Edit: I will be updating the quick summary with what I am learning. Thank you FWF members!
I am going to go back to school, but I have no idea of how much is too much. According to http://www.finaid.org/loans/ "The median cumulative debt among graduating Bachelor's degree recipients at 4-year undergraduate schools was $19,999 in 2007-08. One quarter borrowed $30,526 or more, and one tenth borrowed $44,668 or more."
So, that said, what is your opinion of how much debt is too much debt to take on? Adjust for major, and if you took loans, state your major and debt at graduation.
I plan on being in that 10% group, either borrowing a cumulative of $39k or $75k. This is not taking into account any scholarships of which I will be applying. Below I posted my situation.
I have finished approximately 51 hours worth at community college that is transferable to University of Missouri for their BA in accounting. I currently make ~$24k/yr as a full time department manager at Wal-Mart. I have a house with PITI of $602, all other expenses 550-650/month (includes electric, auto insurance, water/sewer/trash, internet, satellite TV, cell phone and gasoline). My g/f contributes $210 to the bill, plus the groceries. I kick in restaurant visits when I can, usually only with coupons or other incentives to bring cost down.
Per the non essential items (re: internet, tv, cell phone), satellite TV is paid by the g/f, my cell phone is SER0 $30. Cheaper than landline where I live. For the internet, gasoline for commute & time away from family make paying for internet cheaper. Also, I drive a quasi-clunker Festiva that depending on how I drive gets 36-45 mpg.
To maximize savings, I plan to put $5000 in Roth, 7800 in 401k, 1800 in HSA (1200 co-funded match). This puts my AGI at around $16-17, enough to take pretty good advantage of the saver's credit. I plan applying for income based repayment, so I should be maxing out my tax deferred/tax advantaged saving to 100% of its potential. This will tack on additional loans I need of course, but I don't see how I am worse than the stereotypical college student: either party hard on mommy and daddy's money or take out $270-350 loans sporting the newest iPhone but majoring in philosophy. If I keep my full-time job, but only go part-time, I plan to take on $11.6k to $13k per year for 3 years (69 hours to go, based on a schedule of 9-9-6 (maintain saver's credit eligibility for taxes) and without the full-time workload associated with school.
If I can't handle school and full time work, I'll go part time at work, and draw out $25k student loans each year, most of three years.
So, it is either full-time 7-4pm job, evening part time classes @ loans of $13k; or full-time student in morning & afternoon, afternoon & evening part-time work @ loans of @25.
This would total consolidated loans of either $39k or $75k. I'd apply for IBR to defer loan repayment until I find a job earning enough to start making a dent in it. Does anyone think this is too much debt to take on? It's scary to think about stepping away from a $25k/yr job to go to school without any security. But I understand that the payoff may yield at least 50% more than I make now, given an average starting salary of $37k. Hopefully in 2013-14 employment opportunities will be more plentiful.
Another benefit of taking $25k loans instead of the $13k is that I could volunteer my time at college working on tax returns. I could also volunteer for charities. All my resume has right now is that I was a member of FBLA in my freshman yr of high school and placed 3rd in an annual business competition, have supervisory experience, and can hold a job (first and only job, Wal-Mart).
Advise please. And thanks for reading.
Message edited by: MoonlitHollow on 2009-08-27 17:08:17 CDT
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Conclusions so far:
1. It is better to work part time than full time 2. Apply for any and all eligible aid 3. Utilize student resources, forgoing opportunities to save for retirement 4. Tap into student loans, not to exceed exceed expected income 5. To calculate expected income, use the 10th percentile of reported incomes 6. Use student loans to your advantage; use your own money while it is stashed earning interest. As long as it is a subsidized Stafford loan and origination doesn't exceed interest income, you make money from loans.
My strategy now is: - Modify W4 withholding to pay anticipated 2009 taxes - Forgo 401k, no matching incentive from work - Save $500/month towards college - Apply for Fall 2010 as early as possible - Take as many credits that can transfer at community college - Apply for all eligible aid (scholarships, grants, Stafford loans) - Treat any remaining 0% origination PRIVATE loan offers as AOR money to earn interest in a bank - When filing FAFSA in 2011, prepay all accounts (electric, water, dsl, tv, mortgage if possible) to minimize my EFC
Message edited by: MoonlitHollow on 2009-08-29 04:20:28 CDT
Not very helpful, but I would say try to limit the amount of student debt you take on - this will be with you until you die/become a vegetable (can't be discharged in BK). That is definitely something you don't want hanging over your head for the next 20-30 years.
I know that terms may change, but my goal would be to do public work for at least ten years to get the tax free loan forgiveness.
I have not yet applied for loans/scholarships, as my start date will be the fall of 2010, with perhaps taking a few more credit hours at community college in the mean time to take care of business electives.
I could get $2000 from work, $3500 from college, and I suppose that would cover half tuition and books. I would probably quailify for grants from filing FAFSA. It seems to me that my best bet may be to forgo the tax credits and push aid to the max and take out student loans to cover cost of living difference. Part time income would be relatively small so I could rollover some of my 401k to a Roth tax free.
There's a lot of cheap schools in Missouri and the midwest... I graduated in 2006 with about $11,000 in debt... Is it really worth it to take on all that debt just to go to a party school? Not in my book...
You need to look at this from a different perspective. Those debt stats include all colleges - the University of Missouri has dirt cheap tuition so you should be on the way low end of that debt spectrum if you even have to take out student loans. It looks like for two and 1/2 years you need to finish your tuition should be less than $24,000. Of course there are books and other expenses, but they will be fairly minimal if you consciously keep them down - you can definitely keep your expenses under $30,000 for the two years.
I would try to max out your aid opportunities to see what is available. As long as you are 24+, with an AGI like that you will likely qualify for grants like the pell grant and other income based help. The maximum pell grant is about $5000/year. I don't know if you can get it, but if you could that is $10,000 knocked off that 30,000 right there.
You have either full or part time income. You do not need to take out student loans for living expenses. If you can't swing the full tuition that is one thing, but I would definitely try to budget and minimize the student loans as much as possible.
I think a degree in accounting from a solid state school is not a bad idea. I think a small amount of debt is manageable, but I can't see going $30,000+ into debt to do it when you can buckle down and pay most of your own way.
Message edited by: brokestudent on 2009-08-27 10:40:20 CDT
I wouldn't take out anything over what you need to cover tuition books (which you almost certainly are at UoM w/ $39kpy). What is your motivation for doing this? Are you looking for advancement at your current job?, looking for a new job?
You could do what I did in college, just take on as much student loan debt as you can and put all that cash in a MMA 'in case you need it'. With the current MMA/HYS accounts it would still cost you on interest, but you would have the cushion, and you can pay it all off once you secure a job after graduation.
Friendly advice: DO NOT ROLL YOUR INTEREST INTO YOUR PRINCIPAL. This option is weighted so far in the lender's advantage it makes me cry, and 99.99% of borrowers can afford the interest each month.
1) Full time school and full time work is almost always bad idea. Working more than 10-15 hours a week is highly correlated with failure in college. Full-time work and part-time school is generally a bad idea--it adds years to your degree plan (forgone income) and also increases the likelihood of failure. The only exception is if the job you are in now is your career that you will continue post-graduation.
2) You cannot just "draw out $25K per year" in student loans, that's not how financial aid calculations work; the key is to stay within AT LEAST unsubsidized Stafford limits and not to fall prey to private lenders. Those limits currently would be $17K/$20K/$20K for each of your next three years (possibly $20/$20/$20 if you are counted as a junior by Mizzou).
3) In general you are thinking about how to finance your education in exactly the wrong way. Build your financial aid package FIRST--including how to maximize Pell and other gift aid--then fit your job income requirements around it. For example, if you quit your job you can file under special conditions using current year income. This will generally bring in a maximum Pell and other goodies.
4) Forget worrying about savings while in school. Use those funds to reduce your loan amount and get out as quickly as possible.
5) Do not necessarily assume you can get into MU; plan to make it happen. Competition for admission to state flagship institutions has increased markedly in the last 10 to 15 years.
6) There are significant tax credits for education related expenses. Don't forget to take those into account.
Have you considered going to school full time and working full time? I would see if you can swing classes during the day and working at night. I know it's not a popular option around here, but I worked full time while going to state school for an accounting degree and it was just fine - graduated in 8 semesters (realisitically, full time school I felt was easy with just 2-3 classes a day). I used the income from my job to pay tuition as I went. I only got into a tight spot in the last semester and had to borrow $4,000, which I paid off in a year. I wouldn't worry about building up your resume through volunteer work. When prospective employers saw I worked full time through school they were very impressed.
I ended up going into public service and I'm kicking myself for not having any debt to write off in 10 years, but such is life. A lot of my coworkers cant take advantage of that program becasue their repayment terms were only 10 years to begin with, so there will be nothing left to write off. Whichever way you do it, I don't think you can go wrong with an accounting degree from a state university.
Message edited by: dawndelion on 2009-08-27 11:08:27 CDT
BlueEyesAustinTexas said: 2) You cannot just "draw out $25K per year" in student loans, that's not how financial aid calculations work; the key is to stay within AT LEAST unsubsidized Stafford limits and not to fall prey to private lenders.
I think you are failing to draw a distinction between 'not falling prey to private lenders' and 'not using private lenders at all'. There is a significant amount of private student loan money that you can get on very good terms (as far as unsecured loans go) if you have reasonable credit history.
Private lenders have their place, but like everything else you have to know what you are doing and act responsibly. Don't believe all those poor ivy league philosophy majors who are crying foul because they were 'misled' into paying $300k @ 6% for a piece of paper. They are by and large an overly vocal minority, as the stupid usually are.
My view of Kollege is to get in, learn what you need, and get out as quickly as you can. The purpose of college is to prepare you for working and making money later. So the sooner you can get to the working and making money part, the better. Pulling complex manuvres with part/full time jobs/school and that public work for 10 years thing, may all be alright if you are into that sort of thing. But it's pointless to do that to save $30-$40k in student loans. Your best bet is to finish your learning and start earning money.
I ran up a $38k student loan while I got my MBA in 3 years of weekends. Why not, they wanted only 2% interest and gave me 20 years to pay it back. I got a 25k/yr increase in salary after I got my degree and switched jobs.
I would say that if your total loans upon graduation are less than your expected salary, then you're ok. At current rates for Stafford loans (6.8%) you'll have to pay around 14% of your loan value per year if you want to pay it off over the standard 10 year term. If your loan value is much more than your salary then you'll be paying a significant percentage.
BlueEyesAustinTexas said:1) Full time school and full time work is almost always bad idea. Working more than 10-15 hours a week is highly correlated with failure in college. Full-time work and part-time school is generally a bad idea--it adds years to your degree plan (forgone income) and also increases the likelihood of failure. The only exception is if the job you are in now is your career that you will continue post-graduation.
Can you provide studies that back up your statements above?
I wanted to see how I could swing making retirement contributions and rolling that into student loans. I don't understand federal loan limits, which would probably limit me to how much 'living expenses' I could take out.
If I took a demotion and switched to a closer store, I could save commute time to work (heck, I could walk there even) & I would drop to only ~$9.60 or $8.80. AVG to $9/hr for 1080 hrs, it would put me into $9720. Work matches HSA with a $600 gift and matches dollar for dollar to $600. Take $600 off. Take $729 for FICA, leaving me w/$8400. Tuition and free estimate for full time is $8800. Living expenses is $12k/yr, not including food.
Even if I get a full ride, I still need a way to pay living expenses. I realze potential scholarship PRIZES can apply to anything (taxable), I know qualified tuition and fee scholarships are tax free.
I think I'd miss out on most networking opportunities with staying full time job. I wouldn't be able to make acct club meetings to network etc.
I assume that my starting pay with an accounting background would be $36k, which would limit loans to $36k. My living expenses don't include any gift or entertainment. If I could swing my degree in two years, I squeeze by. If I can't, the benefit of IBR and loan forgiveness through working in the public sector might be a viable option.
Personally, I would take out as little as you can. I just recently graduated a few years ago, and I only have about 24K in Student Loans, but it sucks. I hate it. I make a decent amount of money, and even with that, it'll still take me years to pay it off. I'm not saying don't take out loans, if you need them you need them, but try to get as much money outside of that that you can.
Whatever you do, the best piece of advice I can give based on my experieneces is DON'T tell yourself "Oh, I can take out a few more thousand to cover some stuff, once I get out, and I get my good salary, I can pay that extra off in no time!" I'm still kicking myself for that one...
Given this economic climate, I wouldn't be very confident I'd get that high pay job. At best, I find something in 6-12 months at an increase of $12k my current gross income.
Income based repayment works on (AGI - 150% of poverty)/12 months, provided a standard 10 yr plan isn't cheaper already. An AGI of $16k would net a repayment of $10/month. I'm aware of recapitalization but if I get loan forgiveness I can swing this to my advantage. If I don't have substantial work while in college, I pay nothing until I find gainful employment in my field.
I get a job making $36k gross, deduct $15k for 401k, $3000 HSA, that brings my AGI to $18k, payments are $250/month.
Yea, I agree with the masses. Take as little as you can. I was one of the "stupid" people according to some of your definitions. I went to a private Engineering school and got both my Bachelors and Masters. I had absolutely ZERO help from anyone in my family and only about $10k in scholarships for my first 4 years. I ended up with about $130k in student loans after 5.5 years.
Some of that was stupid on my part, meaning I would borrow enough to cover living expenses for when I lived off campus (and then some), but a lot of it was because I chose an expensive school to begin with. I believe the cost of attendance right now is close to $50K PER YEAR (that includes, tutition, room and board, books all of that).
Now I make a decent amount of money, roughly $80K, but it still is outside the recommended student loan debt of 1x. It sucks that I have to devote so much of my income to those loans, but in the long run it should be worth it. I would have done things slightly different if I was as mature as I was now and probably come out with $25k or more less in student loans, but what is done is done.
EDIT: I just looked up the cost of attendance now at the school I went to and it is just over $52K per year. Rensselaer Polytechnic Institute is the name of the school for those interested.
Message edited by: xceebeex on 2009-08-27 13:00:33 CDT
MoonlitHollow said:I think I'd miss out on most networking opportunities with staying full time job. I wouldn't be able to make acct club meetings to network etc.
IMHO networking in undergrad is not that useful (unless this is code word for partying). The people you are networking with are just out of high schoool, don't have any connections to companies, etc. It's a lot different when you are in grad school and the students have experience and connections. Just my 2 cents, but I honestly don't network with anyone I met in undergrad and I'm only 7 years out of school.
20k max, do work and stay busy with whatever you can to keep this at a min. I did one year of college (granted 10 years ago) and left with loans of about 4k and didn't even work, I probally got about 2k in support from parents/grandparents. I didn't have a car and didn't eat great but was happy I kept expenditures low.
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