How much debt is too much debt?

[visitor19]

I have been accepted by two MPP programs and am seriously considering both. I was offered similar levels of financial aid by both, but neither are offering close to full tuition. I assume a job in a related field after graduation will not be particularly lucrative so I'm hesitant to take on too much debt.

To provide some background on my current state, I have a few thousand dollars of debt left to pay from undergrad and some savings, but nothing too spectacular.

So my question is this: how much debt is too much debt to take on for an MPP?

Edited March 24, 2010 by visitor19

[Russophile]

Conventional wisdom on this issue seems to be that you should not take out more in loans than you can make in one year at the job you will get following your new degree. I have violated this conventional wisdom mightily, but overall it seems pretty sound. I suspect that for MPP the advice would be to take out no more than $60,000 including your undergraduate debt, and less is always better, but it also depends upon where you want to work afterward. Good luck with your decision making process.

Edited March 24, 2010 by Russophile

[waldorf1975]

Conventional wisdom is right. Set that limit. Also don't forget to look at the interest rates on your loans, especially if you need to take out a private loan. Sometimes it's the interest, not the principal, that can bite you in the rear.

Conventional wisdom on this issue seems to be that you should not take out more in loans than you can make in one year at the job you will get following your new degree. I have violated this conventional wisdom mightily, but overall it seems pretty sound. I suspect that for MPP the advice would be to take out no more than $60,000 including your undergraduate debt, and less is always better, but it also depends upon where you want to work afterward. Good luck with your decision making process.

[pea-jay]

I have the same challenge. I am trying to figure out how much is too much and whether the private school costs will be worth it the extra debt as compared to the state funded one. As of this point I have no financial info from either so it is pure speculation. That said, I would be supremely happy if I can get out with under 30K in debt (have none right now) and a well paying job. Given the fact that I have a diverse and decent level of work experience, swinging even a 60K loan might be doable after graduation, though I prefer not to pay that much. We'll see.

[oldlady]

Good rules of thumb:

Grad Skool Rulz #9: Why you shouldn't pay for grad school

[Jae B.]

Good rules of thumb:

Grad Skool Rulz #9: Why you shouldn't pay for grad school

^… My feelings exactly. But this is a great site. Thanks for sharing!

Here are all of the rules.

[pea-jay]

Good sites and love the Loan-o-meter. I'd have to make more than $100K/yr to afford full tuition at NYU. I'd need to clear only 40K at Baruch.

Shoving that needle ever closer to a decision...

[moahb]

Since you are in the Public Affairs arena, don't forget about the new Public Loan Forgiveness which could potentially mean that over a certain point you would not be accruing more debt, because above a certain point it would get forgiven after 10 years.

For more info on the PLFP visit:

http://www.finaid.org/loans/publicservice.phtml

http://studentaid.ed.gov/students/attachments/siteresources/PSLF_QAs_final_02%2012%2010.pdf

http://ibrinfo.com/

For me, it looks like, even though it would be 35-45k more in loans to attend Wagner (NYU) vs. USC SPPD, I would only end up paying about 20k (only, yeah, I know) more due to this program. Its still a lot of debt, but 20k looks a lot better than 45k.

[stilesg57]

Couple thoughts:

First, that article is referring to PhD seekers, and for them it makes sense. Not as much for professional degrees, especially law and MBA.

Second, I was freaked out about debt before I started my program, and now I'm not so worried. I've met with a lot of alumni in the last few months - a LOT of them - and nobody's complaining about debt payments. I even started politely asking because it never came up.

Take that for what it's worth. I don't know more than a handful of people within 5 years of my age (26) with just a bachelors who are as happy with their job and their income as MPP alums. I walked into my program with ~$10k of debt and completely unable to get the kind of job and salary I wanted; I'll walk out with ~$80k and few if any regrets. I'm not worried.

Edited March 28, 2010 by stilesg57

[DeepShadeofBlue]

Couple thoughts:

First, that article is referring to PhD seekers, and for them it makes sense. Not as much for professional degrees, especially law and MBA.

Second, I was freaked out about debt before I started my program, and now I'm not so worried. I've met with a lot of alumni in the last few months - a LOT of them - and nobody's complaining about debt payments. I even started politely asking because it never came up.

Take that for what it's worth. I don't know more than a handful of people within 5 years of my age (26) with just a bachelors who are as happy with their job and their income as MPP alums. I walked into my program with ~$10k of debt and completely unable to get the kind of job and salary I wanted; I'll walk out with ~$80k and few if any regrets. I'm not worried.

THANK YOU FOR POSTING THIS. So much of what I've been reading about taking out loans has been very negative. Granted, the issue should never be taken lightly, but reading this post does ease my mind a little, as I am also looking to come out of graduate school with a similar amount owed.

[Cornell07]

I concur. Some debt should not scare you away from a job that will pay huge dividends professionally and monetarily versus staying with only a bachelor's or force you into a program that is is a poor fit for you. Off the top of my head, I know some people here at Yale who passed up better offers from say Georgetown, SAIS, and SIPA to come here with the difference being a full ride and perhaps a stipend there versus half to full tuition here without a stipend. Though those school are all great, they did not offer my classmates the types of experiences that they hoped to get out of grad school and, therefore, those aspects were deemed to be worth the extra 20k-40k.

[coaks]

Yeah, my original post that I deleted was very much along those lines.

I would encourage you to scrutinize the calculations of "needed" salary on that debt pay-back calculator. Actually calculate what you expect to make, find the amount of money you will be bringing home every month after taxes, calculate your monthly payment on a 10 year and 30 year alternate timeframe. When you do this, you should see the numbers/assumptions for what you "need" are simply inflated.

I am looking at over $100K in debt after my MPP and I'm not concerned about being able to repay in the 10 year timeframe or having my quality of life/ability to save for retirement/home-ownership affected.

Edited March 28, 2010 by coakleym

[flyers29]

Some good points made thus far. Certainly, it's not necessarily something you should be freaked out about. However, you also need to plan for the worst case...you can't take on a lot of debt by banking on debt reduction programs that agencies offer or the current policy that will cancel your loans after 10 years of public service. You never know if the government will be in the position to offer those incentives down the road. I'm coming out of grad school with $60k of debt, and I'm sure as heck not going to be able to pay that off in 10 years on a government salary (as I would have to average something like $750/month on debt repayment over the next 10 years). I know there are extended plans etc, but I can't help but feel somewhat like an idiot at the prospect of taking over 10 years to pay off the value of having a MASTER'S from a "good name" when I could've done it at my state-school alma mater for 1/3-1/4 the overall price. I'm not at all bitter or anything, I'm just saying you really need to look at if the extra money for the name is really necessary.

Edited March 29, 2010 by flyers29

[DeepShadeofBlue]

Some good points made thus far. Certainly, it's not necessarily something you should be freaked out about. However, you also need to plan for the worst case...you can't take on a lot of debt by banking on debt reduction programs that agencies offer or the current policy that will cancel your loans after 10 years of public service. You never know if the government will be in the position to offer those incentives down the road. I'm coming out of grad school with $60k of debt, and I'm sure as heck not going to be able to pay that off in 10 years on a government salary (as I would have to average something like $750/month on debt repayment over the next 10 years). I know there are extended plans etc, but I can't help but feel somewhat like an idiot at the prospect of taking over 10 years to pay off the value of having a MASTER'S from a "good name" when I could've done it at my state-school alma mater for 1/3-1/4 the overall price. I'm not at all bitter or anything, I'm just saying you really need to look at if the extra money for the name is really necessary.

Flyers29 ---> I seem to be a very similar position you may have found yourself in a few years ago. I was recently accepted at my dream school (with no funding, of course), and to a state school. Both programs seem great, but the dream school is nationally ranked and offers some location advantages that the state school cannot. That said, I would come out of the dream school about 80k-100k in debt, versus the state school with about 30k in debt. Knowing what you know now, would you still choose to go to the "good name" school versus your state-school alma mater, if you suddenly found yourself in a time warp?

[flyers29]

Flyers29 ---> I seem to be a very similar position you may have found yourself in a few years ago. I was recently accepted at my dream school (with no funding, of course), and to a state school. Both programs seem great, but the dream school is nationally ranked and offers some location advantages that the state school cannot. That said, I would come out of the dream school about 80k-100k in debt, versus the state school with about 30k in debt. Knowing what you know now, would you still choose to go to the "good name" school versus your state-school alma mater, if you suddenly found yourself in a time warp?

Well, hindsight is 20/20 I guess...but yes, I think I would've gone to the cheaper program. Of course, where you go is situation-dependent: my focus was security studies and I'm looking for work with the federal government (finished last week with no jobs lined up as of yet), which in my opinion is kind of blind to the "name brand" thing. Of course, if my focus was more in international economics, which has a strong private sector component, then I probably wouldn't care about the debt as much. So I'm not outright discouraging paying more for a top program, I'm just advising people to put it in the context of what it will personally cost them, how long it will take to pay the debt back, and how much it will benefit their individual goals.

[stilesg57]

Of course this all depends on your options.

My cheapest option was living with my parents and going to an unranked program that nobody's ever heard of and would only improve my hiring chances within 100 miles of Denver. That would've left me $25k in the hole. UCLA & UCSD would've been $55k, Duke and Michigan $70k, and Chicago right around $100k. Given my options, I think it makes total sense that my choice came down to Duke and Michigan.

I talked with our career services extraordinaire, Donna Dyer, today. Actually she demanded I come talk to her because she's keeping up on me and knows I'm behind on my internship search (THAT'S career services). Anyway, I asked her about the debt thing too and she had a similar position: she's never heard any grads bring it up. She's had grads say they need to change careers or leave the public sector for more money for a house or a baby and things like that, but never because of debt. I told her my debt situation ($80k combined after graduation) and she said I wasn't much over the average. So it can't be THAT big of a deal.

Unless the cost is off the charts ridiculous (like, $100k+), I'd probably say go to the best school you can get into that fits you well.

[Minerva473]

Of course this all depends on your options.

My cheapest option was living with my parents and going to an unranked program that nobody's ever heard of and would only improve my hiring chances within 100 miles of Denver. That would've left me $25k in the hole. UCLA & UCSD would've been $55k, Duke and Michigan $70k, and Chicago right around $100k. Given my options, I think it makes total sense that my choice came down to Duke and Michigan.

I talked with our career services extraordinaire, Donna Dyer, today. Actually she demanded I come talk to her because she's keeping up on me and knows I'm behind on my internship search (THAT'S career services). Anyway, I asked her about the debt thing too and she had a similar position: she's never heard any grads bring it up. She's had grads say they need to change careers or leave the public sector for more money for a house or a baby and things like that, but never because of debt. I told her my debt situation ($80k combined after graduation) and she said I wasn't much over the average. So it can't be THAT big of a deal.

Unless the cost is off the charts ridiculous (like, $100k+), I'd probably say go to the best school you can get into that fits you well.

If your choice was between $70k in additional debt from grad school and $100k, would the extra $30k preclude you from choosing the more expensive option -- say if you knew you'd do fine at the $70k school but the $100k school would have more interesting classes and experienced peers? It seems to me that often what you pay for with the £100k + options are super overachiever peers that bring a lot to class discussions (whereas you will have both excellent and not so great professors pretty much anywhere you go).

[coaks]

If your choice was between $70k in additional debt from grad school and $100k, would the extra $30k preclude you from choosing the more expensive option -- say if you knew you'd do fine at the $70k school but the $100k school would have more interesting classes and experienced peers? It seems to me that often what you pay for with the £100k + options are super overachiever peers that bring a lot to class discussions (whereas you will have both excellent and not so great professors pretty much anywhere you go).

At 6.8% fixed interest rate, the difference to you would be approximately $350/month for 10 years. If the $100K option also has a better career services department, you could potentially pay for that with post-grad salary gains.

[gazelle]

Can anyone in IR pay off $70k+ in 10 years?

[coaks]

Can anyone in IR pay off $70k+ in 10 years?

What salaries do they pay in IR?

[gazelle]

$50k range starting, give or take.

[coaks]

I think $800/month would be very tough but doable at first. But you'd probably qualify for income-based repayment, in which case you could lower your payments to almost half that, if you so chose to extend your term and trade-off principle repayment for lifestyle and job selection.

I presume people that work in IR get raises and promotions, though, which would soon ease your burden.

Edited March 30, 2010 by coakleym

[gazelle]

I think $800/month would be very tough but doable at first. But you'd probably qualify for income-based repayment, in which case you could lower your payments to almost half that, if you so chose to extend your term and trade-off principle repayment for lifestyle and job selection.

This is something I'd like to know more about; how do you qualify for something like this, and what kind of percentage are we looking at? Also would this negatively affect credit scores or anything (I'm assuming it wouldn't but it's always good to check)

[fadeindreams]

This is something I'd like to know more about; how do you qualify for something like this, and what kind of percentage are we looking at? Also would this negatively affect credit scores or anything (I'm assuming it wouldn't but it's always good to check)

You can find all of this on the studentaid.ed.gov site:

Income Based Repayment (IBR)

Public Service Loan Forgiveness (PSLF)

[gazelle]

Awesome, thank you.

Interesting--with a 50k income and family size of one, anything from $36,000+ (up to the $140,000 I tried) is the same payment under IBR--$420/mo.

Granted, if you only had $36k in debt you'd be pretty unwise/irresponsible not to be able to pay that off in the set ten years, but it's interesting to note that you could just say "Well, I'm in this for the long haul" and basically be capped at $420 a month (or corresponding amounts reflective of raises, of course) pretty much for life.

I'm curious though--perhaps I didn't notice but I didn't see if it said the income values were household or borrower only; I'm inclined to think that is household income, but I'm not sure. Also I'm curious if the major private lenders offer the same kind of deal (assuming they do but haven't checked).