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SteveC · July 2nd, 2005, 11:04

[ QUOTE ]
So Sallie Mae only wants to give me $20,000 - we all know that is not enough. Key Bank won't approve any school around here. Is there anywhere else to get money for Flight Training?

[/ QUOTE ]

Let me try rewording my response.

I think loans are a bad idea as a way to pay for flight training.

First off, loans are just a bad deal from an overall monetary standpoint. If someone borrows $40,000 with a ten year payback, they will be giving the lending institution somewhere between $10,000 and $15,000 for the privilege of using their money.

Secondly, they are adding debt at the very time that they can least afford it. Someone starting out in the piloting profession is not going to be making very much money for the first few years, and adding a $400 or $450 dollar monthly payment ($40,000 loan, 10 yr payback, 5-6% interest) onto the debt load at that point could be the straw that breaks the camel's back. Here is a quote from another thread that was posted just last night: "I did the Key Bank loan and although the 6-month deferment was great, my parents ended up helping out when the repayment started. I just don't think a $250+ loan payment is doable on a $1000-1200 monthly salary."

If you watch these boards long enough you will see plenty of inquiries about second jobs for CFI's or FO's. My thought is that if someone is going to need a second job to pay for the cost of flight training, isn't it better to make the sacrifices before rather than after, since earning the money before hand will save $15,000?

Thirdly, I think that a limited offer from a lending institution should be a warning to take a serious look at one's financial ability to pay back a larger loan amount than lender is willing to offer. Unless Sallie Mae is a unique lending agency, they are not in the business of giving money away without a pretty confident expectation of getting that money back, plus some. They expect to be paid back with interest. Their whole existence is based on that premise. If they won't give someone more than $20K, then I presume that they don't think that that person will be able to pay back a larger loan amount based on their income potential (and a whole bunch of other factors as well). That should be a red flag. If a lending institution doesn't think that someone can afford a bigger loan, they are saying that because of past history with other people in very similar situations.

(As an aside, I'm sometimes surprised that more people don't question why there are only two lending institutions in this country that routinely give loans for flight training. Most banks and lenders just love to find new ways to loan people money so they can make more off the interest, so why aren't they lining up at the door to give pro-pilot-wannabes loans? 'Cause the odds aren't good enough for 'em, me thinks.)

Anyway, Joel, my apologies if my original response came off as a personal attack or commentary on your situation. I don't know your situation. But yes, I am a founding member of the peanut gallery.

I see one of the prime purposes of this website to be to educate up and coming pilots about the different options available on how to reach their goals. Thus all the discussions about the pros and cons of different academies, academies vs. FBOs, and PFJ discussions. I think that there needs to be more discussions about the good points and bad points of financing training as well, and I hope that more of the CFIs and regional FOs will chime in with their experiences in that area as time goes on.

July 2nd, 2005, 11:04	#11
SteveC Ameliorator Join Date: May 2003 Location: GRR Posts: 11,203	Re: Anywhere else to get money? [ QUOTE ] So Sallie Mae only wants to give me $20,000 - we all know that is not enough. Key Bank won't approve any school around here. Is there anywhere else to get money for Flight Training? [/ QUOTE ] Let me try rewording my response. I think loans are a bad idea as a way to pay for flight training. First off, loans are just a bad deal from an overall monetary standpoint. If someone borrows $40,000 with a ten year payback, they will be giving the lending institution somewhere between $10,000 and $15,000 for the privilege of using their money. Secondly, they are adding debt at the very time that they can least afford it. Someone starting out in the piloting profession is not going to be making very much money for the first few years, and adding a $400 or $450 dollar monthly payment ($40,000 loan, 10 yr payback, 5-6% interest) onto the debt load at that point could be the straw that breaks the camel's back. Here is a quote from another thread that was posted just last night: "I did the Key Bank loan and although the 6-month deferment was great, my parents ended up helping out when the repayment started. I just don't think a $250+ loan payment is doable on a $1000-1200 monthly salary." If you watch these boards long enough you will see plenty of inquiries about second jobs for CFI's or FO's. My thought is that if someone is going to need a second job to pay for the cost of flight training, isn't it better to make the sacrifices before rather than after, since earning the money before hand will save $15,000? Thirdly, I think that a limited offer from a lending institution should be a warning to take a serious look at one's financial ability to pay back a larger loan amount than lender is willing to offer. Unless Sallie Mae is a unique lending agency, they are not in the business of giving money away without a pretty confident expectation of getting that money back, plus some. They expect to be paid back with interest. Their whole existence is based on that premise. If they won't give someone more than $20K, then I presume that they don't think that that person will be able to pay back a larger loan amount based on their income potential (and a whole bunch of other factors as well). That should be a red flag. If a lending institution doesn't think that someone can afford a bigger loan, they are saying that because of past history with other people in very similar situations. (As an aside, I'm sometimes surprised that more people don't question why there are only two lending institutions in this country that routinely give loans for flight training. Most banks and lenders just love to find new ways to loan people money so they can make more off the interest, so why aren't they lining up at the door to give pro-pilot-wannabes loans? 'Cause the odds aren't good enough for 'em, me thinks.) Anyway, Joel, my apologies if my original response came off as a personal attack or commentary on your situation. I don't know your situation. But yes, I am a founding member of the peanut gallery. I see one of the prime purposes of this website to be to educate up and coming pilots about the different options available on how to reach their goals. Thus all the discussions about the pros and cons of different academies, academies vs. FBOs, and PFJ discussions. I think that there needs to be more discussions about the good points and bad points of financing training as well, and I hope that more of the CFIs and regional FOs will chime in with their experiences in that area as time goes on.