Dealing, psychologically, with the debt

[TulipOHare]

How much is it getting to you? How do you deal with it, or how do you plan to deal with it? Not looking for any specific advice, just wondering what other people's experiences are.

I graduated with $26k in student debt and I've got about $19k left. Depending on where I go and whether I get any scholarships or assistantships, the amount of debt I have will increase by anywhere from $10k to $150k. And I constantly go back and forth between panicking ("oh god no way can I handle any more debt!") and shrugging ("who cares, I'm gonna be up to my neck for the rest of my life one way or another").

[Dreams]

How much is it getting to you? How do you deal with it, or how do you plan to deal with it? Not looking for any specific advice, just wondering what other people's experiences are.

I graduated with $26k in student debt and I've got about $19k left. Depending on where I go and whether I get any scholarships or assistantships, the amount of debt I have will increase by anywhere from $10k to $150k. And I constantly go back and forth between panicking ("oh god no way can I handle any more debt!") and shrugging ("who cares, I'm gonna be up to my neck for the rest of my life one way or another").

You aren't the only one who gets burdened down psychologically by debt. Compared to some people I know, I graduated with a relatively low debt burden but it still bothered me. So I spent most of my income paying it down against the advice of others. And I made sure when applying to schools this round, that I would only apply to those who would in all likelihood fund me, and in the best case do so in addition to giving me some sort of stipend. That way I would not have to worry about a horrendous amount of debt coming out and could focus on finding a job I really liked.

[dherres]

I'm graduating with far more debt that I should be, too (somewhere around $60k, I'm a little scared to stop and actually count). And if I go to this MA program which so far is my only acceptance, in all likelihood that'll raise it to anywhere between $100k and $150k. And then there's the attempt for PhD acceptance following that...... My therapist said, though, that if it's something that you truly want to be doing, the pricetag will take a back seat.

[wildcatsfan86]

I'm fortunate to not be graduating with undergrad debt, but so far I've received NO funding offers from the schools I've been accepted to. I've really only got one more possibility for funding but given what I'm hearing from all of my friends, I'm not holding out any hope. I'll almost definitely be stuck at my state school for my Masters, despite wanting to get out of here because it is the cheapest, but as state schools go, it's anything but cheap. It's sounding like I may be able to take out most of my loans from "the bank of dad", but even then, by the time I'm done I'll owe well over 30k, just to him rather than in the form of a real loan. I'm definitely freaking out. I knew going into this there would be some loans, but all my professors fully expected me to get some funding, so I was hoping that I wouldn't end up owing THAT much.

[GraduateSchoolNut]

Including debts to family members, I owe about $80,000. It's pretty scary, but the great thing about being a student is the deferral with no accrual of interest... I have one unsubsidized loan for $34,000. That is the one that will hurt during school so I must use my stipend to pay down as much as I can as fast as I can to keep ahead of interest payments and try to get a big chunk paid. At 6.8%, I'm accruing approximately $2,300/year. If I want to stay ahead and start eating away at my principal balance, I will have to pay at least twice that. Even so, it's a bit daunting.

I try to think of this all as an investment. Whenever extra money comes in, which I hope it will in the summer times, I will use it to pay off my school debt. I'm hoping to pay $6,900/ year on a $22,000 stipend plus summer income. We'll see how it goes. Thank goodness I am used to living like a student.

[TulipOHare]

My boyfriend suggested thinking of it as starting a business. Hardly anyone has the money to just start one, so you have to either borrow money and promise to pay it back, or convince investors to give you money and promise you'll turn it into awesomeness. It takes massive and obsessive effort to make a business work, and it might take a long, long time before the business is stable or turns a profit. You might fail even if you do everything right (in certain industries, the odds of failing are significantly higher than the odds of succeeding). But people still start businesses.

... but then, he's not going to grad school and doesn't have any student debt. And isn't starting a business either.

[Inspekt]

I owe around 40k from undergrad and I would never consider taking out another student loan under any circumstance. If you are interested in a PhD, apply to PhD programs and get funded. You should not have to pay to get a PhD. Many PhD programs will let you get a masters in passing, so if it turns out the PhD is not for you you can always leave with a masters. No I am not advocating scamming out a PhD program for a free masters, but it is an option if you know the PhD is not right for you.

While doing what you love is a nice dream, when you get out of school reality will hit and $800 a month student loan paytments will not take a back seat. It's time people get realistic instead of doing what "feels good."

Use a time value of money equation and actually calculate out if getting a masters or PhD is profitable long term. You may find that working those 5 years and saving means you actually make more money down the road. The opportunity cost of having no income and living on loans for 5 years can be pretty significant.

Shop around for good interest rates and think about consolidating your loans. 6.8% seems a bit high for a student loan interest rate, but then again I consolidated in 2005 when you could get rates as low as 3%. One person I knew even found a rate of 1.7%. That means the lender is actually losing money long term because of inflation! It is always wise to pay back student loan debt as slow as possible. If you can invest the extra money you'd pay on your student loan and get a rate higher than your interest rate you are actually making money. This isn't a credit card, drag that sucker out. Again with the time value of money and inflation, a dollar today is worth more than a dollar tomorrow.

It is truly amazing how basic personal finance is not required in high school or in college.

[Inspekt]

actually the only program I would consider taking a loan for would be B-School and the MBA.

Even law schools these days are too much of a crapshoot unless you are in a top tier program....

Good luck!

[hailmerry]

I disagree that "It is always wise to pay back student loan debt as slow as possible," though I agreed 100% with your other comments regarding debt. Then again, I am a fan of Dave Ramsey. If you haven't heard of him, he doesn't advocate debt of ANY kind, with the possible exception of a 15 year fixed rate mortgage with 20% down. His basic arguement is that paying down debt is a guaranteed return (in terms of the interest you are not paying), where as investing in the stock market carries risk. In the best of times, it would be wiser to invest your money in the stock market gaining 12% and pay the minimum on a 1.7% loan. However, the subsidized stafford loans offered today are 6.8% and that is a far better return than you will earn in the stock market. Now is a fantastic time to pay down debt. I tend to see debt as a barrier to wealth as opposed to a "leverage," but that's just me.

That said, I am going through the same thing as tulip ohare, we are both in speech pathology where it is possible to find an excellent job as a practicioner with a masters. I have been able to find funding for tuition only (not living) through "service agreements," where you agree to work for a particular population/geographic area after you graduate. I really really wanted to attend Vanderbilt, and they have given me 50% tuition remission the first year with assurance it would probably continue into the next year. I attended a cheap state school and lived at home as an undergrad b/c as I said I hate debt, but I am wondering if I should revise my whole philopsophy on this. If I attend Vanderbilt I will be given the opportunity to train in a subest of the field, feeding and swallowing in children and infants, thats highly specialized and may pay better. I requested more funding and we'll see what happens!

[Inspekt]

Hey Hailmerry,

On second thought you are right. It would only make sense to pay it back as slow as possible if you have an interest rate below inflation, which is probably around 4 or 5% now. I didn't realize the rates were at nearly 7% these days! I'm glad I was able to lock in my 3% rate. Also, people should be careful that their repayments are not just paying interest only (as mine were at first...) and that some is actually going towards the principal.

Basically the moral of the story is every one has to do these calculations for their situation, otherwise they may be losing money!

Still student loan debt is one of the "best" kind of debts (if you every have to go in debt) because they are so flexible about working out affordable repayments. However, I would not go into significant debt for grad programs for the reasons I talked about above....

[cath2024]

Still student loan debt is one of the "best" kind of debts (if you every have to go in debt) because they are so flexible about working out affordable repayments. However, I would not go into significant debt for grad programs for the reasons I talked about above....

But also the worst because you can NEVER discharge it, even if you go bankrupt. And you can only consolidate it once, even if interest rates drop.

[mlle]

I'm glad someone started this thread. I've been completely guilt-stricken all evening bc I REALLY want to go to my first-choice school where I just found out I got admitted today, but it is a private school and the most expensive one I applied to, and it is in an expensive area of the country. I only got a token 10K merit scholarship, which won't even cover one semester of tuition.

I have been *very* lucky not to go into debt from my undergrad and master's degrees (stayed in-state, worked and saved up between BA and MA, MA was partially funded), but if I go to this school for master's #2 I will be paying as much as ~65K (not including living expenses) for a second master's degree. I know my family and friends (and probably a lot of people reading this) will criticize me as being frivolous for getting a second masters at an expensive school that may or may not be worth the money for the field I'm going into, but the program seems to be SUCH a good fit for my interests. It's tough. The financial aspect of being a grad student student is definitely as stressful as the academic aspect.

[prosopopeia]

Last week, I was admitted to the one program I ended up applying to; the one I wanted most, and the one that seemed more *practical*/likely to open my horizons than an MFA in Art. I was ecstatic, and so were my parents. However, its within Tisch NYU, in New york, the most expensive city in the world, and there is no funding for me. Since then, I have tried to do as much of a level-headed assessment as can, of just how possible it is for me to do this. I think tonight I've come to the conclusion that this degree is an untenable option for me. I will have to figure out a different way to carve my life. I am not rich. It's time to stop pretending that I am. I went to a very fancy undergrad program, and my parents paid in full. I'm just now realizing what a generous gift that was from them to me. They're not wealthy, they are immigrants who created a comfortable life, and placed emphasis on education and effort. I have a hard time saying that the degree was worth it...all its done is make me a part of a long lineage of "____ girls"...well-spoken, over-educated be-pearled ladies, a lineage which is more a mirage than anything else, at this point. I don't want to make the same mistake. I am not a practical person by nature, and I can just see how the debt would end up weighing on me pshychologically and concretely, in the long run. So, I guess that's goodbye, then. Final decision needed by May 1st, but it seems to have decided itself for me. F this broken system.

[pizzatime]

I'm facing the debt with the outlook of an entrepreneur starting a business. The capital cost of my education is high (even with half scholarship) but I feel that the risk of wallowing in debt for the near future is offset by the possibility of being successful in a field that I am interested in, and can't find a job without a master's degree. I mean it might not work out and I'll be f-ed for a long time but I'm willing to find out.

To anyone reading this for next year, I would strongly suggest applying to a financial safety, whether thats a state school or a program that is a less prestigious. I did that and its nice that I have the option even though I'm not going there since I got some funding at another school. If nothing else, you can try to leverage their cheaper tuition rate against the program you really want to attend.

Also, the NYT recently had a good article about the future of humanities, which provides some more food for thought.