Situation Overview:
- Child accepted to several elite Liberal Art schools (very proud of her!)
- Provided some scholarships, but still substantial costs
- Top 2 schools are out of state, so no live at home options
- Future jobs relying heavily on geography to specific cities/locations
- Qualified for no grants (too high of income)
- Household income roughly $200k
- Debts = Mortgage (~$200k), Car (~$25k), Student Loan (~$3k)
- 401k = ~$250k (just turned 40)
- Checking/Savings/Robinhood = $65k
- $25k college savings account (very low and makes me feel a total failure as a parent)
- No credit card balance
Details:
- School 1 –
- $103k/year tuition (including room & board)
- $412k total 4 year degree cost
- No scholarship, no grants
Dream school, wanted it immediately, but truly impossible.
- School 2 –
- $90k/year tuition (including room & board)
- $25k scholarship
- $65k/year after scholarship
- $260k total 4 year degree cost
- $90k/year tuition (including room & board)
Backup school, still somewhat dream, compared to school 1 feels more possible, but still very difficult.
Financials:
- $65k annual costs
- $9k student loan available at 7% for 15 years
- $56k parent loan available at ~9-12% for 15 years
This doesn't seem so bad, until you multiply it by 4…
- $260k total costs
- $36k student loans = ~$325 monthly payment for 15 years
- $224k parent loans = $2,700 monthly payment for 15 years
————–
Student desired jobs include academia (college level) or high niche roles with average salaries ranging from $50-90k in HCOL major metrics. Most prefer or require a masters degree (so assume another $120k to $180k on top of this).
The ROI for the total school loan and cost vs. the target job isn't there.
Child is absolutely devastated to have done the extremely hard work to get accepted to these prestigious and low acceptance rate schools (< 10%), but now might not get the opportunity. Local state school or community college feel like failures. They could allow for future grad school, but they are not in a desired metro/geography for the aspiring career roles. Offer limited connections and opportunities; however, still considered a quality school.
As a parent I don't know what to do…
- I know that we have a good income/life and a chance my earnings could increase
- We are behind in our 401Ks, not catastrophically, but now is time to catch up
- Our house is very affordable (~3% mortgage rate, < $1500 month in major metro) with up to $200k equity, and feels like we must do everything not to lose this
- Child feels like dreams are completely slipping away
- Spouse feels like we have let our child down if they can't go to elite schools
Ultimately leaving us with:
Spouse wants to take the loan and says we will figure it out.
I do not want to take the loan and am terrified that making this investment for our daughter to pursue her dream will cripple us financially, put an extremely low margin of error for the next 20 years, and basically eliminate any chance of retirement. Including a possible risk of losing home.
Thoughts?
Cosigning student loans for child accepted to elite schools with high cost as a middle income family – What should we do?
byu/Legitimate_Yak_9063 inpersonalfinance
Posted by Legitimate_Yak_9063
31 Comments
I don’t think there’s any single undergrad degree on the planet worth that cost.
Teach your child not to throw their life away on silly dreams. $400,000 to make $90,000? Are you insane? State schools are great and more than adequate.
Unless its a law degree from a top 5 law school
Or a degree in medicine
No other degree, especially an undergrad, is worth anywhere near those costs.
Sorry, but you are making a HUGE financial mistake, also putting it in the head of yiur child that this is also a good idea. If your child takes out loans, you condemn them to 20 to 30 years of massive debt that even bankruptcy cant get rid of.
Wow, wild to me schools even still charge this l after all the student loan horror stories.
Youre considering cosigning this? 75k to 100k per year for a liberal arts school? WOW. both of your lives will be ruined after you are ultimately left with 400k debt and your kid moves back in with you with a bachelor’s in music..
Why teach your kid to be so utterly financially irresponsible?
Yes, I fully side with you. If you don’t have rich parents and you can’t get scholarships/grants then that means your choices are more limited. Period. You shouldn’t sacrifice your entire financial landscape for your kid to go to school. Either you sit down and educate your kiddo about what it means for them to take out loans (be realistic about amortization payback charts, etc). Or they go to another school – a 3rd “not listed” choice. You did good. You’re a great set of parents, but you need to have sustainable retirement funds and not need to rely on your kid to supplement your Social Security down the line. Don’t do it.
Starting life $400k in the hole is setting her up for failure. How will she afford to buy a house with that amount of debt? And that’s assuming she doesn’t go to grad school. It will be a huge burden and source of stress her entire life. I know this is a tough topic but I would never let my kid do this. For the vast majority of people, the name of the school doesn’t matter nearly as much as the degree itself and if it’s relevant to the position.
You said it yourself—the ROI on a $400k degree for a $50k-90k job (in an HCOL no less) is awful. To me, that makes this a parenting/relationship issue, not a finances one
None of those options seem worth it. Tell your child to start at a state school and do not take on private loans for education. If federal loans and scholarships don’t cover the bill then you can’t afford it.
What job that pays $50k is competitive? She should rethink that career choice. It’d be fine if it didn’t require taking on debt, but the education and financing would cost more than the job pays. Sounds like a choice between ruining her financial life if she takes on the debt or your retirement if you take on the debt.
People need to say no to these schools. The product they’re selling isn’t worth the price. In the real world they should go out of business or change their business model.
What the hell school/major is this.
EDIT: Whats this school 2 aswell? 90k a year? It’s been a while since I was last in college (graduated 2012) but that seems absurd to me.
Don’t take more loans than the students starting salary. So if starting salary is expected 90k, don’t take more than 90k loans for the degree
If she is going to get a graduate degree, literally no one cares where you do undergrad. Save crippling debt for whatever her terminal degree will be.
There’s no way that’s a rational choice. If the career goal is a $90,000 a year job, apparently a niche job only available in a HCOL area, it’s a setup for failure.
And you are absolutely right. It will cripple you financially for the rest of your lives. Need to replace a car, can’t do it because your debt to income ratio is too high. Want to sell your house and buy a different one? So sorry same story, debt to income is way out of whack. Your wife and daughter are being very unrealistic, and this will wreck your life.
With stuff like this, there is no figuring it out later. You’ve already figured it out, and it’s disastrous. This is almost worth divorcing over. If your wife wants to do it that badly, let her do it, but don’t let her drag you down with her.
I would never consider this and explain to my child that going into deep debt at this point in life (both of you) is not prudent. I’ve had this conversation. Thankfully, our super bright, motivated kid understands that dropping a half million on undergrad is not a good investment.
Your post is so thoughtful and well-written–it’s very impactful. Now is the time to treat your kid like the young adult they’re about to be and show them this post and (at the time of this posting) the accurate replies here.
Oh and since you asked for thoughts, don’t take on this debt. I know it’s hard to seem like you’re crushing your kid’s dreams but by helping them select a school you can afford, you’re saving them from a potential nightmare.
Kid wants a liberal arts degree go to a state school.
Please read “Dream School: Finding the College That’s Right For You” as soon as possible. Your child may not even be happy at the “elite” schools. And if they’re not and want to transfer in a year or two, that’s a VERY expensive mistake.
You’re very right to look at the ROI of the intended career path, and if these “elite” schools provide the right type of early career experience and networking to align with that.
Most people do not pay that much to go to college. Your child and spouse may be romanticizing what it’s going to offer in the long run. State schools are great. Especially if you can gain access to an honors program or some sort of specialized program to get career exposure/experience.
Source: I’ve worked in higher education (non-faculty) my entire career, have three degrees all from non-elite schools that made good career connections, and am living a thriving upper middle class life in my 40s without any remaining student loans. Borrowed about $50k total to go all the way through a PhD.
I would never cosign a loan. I would also never pay that much for education. Stay instate and get the same degree for much less.
17 year olds don’t know how life works, you do. Be the parent here
Do you want your child to be in the same position you are in, but likely worse? 40 years old, behind on 401k and still tens of thousands in student loan debt?
That’s what you’re setting them up to be.
These schools are for the “rich” where $400k is like swiping a credit card. They are not for your average person because there is no actual ROI.
Have kid go to a local community college and get core credits, for two years. Then could go elsewhere. The education is near all the same. “Elite” schools are for rich kids who network.
I’m a former college advisor and financial aid advisor, a liberal arts degree is not worth this. I know it’s hard to say no to your child’s dreams but the debt that they or you will have is 100% not worth it.
If they TRULY are set on graduating from this school I would suggest having them do community college for 2 years and then transfer. This gives them time to know if this is what they truly want and you can also gauge their interests and commitment to this career field.
Curious what exactly the field is. Academia is notorious for underpaying unless you become elite in your field, highly published and sought after. Basically the equivalent of going pro or being a celebrity.
This is absurd. Are state schools an option? Why would you let your kid go into this kind of debt over a bachelors degree? What does your kid want to do? Unless it’s finance this isn’t at all worth it.
There is no degree currently worth the cost of taking our sudden loans unfortunately. Are you factoring interest into these costs?
Unfortunately there is also a very uncertain future that comes with not getting a college degree, as even most entry level jobs require it if she ever wants to change professions to a degree unrelated to her field
If these schools waive tuition for low income families, your family would probably come out ahead by intentionally reducing your income by someone resigning their role (I’m not saying to do this, just highlighting the absurdities of the tuition cost) than taking on 265-400k of debt over 4 years… holy crap those numbers are insane.
Taking on that loan with a projected income of 90k in a hcol area is insane. She wouldn’t survive, just putting into perspective, paying back 400k over 30 years with 0% interest would be over $1100 a month.
I’m sorry to say but this isn’t a do it and we’ll figure it out later decision like your spouse thinks it is. You know the consequences, and they’re awful for you, your spouse, AND your child.
When I was applying to colleges my parents started with the “this is how much we are willing to help and anything else is on your or through scholarships you get” … My senior year of high school I was applying to scholarships like it was my job (in addition to my actual job in hs) and it actually got me a good amount. I wrote an essay about how milk changed my life for a milk scholarship (after the fact I realized it was targeted at kids who grew up on dairy farms, not kids who drink a lot of milk and avoided breaking bones). I pieced together enough $500-few k scholarships to avoid having to get loans when I went to an in state school (that I picked because I got a scholarship that was about a third of the cost).
Point being- admittance to the fancy schools was one thing… But being able to pay was a separate thing.
Don’t co-sign loans for over priced schools. Is this Harvard or Yale or something? If then maybe think about it. Most fancy schools are not worth the money. Otherwise this is madness on your income and retirement savings. You can’t take a loan for retirement.
With their grades, wouldn’t they qualify for almost a full ride scholarship at a less prestigious school? Then use the money that’s saved to live the dream AFTER college.
You said: “you aren’t thinking rationally”. That is a complete sentence and ends the discussion. These “wants” by your child are totally unrealistic.
You cannot afford those schools. Your child can only take out $5,500 freshman year. The rest of the loans are on you. You cannot afford those schools. I am sorry.
Public state university. Full stop. No one should be getting an “elite liberal arts” education for undergrad.
I’m sorry, 6 figure student loan debt for a liberal arts degree? Nowhere on this planet is it worth it.