Why do you pay for your kids college education? (children, insurance, learning)
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Of course starting salary is just that- a start. I am 10 years out from school and make 3x my starting salary now. However, student loans come due 6 months after graduation, so starting salary does need to be taken into account.
For example, let's look at a debt load of $50k @ 3% interest over 10 years. That yields a $482 monthly payment.
Now let's see what that does to some at several salary levels in Texas (no state income tax, relatively low COL) and in NYC(income tax + relatively high COL)-->
$25k Salary Monthly Net Pay in TX: $1,807. Loan is 27% of Net Pay and leaves only $1,325 to live on (rent, bills, food, car expenses, etc). VERY TIGHT, but possible with roomates and very low/no car payment.
Monthly Net Pay in NYC: $1,687. Loan is 29% of Net Pay and leaves only $1,205 to live on.....let me tell you, you can barely find a tiny room in Queens or Brooklyn to rent for $800/mo and a monthly subway card is $105. Can you eat, pay bills, go home for Christmas, etc on $300 a month when starting out? Does it even matter that by age 28 this person will be making $75k if they can't make ends meet at age 22? This is just a recipe for credit card debt and an impending financial implosion.
$50kSalary Monthly Net Pay in TX: $3,410.Loan is now 14% of Net Pay and leaves nearly $3,000 to live on. This person could look at buying a starter home now once his/her savings are built up.
Monthly Net Pay in NYC: $3,069. Loan is now 16% of Net Pay and leaves $2,587 to live on.....enough money to live in a safer neighborhood and even save a little!
$75k Salary Monthly Net Pay in TX: $4,855. Loan is now just 10% of Net Pay and leaves $4,500 to live on.This person is financially in great shape and can probably knock out the balance of the student loan over the next 1-2 years, paying it off significantly ahead of schedule.
Monthly Net Pay in NYC: $4,290. Loan is now just 11% of Net Pay and leaves $3,800 to live on. This person can finally afford to ditch the roomate and live alone.....and build up savings, too!
honestly, people make such a big deal about NYC cost of living. truly, it's not nearly as bad as people make it out to be. you don't have to pay $800/month, but you could do it. $25,000/income probably isn't feasible, but i know people who have started at $30,000 and have done just fine. and there's a lot of people that make less. i'd take a $105/month metrocard any day over a car + insurance + gas + oil changes + tires + etc. etc. people don't realize how much money new yorkers save because they don't have vehicle expenses, don't need a lot of stuff because they don't have space for it, all the free entertainment that exists, etc etc. COL calcs for NYC are very misleading. Yes, it could easily be very expensive, but you could go weeks without spending much money at all if you wanted to.
That 25k salary would go a lot further if they'd do what most recent graduates do and live with roommates. Since when is it imperative that new grads with their first "real" job have their own apartment? Again - this is all part of the rites of passage for young adults. Or it used to be, once upon a time not all THAT long ago in the last half of the previous century. I don't know why this has changed, but apparently it has. And maybe people need to steer their kids back to reality: you can't expect to be financially stable your first couple of years out of college, OR your first decade after high school. It is an unrealistic expectation, with or without a recession.
awesome book just came out about this topic as well...Triumph of Cities. i'm gonna pick it up soon. really seems interesting. it spoke about how people in cities typically rent with little desire to own a place, and as a result, build up savings/worth in different ways. among other topics.
I guess what irritates me the most is that in other countries tution is free or very low cost...in America we have to shell out $40K a year and start our lives off with a boat load of debt.
Where our family is from you test into University. If your grades are good enough you get in on the government dollar. If not, find a job or join the military. I'm from a communist country, so there was no studying religion or women't studies...whatever you were good at is where they placed you...math, science etc.
I just can't see paying so much money and at the same time, I don't want to put my kids to be worse off than their peers.
it's not "free", it's just covered by government taxes instead of tuition. not saying that's wrong or bad, but it's not free, just more accessible because it's taken from people slowly instead of in 4 years and then spread out over a loan payment.
stop looking at sticker prices and the amount. it's daunting, i know, but there's so many options out there depending on the career, and federal loans are very low cost. private loans are where it gets a bit more uneasy, but I got lucky with incredibly low interest rates. you don't have to pay it all at once. there's plenty of ways to do it.
I guess the main question I had was is it wrong to tell your child that you will not pay some huge amount to put them through school, especially if they go for a less usefull degree? I asked my parents not to question my choices as to my major and I guess I would have to grant my child with the same benefit. On the other side of the coin, I would like my kids not to have too many loans when they graduate.
TurtleCreek80, and others who might want to respond, too - I was wondering if you would share what your opinions are regarding students who use their school loans for life expenses?
What I mean is... I know several people who graduated with a 4-year degree with $40K+ debt in the form of school loans, but I know for a fact that these people used school loan money for things like furniture, rent, groceries, etc.
When I asked them about this, they responded that school loans were for anything they needed while in school... so they felt it was OK to use their school loans for "life expenses".
One person even used school loan money to pay for baby stuff when she became pregnant while in college. Now this person is out of school with a useless degree (photography) complaining about the amount of debt "college" cost her. She works retail and is thinking about going back to college - using more school loans to pay her way.
These people all attended state/public colleges.
So - if you must do the school loan option... are you supposed to also use them to pay for things other than tuition and books and school-related expenses? Why does the government allow this?
well, i lived off campus senior year so i didn't have "room and board" but still got the money to pay for rent and groceries. that is room and board for an off campus student.
not all loans are from the government program, and if they have $40k in debt, definitely not all loans are from the government. i see nothing wrong with using the money for many expenses you face while in college, even if it's not a direct relation to cost of college.
My daughter's physical therapy program told them not to work. The program really did take up 40 hours a week.
some programs truly don't allow it. phys assistants aren't allowed to, law school students aren't allowed to, etc. it's really nearly impossible for some degrees. i worked a part time job and did some other odds and ends while in college for spending money, but my grades probably suffered slightly.
I guess the main question I had was is it wrong to tell your child that you will not pay some huge amount to put them through school, especially if they go for a less usefull degree? I asked my parents not to question my choices as to my major and I guess I would have to grant my child with the same benefit. On the other side of the coin, I would like my kids not to have too many loans when they graduate.
not wrong at all. you should help them understand the cost of one vs another, and the benefits. is it worth paying a certain amount more for harvard vs penn state? maybe the answer is yes. maybe all you can do is $5,000 per year, and the rest is student loans. there's nothing wrong with that. they just need to understand what they are getting into. also, i think the american attitude of "you can do whatever you want" causes a lot of our student loan debt problem. because no, you can't do whatever you want. not everyone realizes it. but if your child is interested in a healthcare profession, there's a very good chance they'll get hired right after college. so by all means, get the best degree you can in that field. that's the way i look at things at least. i went into IT/Business Process Re-engineering and my wife did Pharmacy. Honestly, since both professions are such high demand, it didn't matter if we spent $40,000/yr instead of $30,000/yr, especially if there's a chance that our earning power increased or if it helped us get hired quicker.
This is what is the problem with educational institutions in America.
They SCAM these kids. They literally SCAM them.
50 to 100K+ in student loans and sending them to a job with little upside potential. And make no mistake we're living in the age of offshoring. Nobody wants to hire an MBA from Cornell or whatever, when they get a better Indian/Chinese guy at 1/8th the cost. That's what shareholders love, they want revenues in every quarter and increasing ones. A little patriotism is costly, it's like 12% in stock devaluation. Now they call themselves MNC's, it's not a national company anymore.
But........ sure as they know it, these educational institutions do not prepare the kids here for that. Becoz they just care about their coffers only.
Losers here are just the kids themselves and some of the unsuspecting parents who pay for it.
I was educated outside the US. Based on a merit test, and my ranking, my government paid for my entire college tuition fee, it was the leading engineering school in the country. I walked out of college debt free.
I wonder why the American colleges cannot do this. Even with top notch GRE and TOEFL scores, nothing is for free.
I was educated outside the US. Based on a merit test, and my ranking, my government paid for my entire college tuition fee, it was the leading engineering school in the country. I walked out of college debt free.
I wonder why the American colleges cannot do this. Even with top notch GRE and TOEFL scores, nothing is for free.
That is truly sad.
I totally agree. Will force these kids to work harder.
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