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Is a 6 figure loan ever justifiable?


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I was lucky enough to receive an acceptance letter to SAIS-Bologna, but I unfortunately did not receive any aid. After looking through the cost of attendance budgets, I'm debating whether or not the loans are worth the education. I was lucky enough to come out of undergrad without any debt, but I have very little savings. As I am pursuing public/non profit work, I doubt that I will receive a salary more than $50-55k straight from grad, which is slightly less than the $213k most debt repayment calculators say I need to earn to not be swamped with debt.

I guesss my question is this: At the end of the day, how much is this debt going to affect my quality of life? I'm fairly frugal, single (and with no plans to marry/kids in the immediate future), and am perfectly fine continuing to live in communal/college style apartments with a cheap car that's paid off. If I'm not mistaken, I would be able to use the income-based repayment plan to ensure that I'll actually be able to enjoy myself, and after 10 years in public service I can use the public service grant to forgive my interest - of course, the caveat to that is that I have no idea if those plans will still be around in 10 years.

My other option is to attend Denver with a 10k scholarship, but the way I see it, a 120k loan isn't going to be drastically worse than a 80k loan, so if I'm going to consider the 80k I might as well tack on the 40k and reap the advantages of SAIS.

As an aside, for those of you who attended SAIS, what are the fellowship/scholarship opportunities available for second year students, and are they as cut-throat as some have made it out to be?

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I was trying to find an easy calculator online, but didn't have much luck.

The easiest way to think about this decision is to do a Net Present Value analysis.

http://www.investopedia.com/articles/fundamental-analysis/09/net-present-value.asp

A dollar today is worth more than a dollar a year from now, so an NPV analysis distills the impact of positive and negative cash flows over a certain period of time to present dollars. If the NPV is positive, you should take out the loan.

Basically, you have two years of negative cash flow (foregone income by not working, tuition), followed by 10 years of (hopefully) increased salary. An NPV analysis will help you determine if the investment is worth while.

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Schifoan, you are correct. However, when I looked over the financial aid application form, I came to the realization that I had never seen that form before in my life. I avoided saying that in the original message for embarrassment reasons.

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I doubt that I will receive a salary more than $50-55k straight from grad

I agree with the previous poster - I think the SAIS fin aid info is coming out at the end of this week.

Can you be a little more specific with your career goals? Are you thinking more along the lines of non profit work in the developing world, or are you talking about working for the government?

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Schifoan, you are correct. However, when I looked over the financial aid application form, I came to the realization that I had never seen that form before in my life. I avoided saying that in the original message for embarrassment reasons.

cckrspn156, whoah! Don't jump the gun there.

When I read my acceptance letter (to Bologna, incidentally) I read that finaid decisions will come this week, and was mortified to see that I too had never seen that one page form/hadn't filled it out.

This morning I called, told them I had thought the FAFSA was the form and that I hadn't filled out the additional form. The lady who answered told me it was fine, didn't negatively affect my aid eligibility, as long as I clicked "I will be applying for financial aid" when I submitted my original application. So I faxed it in today, although she said mailing it in is fine too.

Nonetheless, we might still be in the same boat and ultimately not get any aid. I'm grappling with the same decision as you are, so thanks for posting. Good luck!

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I just called the SAIS Financial Aid Office and the woman gave me the same message, but when I asked if it was required to send in that additional form she said yes. I'm still concerned that it may be too late, but it's worth a shot.

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This is one of the reasons I didn’t bother applying to GT or SAIS. $120,000 may be a good investment for a top MBA or Law degree, but I have no idea how those pursuing the type of work that comes from an IR masters justify spending that kind of money. Especially when you consider that after a year or two out of school the institution from which you obtained your degree is barely a factor next to other career accomplishments and experience, the thinking that the SAIS springboard is worth tens of thousands of dollars plus interest has boggled my mind.

Those I know that ended up going to GT were basically independently wealthy. Those institutions are fantastic, no doubt, but the cost benefit analysis never worked for me. Unless you have your heart set on work for the World Bank, or IMF, and need the SAIS label to get it, I would be wary of that level of debt for this type of degree. Just my $.02, thoughts vary I’m sure.

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I just called the SAIS Financial Aid Office and the woman gave me the same message, but when I asked if it was required to send in that additional form she said yes. I'm still concerned that it may be too late, but it's worth a shot.

No, she was very clear with me that I definitely need to send in the form. It's required. But she was also clear that it's not too late. The fafsa and checking the box that "I will apply for student aid" was sufficient for processing aid requests.

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Wow. Thanks for saving my day!

Sarah, I'd like to work in the State department either within the Foreign Service or developing/analyzing policy and intelligence. Mmm vague.

No problem! Glad to help.

And see my note below. I'll admit that there could be an outside chance that we blew it, but she was pretty reassuring on the phone.

I'm looking to do the same type of work as you. On the one hand, the debt could be potentially huge and working in public service I won't be raking it in. On the other hand, the student loan reforms that passed with the health care law last year put in a provision that you can't be required to pay more than 10% of your income in public student loans, and I could see myself working in public service for ten years to fulfill debt forgiveness requirements, without any problem. As someone else said, there's no guarantee that those laws will be in place forever, but it's something.

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On the other hand, the student loan reforms that passed with the health care law last year put in a provision that you can't be required to pay more than 10% of your income in public student loans, and I could see myself working in public service for ten years to fulfill debt forgiveness requirements, without any problem. As someone else said, there's no guarantee that those laws will be in place forever, but it's something.

That's what I'm banking on, personally. Here are some specific links to check out:

This PDF covers eligible loans and eligible employers (basically any governmental employer, 503c non-profit, university, etc.)

Income-Based Repayment (IBR) info: Includes a calculator and a chart.

Between these two programs, you would end up repaying about $50-$60K of your $120K in loans over 10 years, depending on income, whether you get married, etc.

Edited by D-Lux
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Wow. Thanks for saving my day!

Sarah, I'd like to work in the State department either within the Foreign Service or developing/analyzing policy and intelligence. Mmm vague.

Not vague at all actually. Part of working for the government is the fact that for 9 jobs out of 10, everyone knows what you're making (it's a transparency thing). Most federal workers are on the general service (GS) pay scale (unless you're military, a political appointee, or foreign service at the state department*). You can get a good sense of what jobs you might be interested in, and what the associated pay grades are at usajobs and opm.gov. With a graduate degree, you'll most likely start at a GS-11 or GS12 (this is pretty much the same across the board: State, Treasury, USaid, Commerce, etc.), but you'll also be living in DC. This means you'll be getting locality pay as well (a certain percentage tacked on top of the pay grade to account for cost of living expenses). You can check here to see what those salaries look like, remember that you'll probably be starting at GS 11, step 1.

Foreign Service (FS) is a different pay scale, and I'm not quite as familiar with it. I believe the pay is somewhat comparable to the GS scale, but there are tax/savings advantages for living abroad at an embassy. Foreign service is definitely an attraction for some people, but it's a little too military-ish for me. If you commit to a foreign service career track, you're committing to moving around from embassy to embassy every 2-4 years. Based the description of your lifestyle you gave earlier (single, flexible) - foreign service is definitely something you might consider.

Anyway, this was probably more info than you were asking about. The point I was trying to get at, is that there are a subset of jobs that do pay less than 65k a year. Generally these are the sorts of jobs you find on idealist.org. In other words, you're exchanging salary for something really rewarding. If you suspect (maybe based on your previous work experience) that you're going to be drawn to those types of opportunities, I'd stay away from saddling yourself with huge amounts of debt. But if you want to work in the federal government, you at least have a sense of what you'll be earning. I'm still not saying go for the debt, just trying to give you more data points.

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Foreign Service (FS) is a different pay scale, and I'm not quite as familiar with it. I believe the pay is somewhat comparable to the GS scale, but there are tax/savings advantages for living abroad at an embassy. Foreign service is definitely an attraction for some people, but it's a little too military-ish for me. If you commit to a foreign service career track, you're committing to moving around from embassy to embassy every 2-4 years. Based the description of your lifestyle you gave earlier (single, flexible) - foreign service is definitely something you might consider.

Thanks for this post. I found it really helpful to read. I'm curious, though, about what you mean by "military-ish" when describing the Foreign Service. Is it just that they're organized in a similar fashion to the military or that their work tends to center on military concerns or something else...? I guess I ask because I kind of know what you mean, but I'm not sure where I got the idea!

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Sarah, I have a feeling that federal workers with master's degrees don't necessarily start at a GS11. It's more like a GS9 or a GS10...check what PMFs start at, but I'm pretty sure its a GS9.

I'm also familiar with the foreign service hiring process and I don't think SAIS will help you over any other school. A master's in IR from the University of Phoenix would probably put you on that playing field. The fact that you may be headed to SAIS Bologna is important though. Living and work exeprience abroad is a very important component of their assessment. If you're gonna do the foreign service, take your test NOW. You'll see what I mean about the hiring process. AND almost EVERYONE fails their first time. Obviously, considering the 20,000 people who take the test each year for approx. 400 job openings. Given the crap-shoot of finding employment in the State Dept (Career OR Civil service), I say follow the money and take a semester or an internship abroad (or both).

Not vague at all actually. Part of working for the government is the fact that for 9 jobs out of 10, everyone knows what you're making (it's a transparency thing). Most federal workers are on the general service (GS) pay scale (unless you're military, a political appointee, or foreign service at the state department*). You can get a good sense of what jobs you might be interested in, and what the associated pay grades are at usajobs and opm.gov. With a graduate degree, you'll most likely start at a GS-11 or GS12 (this is pretty much the same across the board: State, Treasury, USaid, Commerce, etc.), but you'll also be living in DC. This means you'll be getting locality pay as well (a certain percentage tacked on top of the pay grade to account for cost of living expenses). You can check here to see what those salaries look like, remember that you'll probably be starting at GS 11, step 1.

Foreign Service (FS) is a different pay scale, and I'm not quite as familiar with it. I believe the pay is somewhat comparable to the GS scale, but there are tax/savings advantages for living abroad at an embassy. Foreign service is definitely an attraction for some people, but it's a little too military-ish for me. If you commit to a foreign service career track, you're committing to moving around from embassy to embassy every 2-4 years. Based the description of your lifestyle you gave earlier (single, flexible) - foreign service is definitely something you might consider.

Anyway, this was probably more info than you were asking about. The point I was trying to get at, is that there are a subset of jobs that do pay less than 65k a year. Generally these are the sorts of jobs you find on idealist.org. In other words, you're exchanging salary for something really rewarding. If you suspect (maybe based on your previous work experience) that you're going to be drawn to those types of opportunities, I'd stay away from saddling yourself with huge amounts of debt. But if you want to work in the federal government, you at least have a sense of what you'll be earning. I'm still not saying go for the debt, just trying to give you more data points.

Edited by blingem
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Thanks for this post. I found it really helpful to read. I'm curious, though, about what you mean by "military-ish" when describing the Foreign Service. Is it just that they're organized in a similar fashion to the military or that their work tends to center on military concerns or something else...? I guess I ask because I kind of know what you mean, but I'm not sure where I got the idea!

I guess "military-ish" probably isn't the best word to describe it. What I meant to convey is that it's very structured. You go to country X for 3 years and stamp passports (yes, everyone has to do it), then you go to country y for 3 years, then country z, etc. Many foreign service officers have spouses that either a) don't work or B) have very flexible lifestyles. Or they are married to other foreign service officers. Again, not necessarily a bad thing. But it's a very defined career path.

I've also heard a number of my FS friends express frustration that they felt very removed from policy making decisions. You can send back your reports to DC, but the decisions about policy are made in DC, not at the embassy. You also have to be the face of the US (and US policy) - which isn't all that bad if you're in India during the Obama administration. But if you're stationed in the Middle East during the Bush administration - you either support the administration's policy agenda or you resign. There isn't a lot of middle ground (which is just to say it's a political job, like many in DC).

If you're serious about finding out more, the best person to talk to is someone in the foreign service. I'm sure there are a lot of positives that I'm not focusing on in this post.

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Thanks, this is really helpful! My main concern with public service IBR is still that it could go away at any time. Also, does anyone know if you have to work for the same employer for the 10 years, or if you can move around in the public sector?

I'm petty sure you can move around, though maybe someone else can back me up or refudiate refute.

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I'm petty sure you can move around, though maybe someone else can back me up or refudiate refute.

At Berkeleys visit day they were saying you could move around and still be eligible, so I think you are correct.

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Just something for people thinking about public service jobs to keep in mind - they are extremely competitive right now. It's hard to say what the economy will be once you have finished your masters, but I have been applying to federal jobs for over 2.5 years without success. From my reading on various forums, this is the norm... it is hard to even get considered for a federal job without veterans' preference. Combine that with the budget problems and cuts, and it is kind of a crap shoot as to whether anyone will be able to depend on the debt forgiveness program.

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