRox

First of all, you're assuming this person does not go out at all. Like you said, only gas and food. You're also assuming mommy and daddy pays insurance and rent, which most parents will make you pay rent after graduating.

Second, what about the damn taxes? Should be mostly tax free up to an income of like $30-40k, which they tax the income you make after that. By your numbers, you're assuming this person makes atleast$75k right after graduating. How often does that happen? Again, not often at all.

Third, you're forgetting the interest! Most places charge you interest as soon as you graduate or basically all places. Not only that, most places charge you interest even before you graduate. At a debt of $70k you assumed easily to pay off, you're interest will be atleast$450-600 a month!!! Try paying off debt with that kind of interest rolling around every month. Well, if mommy and daddy pays that too, then yeah it shouldn't be too bad.

18. Jun 10, 2007

### 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?

19. Jun 10, 2007

### 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.

20. Jun 10, 2007

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 :) 21. Jun 10, 2007 ### cristo Staff Emeritus 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." 22. Jun 10, 2007 ### 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. Last edited: Jun 10, 2007 23. Jun 10, 2007 ### 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.

Last edited: Jun 10, 2007
24. Jun 10, 2007

### 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.

Last edited: Jun 10, 2007
25. Jun 10, 2007

### 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.