The elephant in the room: Taking on debt for IR

[KJ90]

Where do you go to get private loans? I only get $20,500 which is about $10,000 short of what I need.

The public service loan forgiveness option only applies to direct federal loans. Im only eligible to take out $20,500 a year in those. I'm going to need to take out at least $100,000 in loans total, which means most of my debt will be private.

It's good to hear that others facing this kind of debt are surviving though!

[rose1]

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

This link talks about private loans. At the bottom of the page is a link to a list of places where you can take out private loans. Most of them are banks or credit unions. Most schools also have a place on their financial aid website that lists the most popular place to take out private loans for that school.

[haplessdreamer]

Is 120k in debt really worth it for an MA??? Even at the top schools? what are the earning potentials in the long run? That's like $500/mth for 25 years!!!

[OregonGal]

@Rose1

Actually, according to my research that's not quite how it works. The PSLF program applies to federal loans; however, you can probably cover the costs beyond the Direct (Stafford) loan with Graduate PLUS loans--also from the government. That's because as long as the PLUS loans are in your name (as opposed to the Parent PLUS loans, in the name of your parents) you can consolidate them with other federal Direct loans, and that consolidation loan is PSLF eligible. Grad PLUS loans cover total COA above Direct loans, and I don't think you can max those out. The downside is that they have a higher interest rate (7.9% currently) so when you consolidate with a 6.8% smaller loan your interest ends up around 7.2% for the consolidated loan. I linked earlier to my spreadsheet covering cost comparisons; the second tab of that spreadsheet is a breakdown of repayment costs over various periods and at various incomes.

The caveat is that those are only available to US citizens AFAIK; however, the gist is that the government is moving away from private student loans backed by the government, and towards supplying those loans directly since they're assuming the risk for the loans anyways.

[JayLovesAfrica]

Is 120k in debt really worth it for an MA??? Even at the top schools? what are the earning potentials in the long run? That's like $500/mth for 25 years!!!

That is what I am asking myself. I could go to SIPA and take out 20-30k per year or gratefully accept my fellowship from GW and graduate with no debt at all! How much will Columbia's ivy league name increase my earning potential later in life? Is it worth the debt I'd incur?

[yo_yo86]

That is what I am asking myself. I could go to SIPA and take out 20-30k per year or gratefully accept my fellowship from GW and graduate with no debt at all! How much will Columbia's ivy league name increase my earning potential later in life? Is it worth the debt I'd incur?

I think it largely depends on what you want to do. If you're interested in working for the government I would think being in DC with the chance at doing five relevant internships would be more beneficial than the Columbia brand name. If you're interested in doing work in the private sector, particularly with an i-bank, SIPA would likely set you up better with its NYC connections. Really, though, 40K is a much more manageable amount of debt than 120K.

I am trying to figure out if I should go to Maxwell (just found out that I got 30K tuition scholarship + 12K stipend; total tuition cost is 50K) or sticker at SAIS or Gtown. Luckily I won't have to worry about living expenses, just tuition/fees. Most people I have talked with (both in and out of IR) say that in the long-run the better schools will pay for themselves in higher earning potential and connections. I plan to work for the government post-graduation, but I would also consider a private sector job if the situation were right. I feel like Maxwell wouldn't be bad for government work, but Gtown and particularly SAIS would be better for private sector work. I would be glad to hear anybody else's thoughts on the matter.

[rose1]

OregonGal - thanks for that about the PLUS loans. I thought it would show up on my aid package if I was eligible for PLUS loans but I guess it doesn't. That makes things a little more simple at least.

I also realized that on my $33,000 a year salary, I'm currently saving $500 a month and don't even notice the loss. I haven't had to dip into it at all,even when faced with big expenses like car problems, applying to grad schools, vacations, etc, and while I don't live like a rock star, I really don't watch my expenses the way I could. Plus my boyfriend is unemployed right now since he's getting HIS masters. This makes me worry a bit less since hopefully I'll be making more than $33,000 upon graduation and my boyfriend will be employed at an engineering-masters-degree salary!

I guess $500 or more in student loans seemed like a lot until I realized I'm already putting that much away now on half the salary.

Doh.

[rebmaLS]

Is 120k in debt really worth it for an MA??? Even at the top schools? what are the earning potentials in the long run? That's like $500/mth for 25 years!!!

I think that depends on how far you want to go and where you want to work. I've found that most of the best jobs are out of reach if you do not have a masters. Eventually you can probably reach some of those jobs once you have 5-10 years experience, but even then you may be paid less. For example, my employer won't consider you for a manager position unless you have 5 years or a masters degree. Some organizations won't even consider you at all, even with experience, if you don't have a masters. I'm fairly certain you can't work for the World Bank or the IMF w/o a masters, and I think the UN may have similar requirements. I would argue that you are limiting yourself in the field of IR if you decide to continue on with only a BA/BS.

That is what I am asking myself. I could go to SIPA and take out 20-30k per year or gratefully accept my fellowship from GW and graduate with no debt at all! How much will Columbia's ivy league name increase my earning potential later in life? Is it worth the debt I'd incur?

I am facing a similar choice - GW with cheaper tuition & a greater fellowship or SAIS or Fletcher with a lot of debt. I've been thinking about this and I rthink the choice to take on a large amount of debt does not have a clear answer. I've talked to some people who have described grad school as a means to an end, rather than an end in and of itself, and so have encouraged me to go with the cheapest option. Many people view it that way, and if that's the case with you, I think GW would serve that purpose equally well as SIPA, especially given GW's location in DC.

On the other hand, if you're like me, and you view these next two years as an important experience in and of itself, then I would say taking on the extra debt could be "worth it." I think that your more personal values should weigh equally against which school will get you a better job, faster. If you think you'll have a richer experience in one school b/c it has a stronger community, a curriculum that suits you particularly well, b/c you've always wanted to live in x town, or b/c you've always wanted to intern for x organization that is located in x town, etc., those are all characteristics to consider in addition to just brand name. Because ultimately you want to be happy and not always thinking "I wish I'd gone to x school." Clearly people have figured out ways to manage large amounts of student loan debt in the past, so it can be done.

If I decide to go that debt route, I plan to work my ass off my first year so that I'll have a better chance at a larger 2nd year fellowship. I'd also plan on getting a govt job after graduation to take advantage of the public service loan forgiveness program. And, I'd probably pick Fletcher b/c they offer their own student loan repayment program.

[state_school'12]

Here's the 'Beta' version of my loan spreadsheet. I think it has some good features. It calculates deferment options, and the interest accumulation while in deferment, along with other features that you'd expect. You can compare up to ten programs. I recommend copying and pasting (values) from the results of each school analysis (i.e. the green cells in the Dashboard tab) into a separate tab or workbook.

Sorry if all of the colors are confusing, I got a little carried away. It uses a pivot table and a lot of referencing, so I hope that everything translates when you download it. Don't use it in Google Docs, it won't work. I'm still refining it, so shoot me suggestions/bugs. I think the next step is to factor in up to $8500 in subsidized stafford loans we might be table to take out, and to build in undergraduate loans into the monthly payment and monthly take-home pay figures.

Link: https://docs.google.com/open?id=0B476rg_hUjpiUHhwSGg0bi1Ubk9Xa2RKcmhuZkZEdw

[OregonGal]

Re: subsidized Stafford loans... last I heard they've phased those out for graduate/professional degree students. They're only subsidizing undergraduate debt.

[state_school'12]

Lame! The website hasn't changed... Let's hope it's right. http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp

[TypeA]

I'm pretty sure OregonGal is right. IIRC, it was part of the debt ceiling bill that was passed, and takes effect in July... just in time for us, naturally.

[OregonGal]

http://studentaid.ed.gov/PORTALSWebApp/students/english/recentChangesSA.jsp

Graduate and professional students are no longer eligible to receive subsidized loans.

• Effective for loans made for payment periods that begin on or after July 1, 2012, graduate and professional students are no longer eligible to receive subsidized loans. However, if you are a graduate or professional student, you may still qualify for up to $20,500 in unsubsidized loans each year.
  

Totally lame, I know

Also, for your calculations to come about incorporating undergraduate debt and calculating take home pay--I used the loan consolidation calculator and a tax withholdings calculator to figure out those amounts--the tax calculator I found was for small business owners/self-employed so it calculated federal, state, Medicare and SSI withholding.

[KJ90]

I was wondering that too why no one seems to have gotten subsidized loans, so much better...

[urbanrenewalprogram]

I'm also in a similar boat. I thankfully got into the programs i applied to (HKS MPA/ID, SAIS IDEV, and SIPA Iforgetwhat) and am pretty much settled on the MPA/ID program. It's been a dream for the last 3 years and there's a very good fit between my interests and the program.

The debt, however, is not so attractive. Despite SAIS offering me a 20k fellowship plus 20k in Stafford loans, HKS offered me nada. I applied to two fellowships and wasn't selected for either one.

Right now my options are to take on $120k of debt through the federal government, or to defer for a year, get feedback on my fellowship applications, and then reapply to the same fellowships plus a few more that I could not apply to this past round. Although the latter option sounds okay in principle, there are a few caveats: I hate my current job. If I leave to switch to something else (this is still difficult given the economy!), the salary has to be similar enough so I can, at the very least, save some money (ideally $30k) and not feel like I made a mistake taking a year off just barely surviving and not putting money away for graduate school. The most obvious drawback is that there is no guarantee that I will get any of the fellowships the next time around.

If i take on the debt then my job options out of HKS are obviously limited. I'll have to go the private sector route (probably strategy consulting, thankfully that is possible with the MPA/ID) for several years to pay off the loans. I am not sure if I would feel okay finishing a degree focused on international development and then turning around and arguably doing more harm than good working for one of the strategy consulting behemoths. If I have to I have to, but it's not something I am excited about.

Thankfully though I don't have any undergrad debt.

Any tips?? Would love some of this forum's insight!!

[OregonGal]

@urbanrenewalprogram

I would urge you to think about your desired career trajectory after graduate school--specifically, is private sector where you want to end up or would you prefer ending up working for a public/501c3? Research the kinds of organizations you would prefer to work for. What kind of help (if any) do they offer with paying off loans? How much do you expect to be making entry-level at these organizations? Would your employer be PSLF-eligible?

The reason I want you to think about these questions is because I definitely had issues when I crunched the numbers and realized I was staring at potentially $100-120K in debt for two years of school, after I managed to stay below $20K for 4 years of undergrad. I also had issues with the concept of depending on the government to forgive my debt, even though I am 99% sure I will be working for a PSLF-eligible organization after graduate school.

However, after crunching the numbers with figuring out my take-home pay I was a little more okay with it. Is it a ton of money? Definitely. However, if I went private-sector I would be making enough money to cover the standard repayment plan. If I go public/NPO like I expect to, the PSLF program literature specifically encourages people to take out the IBR plan--which would have me, at $40K/yr salary, paying essentially the same I do now on 1/6 of the debt on a standard 10-year plan. By the time I hit 10 years, I would have more than paid the equivalent of the loan principal which is what makes me okay with the program--personally, I'm comfortable with the government essentially converting my 25-year loan to a 10-year interest free/very low interest loan, but not comfortable with not paying back at least the principal of the loan I took out.

I am currently facing the exact same dilemma as you, though unfortunately not at as amazing an opportunity as HKS. I'm trying to decide between going to UCSD IR/PS or working a year or two, saving up money and re-applying to get into a more 'name-brand' school like SAIS. One of the pros for me of graduate school are that it would lack uncertainty: I would know where I was going to be for the next two years, and that it would (theoretically) help me further my career ambitions and upward mobility. One of my worries about waiting and re-applying is that I don't have an amazing career opportunity lined up, and while I'm fairly confident I can find a position in the DC area somewhat relevant to my interests, I feel that if I do work and try again I would need a great position that would really enhance my resume, and that's a bit harder. Even with that there's no guarantee I would fare better in the application pool next time, or get any financial aid, fellowships, etc. I am really tempted to just take the guaranteed path and go with it.

[rebmaLS]

Right now my options are to take on $120k of debt through the federal government, or to defer for a year, get feedback on my fellowship applications, and then reapply to the same fellowships plus a few more that I could not apply to this past round. Although the latter option sounds okay in principle, there are a few caveats: I hate my current job. If I leave to switch to something else (this is still difficult given the economy!), the salary has to be similar enough so I can, at the very least, save some money (ideally $30k) and not feel like I made a mistake taking a year off just barely surviving and not putting money away for graduate school. The most obvious drawback is that there is no guarantee that I will get any of the fellowships the next time around.

I can sympathize - I too hate my job and I cannot wait to quit come August. For me, I refuse to spend a whole bunch of time looking for another job that may or may not be better (I'd have a required salary as well) only to then spend a whole bunch more time (and money) re-applying to grad schools & fellowships. And then, like you said, you don't even know that you'll end up better off.

Like OregonGal said, the IBR plan, in conjunction with the PSLF program, make a significant amount of debt at least manageable. Sure, it wouldn't be pleasant having that much debt upon graduation, but at least you'll know you got the most out of your (likely) one-and-only experience in grad school. With that said, I still haven't decided. I'm hoping the open houses will help me decide whether what I'll get out of the pricier schools will justify the extra money.

[urbanrenewalprogram]

OregonGal and rebmaLS

Thank you for your response and insight. It's definitely very much appreciated. Your insight into the PSLF perhaps goes to the crux of my point: you become restricted in your career either way. I am trying to get into a career in private sector regulation and I envision my career straddling both the private and public sectors. I am definitely in the younger part of my career (I am 25 currently) so I honestly do not know where exactly I'd want to go right after graduation. I'm hoping to find my niche when I actually get to HKS and start meeting folks. I've always had the World Bank YPP on the back of my mind but that is very competitive (though a significant number of MPA/ID alum end up there) and is mostly a pipe dream.

In addition, I've worked a decent amount in my home country and definitely want to head back there eventually, perhaps for a few years. Although my salary there would put me in a high income bracket by the standards there, it would be close to peanuts in USD terms.

Given my lack of a specific career vision at the moment, it is scary to think that I may be restricted in my choices coming out of HKS. I will definitely be applying for external sources my second year (and perhaps the fact that I am enrolled at HKS will help put a "name" to an application) so there's always that possibility. I'd just like to keep my options open, which is why I am so nervous about these loans.

For the IBR -- if you pay more than the minimum amount, are there any penalties? It would be nice to have the IBR payment amount as a "worst-case scenario" and then attempt to pay it off sooner than the program stipulates if you are able to tighten your belt each month. From what I understand it turns the loan into a 25 year loan, correct?

I feel kind of embarrassed -- admitted to my dream program but yet complaining about the pseudo-difficulty of having to choose between public/non-profit v. private career after graduating. First world problems.

[OregonGal]

For the IBR -- if you pay more than the minimum amount, are there any penalties? It would be nice to have the IBR payment amount as a "worst-case scenario" and then attempt to pay it off sooner than the program stipulates if you are able to tighten your belt each month. From what I understand it turns the loan into a 25 year loan, correct?

This is my understanding of the IBR plan with the caveat that I am not an expert on loans, government loan programs, financial aid, etc. This is just what I think I know from my experience going through this process

In general, the federal government allows you to pay off the principal of your loan at an accelerated rate whenever you choose, thus reducing the amount of interest you pay and, potentially, the term length of your loan. They do not apply a penalty to forward payment, but I believe you have to specify if you're making future payments in advance (like giving them a year's worth of loan payments in a sort of annual installment vs monthly installment) or if you're paying down the principal. AFAIK, that scenario does not change if you enter an income-based or income-contingent plan. Of course, when you pay down the principal it has an outsize effect because that reduces the compounding of the interest, so if you have the ability to do so and your student debt is your most expensive kind (7% rate vs 3% on your home loan, for example) it's in your best interest to pay it down as quickly as you are able.

The standard loan is a 10-year, 120-payment loan; a standard consolidation loan is a 30-year term loan; neither takes into account any variables like income. It calculates how much you need to pay to pay off your loan in X installments, and you have to pay that amount. Nice and straight-forward.

The difference between that and the IBR plan, besides the 300-payment term (25 years) is that income-based repayment is just that--income based. It's designed for those who are either have a significant amount of debt, are planning on a low-income career, or both. You are eligible for the plan if your payments under IBR (where they calculate a percentage of your take-home pay with adjustments for household size) are less than your payments under the standard 10-year plan (they won't be if you only have $20K in debt, but will be if you have $100K). You submit your tax returns every year so they can recalculate your monthly payment, but it will never be higher than what that 10-year payment amount--it remains your cap.

The plan caps your monthly payment at a certain percentage of income over the federal poverty limit or that 10-year plan amount, whichever is lower. So, let's say for example after your MA you go into the PeaceCorps, and therefore your "full time salary" is below that income floor: your monthly payment would be $0. However, you have some money set aside and don't like to see that debt stacking up--you could overpay by putting in even $25/month and put it towards your debt principal. Then, after PeaceCorps you go consult with a major firm and start making 6 figures very quickly (you can dream, right?). Your income tax return would reflect that, which in turn would alter your monthly payment to that capped amount. End up having 5 kids? You won't be choosing between buying diapers and paying your student loans, because IBR takes household size into account.

Now, when I calculated out the IBR plan it turned out that at a certain income amount, remaining single, I would pay off my amount in less than 300 payments because I was paying at the capped amount the entire way through. At a lower income, however, I wouldn't pay off the loan entirely and the remaining balance of interest would be forgiven after 300 payments, if I chose not to go for PSLF and have it forgiven after 120 payments.

Here's the link to the IBR FAQ if you want to read through their explanation, but I think I've summed it up pretty thoroughly here. Fairly complicated, but I think that at the levels of debt MA IR/PP candidates tend to accrue it's definitely worth enrolling in because it allows you more flexibility to take that lower-paying job if you want to; you don't have to choose the soul-sucking job in order to pay your bills.

[HDPFDan]

Does anyone have any links to a good directory for scholarships/fellowships, particularly focused on govt/internatioal affairs? I'm not eligible one way or another for just about everything I've found out there. I also know its late to apply to start in Fall 2012, but I may be waiting another year to start school, or looking to fund as much of my 2nd year as possible.

[OregonGal]

If you check some of the big IR schools they have listings of external fellowships that they keep; I definitely went through SIPA's list and UCSD's. Unfortunately, I don't know of a useful aggregator of graduate IR fellowships outside of IR school admissions websites.

[HDPFDan]

Yeah I've used SIPA's, not much there that I can make use of. I'll take a look at UCSD's though, thanks.

[aspiringmaster]

Does anyone know what the process is for being approved for a Grad PLUS loan?

Here is my situation: I'm taking summer courses. My total summer tuition cost is $8,750. I've been approved for a Federal Direct unsubsidized loan in the amount of $10,250. This obviously covers the tuition cost and gives me $1,500 extra for living/book expenses...which will not be enough to live off and pay my bills. So...I will be applying for a PLUS loan.

From what I understand PLUS loans have no limit and can be used to cover the total cost of attendance not covered by direct fed loans. But in my case this summer, direct fed loans DO cover the tuition cost.

So...I'm wondering:

1) Would I be approved for a PLUS loan even though direct fed loans already cover the cost of tuition?

2) Is there more leniency regarding the credit history check when approving PLUS loans than the process used by normal private lenders? (I have two credit cards, both in good standing but both with high balances relative to credit amount allowed)

3) Would there be a cap on my PLUS loan if I was approved? (If no cap, I would actually like to use PLUS money to pay off credit card debt)

Edited April 4, 2012 by aspiringmaster

[OregonGal]

I would suggest contacting your school's financial aid office. AFAIK PLUS loans come through the school, and the cost of attendance is based off the school's estimate. I don't know anything about the credit check, but the PLUS loan caps out at total cost of attendance so you can't increase it to pay off credit card debt.

It could be that the unsub direct loan covers the school's estimated COA, in which case you can't get a PLUS loan to supplement. However, some schools will extend small "bridge" loans for summer classes.

[rebmaLS]

I would only add that COA typically includes more than tuition.