harvard financial decision

[jchig]

I just read all the helpful replies regarding the decision--the Harvard quandry--concerning the financial issue. My son has been accepted to the MPP program and is overjoyed. However, we cannot help him financially and he plans to apply for $70K in student loans for two years to complete this program. I cannot sleep at night, worried about how he will feed himself and his family with this amount of student debt (his finance also has student debt). This debt will go on for most of his lifetime, and how does one buy a house, feed a family, and purchase cars and other basics with trying to repay a loan with 6.8% interest? His father and I make a decent income but could never afford the equivalent of two mortgage payments. Is there a Kennedy alum who could talk about how does this work--does anyone take out this amount of debt and still live a decent life? He has no designs to be rich--just wants to live a decent life and very public sector-oriented. I am the only one "raining on his parade" but I am very scared for him. Any advice?

Thanks!

Worried mom

[ghanada]

So are you saying $140k total debt for 2 years? If it is just $70k total, than I would think that is a fairly average debt for a Masters. But if it is $140k total than that is extremely high and would seem pretty risky! I personally have around $70k in loans total for my 2 years Masters, but I am going to be doing a PhD in engineering and expect to make around $100k salary when I finish so $70k debt is about $800/month for 10 years and seems justifiable. However, I would be hard pressed to justify $140k debt unless your son is looking for jobs that will be $150k+ salary. $140k debt is in line with people that are doing med/law/business school, which all have high payouts in the end. Do you know what types salaries the jobs your son would want are? Was he offered any funding at any of the schools that he was accepted to? The best advice for grad school is "follow the money".

[jchig]

Thanks for asking--the total will be $140K for two years, in addition to his financee's debt of about $50K for her degrees. There is no aid from Harvard; yet he has been led to believe the alumni connections from Harvard are worth this debt. That is my question to him--how can this debt be anything other than crushing, unless you can generate a salary of $300K or above? He is not interested in grad school anywhere else. I am trying to comprehend what type of life he will have with this debt and wonder if anyone believes it is manageable.

For my part, having done grad school 30 years ago, with student interest rate of 3%, I am outraged at our country that students who want an education are taken advantage of in their desperation to find good jobs. I will be voting for those candidates who are truly committed to solving this student loan crisis--it is far worse than the mortgage crisis, because you cannot simply bankrupt and let go of these loans. From my perspective, I don't know how you students are managing this, but for my son's sake, I am hoping to be wrong.

[IRToni]

If your son is truly committed to public service, he might be banking on the Public service loan forgiveness program. With this program, he would pay the loans back according to his income and after 10 years, the remainder would be forgiven completely.

Aside from that, there's something I just need to say and I hope you don't take it the wrong way.

I think it's great that you're so active and take such a personal interest in your sons' life, but I also think that while your input should definitely be appreciated, it is ultimately his life and his decision. He's probably in his mid-20s right now, having worked for at least a year (since he got into HKS). That means that he's old enough and it is his choice ultimately. That doesn't mean that you shouldn't share your feelings, but I get the feeling, from the way you come across here, that you might be a little overbearing to him and that this might hurt both of you in the long run. Now, you being concerned is understandable, but ultimately, he's an adult that makes his own decision and for him personally, the debt might be worth it. Also note that in case he goes the private sector route, he will likely make 95 to 100k starting salary (the mean here: http://www.hks.harvard.edu/var/ezp_site/storage/fckeditor/file/pdfs/degree-programs/oca/class_employment_overview.pdf). Add bonuses and likely increases through seniority, the debt does seem managable, if he's so inclined.

Hope this helps and you don't take this the wrong way.

[jchig]

Thanks! No worries at all about "taking it the wrong way" I absolutely want to get more sleep at night and not worry about him. I am hoping that I don't know something about this school that is worth this financial stress, which is why I logged on. I do get anxious when I hear folks talking about $100K, as if it's a lot of money. In this day and time, especially if you have a family, it still isn't enough to pay such high loan amounts, and still buy a house, etc.

And he will ultimately do what he wants to do anyway--but it is very hard to know of the financial struggle ahead of him. I will be campaigning for all of you in this fix, that Obama does work to lower that interest rate on loans and perhaps come up with creative funding solutions for education for all of you.

[bluebunny]

Looking purely from a numbers perspective, $200K of debt on a combined income of $150K (assuming your son's fiancee makes about $50K) is doable. Debt payments would total about $28K/year for 10 years @ 6.8%, and federal income tax would be about $30K/year, leaving about $92K take-home pay. This is equivalent to a combined income of $112K with no debt payments.

Also, it seems like buying a house is no longer assumed for this generation, especially in urban areas where an MPP grad is likely to live. It sounds like that's a tradeoff your son is willing to make to pursue the career he wants.

[jchig]

Your numbers sure sound better than what I've worked out--I hope you're right.

Thanks for the reply! Good luck with your program!