Looking for some opinions about the dreaded four letter word: debt

[WinterSolstice]

Hi all,

I noticed there weren't any threads addressing this topic, so sorry if this is taboo or something! As everyone is finalizing decisions now, I'd love to hear people weigh in on the realities of paying for an MA. What do you all consider to be an acceptable amount of debt? How much do brand names matter?

I personally did not receive funding, and I imagine there are others in similar situations. I feel like I'm some kind of statistical anomaly to have gotten into SAIS, but have gotten zero funding from Elliott or LSE, which are typically viewed as lower ranked schools. 

But anyway, how is it factoring into your decisions? Is anyone paying full-freight with only loans? Deferring and then re-applying? Would love to hear some opinions!

[anthropologygeek]

The rule of thumb I've heard is don't take out more than you will make in year one of salary

[ProTrans]

Unless you expect to be eligible for forgiveness (my plan)

 

Right now I'm trying to decide less on how much debt and more which debt... although I also don't quite understand when it makes sense to use work-study/fellowships to pay down balance versus use it for living expenses

[azuljen88]

Unless you expect to be eligible for forgiveness (my plan)

 

Right now I'm trying to decide less on how much debt and more which debt... although I also don't quite understand when it makes sense to use work-study/fellowships to pay down balance versus use it for living expenses

 

I think it depends on what your interest rate is and how much you are taking out in loans. If you invest the money you make from fellowships/work-study and get 10% on the returns, while your loans are at 5% interest, it would make sense to invest the money and take out loans for living expenses while in school, as you are growing your money faster than the interest is gathering on your loans. The trade-off is that you'll be paying loans for a longer amount of time. It's definitely a balance!

[WinterSolstice]

@azuljen, that's a good point. How you use savings definitely makes a big impact on the final balance. Looking at the schools you were accepted into, I'd be curious about how you're weighing the options. Do you consider, SAIS, for example, worth going to considering they didn't give aid (which is my situation with them)?. Getting an MA in this area, it's pretty much a necessary evil to take out loans. I'm interested in knowing what amount of loans people consider to be an acceptable level, and how much a "brand name" is really worth. What are your thoughts?

[pavlik]

It's going to be pretty unlikely (read: it won't happen) you'll be able to invest fellowship awards and earn anything close to a 10% interest rate, unless you play the stock market and manage to avoid getting burned. Rates are low now, and the amount you'll have won't be suitable for much, and you'll want access to it in 2 years' time at any rate once you graduate. This is just my opinion, but I would use as much liquid cash as you have (whether it be personal savings, support from family, stipends/outside awards) to first cover living expenses and then any tuition balance. Doing so reduces your future debt load and will mean that your overall debt will be lower (and accordingly monthly payments lower) and that you'll be in a better place to pay it off quicker or actually save money for the future when you have a job after your degree.

 

In general, anthropologygeek is right. Don't borrow more than you anticipate your starting annual salary to be. In a few rare cases, higher debt loads can be justifiable, but don't discount the impact it will have on your lifestyle. If you're carrying $100k+ in debt, you can pretty much forget about being able to save for retirement or a house (good luck getting approved for any substantial mortgage, even if you can swing a down payment), and it could very well mean you're chained to a job you are less than enthused about because you can't afford to leave. Do you want to still be paying off student loans 15-20 years from now?

 

On a tangential note, I would love to see the reasoning behind admissions/aids decisions. Applicants get into and get $ from School A, which is more prestigious and desirable than School B, which admits them with no $, and then School C, which is at best as well-regarded as School B, rejects them. Admissions is somewhat predictable, but I honestly believe getting merit-based funding/fellowships is more akin to a crapshoot than anything predictable. I guess the admissions and scholarship committees all weight GREs, GPAs, undergrad institutions, and work experience totally differently.

[garlica]

Just a heads up to those looking to go to public service forgiveness route- the Obama administration last month capped the amount you can have forgiven at $57K...which hopefully anyone who has been making payments for 10 years will have less then that. I have some friends who were really dissappointed by this news.

[WinterSolstice]

 

On a tangential note, I would love to see the reasoning behind admissions/aids decisions. Applicants get into and get $ from School A, which is more prestigious and desirable than School B, which admits them with no $, and then School C, which is at best as well-regarded as School B, rejects them. Admissions is somewhat predictable, but I honestly believe getting merit-based funding/fellowships is more akin to a crapshoot than anything predictable. I guess the admissions and scholarship committees all weight GREs, GPAs, undergrad institutions, and work experience totally differently.

 

That's a question i would love the answer to as well and one we'll probably never get. I see a lot of people on here insist that if you work to make your GRE a killer score and you have a good GPA then you will get aid. But every person I've actually talked to has said it's pretty random and that MAs are usually pretty poorly funded and first years almost always get shafted. But it would be interesting to find out regardless. I thought having gotten into SAIS, that I was pretty sure to get aid from GWU (which, don't get me wrong is an amazing school, but it's not SAIS), but it wasn't the case. So I wonder if I was particularly unlucky in aid or particularly lucky in admissions. Because say I do go the route of deferring and working on my applications, I don't really know if that will necessarily yield more aid.

[azuljen88]

@azuljen, that's a good point. How you use savings definitely makes a big impact on the final balance. Looking at the schools you were accepted into, I'd be curious about how you're weighing the options. Do you consider, SAIS, for example, worth going to considering they didn't give aid (which is my situation with them)?. Getting an MA in this area, it's pretty much a necessary evil to take out loans. I'm interested in knowing what amount of loans people consider to be an acceptable level, and how much a "brand name" is really worth. What are your thoughts?

 

I decided going to HKS was worth the $35k more than what Fletcher was offering me because I think the program will work better for me (more focus on skills-building, less strictly IR-focused...and yes, the "brand" was a factor as well). I eliminated SAIS from my options almost immediately because I preferred Fletcher anyway and Fletcher was much cheaper. It was definitely a hard decision, and the amount of loans I'll take out (around $88k) is scary, but I am confident it is the right choice for me.  I am incredibly lucky that my parents are willing to help me pay for some living expenses and can help me with loans if I really need it down the road. HKS also has an awesome loan repayment/forgiveness plan for people who work in public service and make less than $60k. They have an endowment set up for this and help cover monthly payments. Now, I wish they'd just given me the $$ in the first place, but it makes working abroad for an NGO in a developing country (as I do now) a much more feasible and attractive option.

[MaxwellAlum]

As someone who is currently making student loan payments for an MPA degree, I'd say that keeping your loan balance at a minimum should be a high priority, but student loans aren't the end of the world. If you do income-based repayment, any balance is pretty manageable day to day. However, I would avoid having a loan balance so high that an income-based payment doesn't even cover the interest that accrues every month, as that is really stressful. Also, if taking out a mortgage is something you want in the near future, maybe talk with a financial planner about how different loan balances will affect that.

[lbjane]

So, I tend to bang this drum quite a bit here, but I personally think that it's not wise to take out a lot of debt for an MA/IR, MPP, or MPA because the salaries in those jobs aren't that high and the rankings don't matter nearly as much as they might for an MBA or JD, for example.  A big part of my decision to attend LBJ was financial. I was accepted to a couple of DC schools, but with little financial aid. Between the higher tuition and higher cost of living in DC, I was looking at about $80,000 more over two years to go to school in DC. As much as I wanted to go to school in DC, I knew that I wanted to go in to government or NGO work and I just couldn't bring myself to spend $80k more to be in DC. On the other hand, between financial aid, working, my savings, and the lower cost of living in Austin, I graduated from LBJ debt-free which was a great feeling to have when I graduated since it meant that I had more options and didn't have to take the highest paying or first job that came along.

If you're interested in working for the federal government, where you go to school will have very little effect on your starting salary. The salary determination process is more or less an equation of education + work experience = GS level X, step Y. The brand name of a school might make a difference in opening doors at NGOs and make a small salary difference, but probably not a big enough difference to offset much extra debt since salaries are generally lower in the NGO/non-profit sector. If you've got your heart set on consulting, then the extra debt to attend a more prestigious program might be worth it, but if you change your mind partway through the program you could be stuck with consulting anyway to pay off the debt. If you come in to the masters as a mid-career student with a lot of work experience though, you could have a higher salary after graduation, so a larger debt payment might not be as big of a problem.

After graduation, I started working with the federal government at a little over 55K in DC, which is more or less average for someone with a master's and a couple of years of work experience. After taxes, social security, etc, I was left with a little less than 40k/year to live on. That's manageable in DC especially since I'm single, but if I had a large student loan payment like the $600-$900/mo payments you can incur if you take out $60K-$80K of loans or had a family, it would be really tough to live in the DC area on that. My salary has gone up a bit in the almost 5 years since I graduated, but it would still be tough if I had a huge loan payment every month. Without debt, I'm able to live comfortably, though not lavishly, save for future needs, and put away some money towards a down payment on a condo/house later on.

Also, being in DC can give you a leg up in networking, especially for the private sector and NGOs, but all of the big policy schools will have a decent alumni network in DC and the big employers of MPP/MPA/IR grads will hit the big policy schools. We had recruiters at LBJ from a lot of government agencies, several consulting firms, and many different international and DC-based NGO/Non-profits.  People in my graduating class went on to work at any number of federal agencies, UN orgs, think tanks, get PhDs, etc. and going to school outside of DC didn't really seem to hold anyone back.  So, while I was initially a little apprehensive about going to school outside of DC, I don't really think it hurt me in the long run. I got 2 great federal internships and then was eventually hired by one of them. Now, I'm in DC and have been able to take advantage of the LBJ alumni network here and build my own network through my current job and living in DC.

 

I'm not sure how much debt you'd be looking at, but 100k in loans with a 10-year repayment at 6.8% interest equals a $1,150/mo payment and, with the interest you actually end up paying $138k.  That's a house in some parts of the country and at least a decent chunk of a condo in a place like DC.  The opportunity cost is higher because if you invested that $1,150/mo in a fund with a 10% annual return, you'd have $237k after 10 years.  Even if your investment only hit 5% a year, you'd still end up with $179k in the bank after 10 years.  So, not only are you paying $138k, you're not saving or investing that same money, so you're losing out on interest and investment gains.

It's ultimately a personal decision, since everyone has a different tolerance for debt, but I generally don't think that a lot of debt is advisable or necessary for most MPP/MPA/IR grads since salaries are not usually that high. I also think that the name of the school, while not irrelevant, is not as important in the public and NGO/Non-profit sector as it is in the private sector. So, paying big bucks for a name brand is not as important as it might be for law schools or MBA programs. For example, a person that I met at an admitted student day for LBJ when I was trying to decide where to go ultimately turned down LBJ to go to HKS. We now work for the same employer, doing the same job with the same promotion potential, and my salary's actually a bit higher because I had a little more work experience before being hired. He has a ton of debt that he's trying to manage, but I don't.

I also think that, if you don't have a good match between program fit and financial aid, it is worth taking another year to work on your application package and/or research other schools. If you got in to top ranked program X with no funding, chances are good you'll get in there again or at least in to a similar program if you apply later. In the mean time, you can do things to improve your application package like trying to boost your GRE, improve your resume, improve your statements of purpose, etc. I would also strongly consider casting a wider net when you apply to schools the second time around because maybe you can get in to slightly lower ranked school Y with decent funding and have similar career prospects after graduation.  

[cappuccinolite]

WinterSolstice, I am in the exact same position as you regarding both Elliott and SAIS so I am so glad you started this thread! I have always assumed that taking out loans was going to be a given, but then reading some of these posts, I wondered if I should even attend grad school next year at all and just wait and re-apply. However, I do feel that grad school is the appropriate next step for me both professionally and personally, and I don't want to work for another 2 to 4 years in a field I don't like just to save up more money, or on the off-chance that I might magically get more aid the next time around - who knows, there could be even more competitive candidates applying during the next application cycle. 

 

I'm planning on calling the financial aid offices at both schools and asking what percentage of their second year students receive funding - that will be a big deciding factor me. As it stands right now, I'll just suck it up and take out loans for the first year, and apply like crazy for any and all fellowships (both within and outside the school) for the second year. I'm also planning on getting a part time job on the side to help offset living expenses and cut down my overall debt - I did this during a semester in DC a few years ago, and while it was difficult, I was able to provide for my rent and food on under $1000 a month. I didn't get to go to the bar as often as some of my friends and I got really good at thrift shopping for my clothes, but it's worth the sacrifice. 

 

In the end it's all about opportunity cost, and only you can decide what that is for your personal situation. 

[uncgrad2009]

Just a heads up to those looking to go to public service forgiveness route- the Obama administration last month capped the amount you can have forgiven at $57K...which hopefully anyone who has been making payments for 10 years will have less then that. I have some friends who were really dissappointed by this news.

 

 

This is not a done deal.  It is just included in the President's FY2015 Budget Proposal (which is routinely rejected/voted down by both parts of Congress).

Edited April 7, 2014 by uncgrad2009

[WinterSolstice]

WinterSolstice, I am in the exact same position as you regarding both Elliott and SAIS so I am so glad you started this thread! I have always assumed that taking out loans was going to be a given, but then reading some of these posts, I wondered if I should even attend grad school next year at all and just wait and re-apply. However, I do feel that grad school is the appropriate next step for me both professionally and personally, and I don't want to work for another 2 to 4 years in a field I don't like just to save up more money, or on the off-chance that I might magically get more aid the next time around - who knows, there could be even more competitive candidates applying during the next application cycle. 

 

I'm planning on calling the financial aid offices at both schools and asking what percentage of their second year students receive funding - that will be a big deciding factor me. As it stands right now, I'll just suck it up and take out loans for the first year, and apply like crazy for any and all fellowships (both within and outside the school) for the second year. I'm also planning on getting a part time job on the side to help offset living expenses and cut down my overall debt - I did this during a semester in DC a few years ago, and while it was difficult, I was able to provide for my rent and food on under $1000 a month. I didn't get to go to the bar as often as some of my friends and I got really good at thrift shopping for my clothes, but it's worth the sacrifice. 

 

In the end it's all about opportunity cost, and only you can decide what that is for your personal situation. 

 

Good to know I'm not the only one in this situation. Mostly I'm thinking about things in general terms of what the value of brand name is, how these schools compare and what would be most useful in terms of where I want to go.  I have a friend who is at MSFS at the moment, and he actually dislikes it immensely because it isn't a good fit for what he wants. So it's of course not simply a question of branding. I'm simply trying to assess the sitaution at the moment and determine how much better of a school is SAIS versus GW. The decision I came to weeks ago was requesting a deferrment from GW, as they seem to be far more flexible than SAIS, and taking time to save up more money, and if I'm feeling ambitious, apply to SAIS again and see what happens. In terms of what I want to do, however, I think GW is really an ideal fit (and being cheaper is just a bonus). They have so many opportunities to focus on gender and development, which is what I want to do. They have more diverse options for study abroad than SAIS, which is very important to me. I'm personally just getting hung up on the brand name of things and my own ego. I'm working on it. 

 

Anyway, I hear a lot of people saying they're just going to bite the bullet and do SAIS even with no aid and hope for second year funding. I would be interested to know how that pans out. I haven't heard any concrete statistics on that kind of thing, and looking further down the line, SAIS is not nearly as detailed with their employment statistics as GW (at least in terms of what's online). With SAIS being so expensive, does it REALLY help you get consulting jobs? I wonder if it's truly worth the price sticker to people. Not to mention I imagine there's a pretty serious spread between how much money the IDEV people make and how much their IR program people make. 

 

At the end of the day, it's about the individual tolerance towards debt, but I do wonder if in terms of salary gains, if one name makes a difference over another, and how much of a difference that is.

Edited April 7, 2014 by WinterSolstice

[X-Thor]

So which would be a "good" debt range. I mean, obviously the best would be 0 (or even better, negative numbers!), but which would be a good "maximum" amount of debt? 50K? 60K?... for an MA to work in the government/non-profit sector, I mean.

Edited April 7, 2014 by X-Thor

[lbjane]

Good to know I'm not the only one in this situation. Mostly I'm thinking about things in general terms of what the value of brand name is, how these schools compare and what would be most useful in terms of where I want to go.  I have a friend who is at MSFS at the moment, and he actually dislikes it immensely because it isn't a good fit for what he wants. So it's of course not simply a question of branding. I'm simply trying to assess the sitaution at the moment and determine how much better of a school is SAIS versus GW. The decision I came to weeks ago was requesting a deferrment from GW, as they seem to be far more flexible than SAIS, and taking time to save up more money, and if I'm feeling ambitious, apply to SAIS again and see what happens. In terms of what I want to do, however, I think GW is really an ideal fit (and being cheaper is just a bonus). They have so many opportunities to focus on gender and development, which is what I want to do. They have more diverse options for study abroad than SAIS, which is very important to me. I'm personally just getting hung up on the brand name of things and my own ego. I'm working on it. 

 

Anyway, I hear a lot of people saying they're just going to bite the bullet and do SAIS even with no aid and hope for second year funding. I would be interested to know how that pans out. I haven't heard any concrete statistics on that kind of thing, and looking further down the line, SAIS is not nearly as detailed with their employment statistics as GW (at least in terms of what's online). With SAIS being so expensive, does it REALLY help you get consulting jobs? I wonder if it's truly worth the price sticker to people. Not to mention I imagine there's a pretty serious spread between how much money the IDEV people make and how much their IR program people make. 

 

At the end of the day, it's about the individual tolerance towards debt, but I do wonder if in terms of salary gains, if one name makes a difference over another, and how much of a difference that is.

 

I may be biased because I *didn't* go to SAIS (or HKS, MSFS, etc. for that matter) and turned out ok, but I realllly don't think the name brand makes that much of a difference in terms of salary in the public sector and it boggles my mind that people take out so much debt for MA/IR, MPP, and MPA degrees.  But, I respect that it's a personals decision and if someone else wants to go in to massive debt instead of saving, that's their choice.

 

For federal jobs, where you went to school makes exactly zero difference since the salary determinations are formulaic, for the most part.  You might get a salary bump in the NGO or private sector, but it's probably not that much, and certainly not enough to offset a massive loan payment.  Some of my LBJ classmates went in to consulting and for the big firms, I suspect that their starting salaries are fairly formulaic as well.  One could argue that graduates of prestigious programs get promoted faster, but at least for federal jobs, that hasn't been my experience. 

 

It's also hard to know whether potential higher starting salaries (or faster promotions) are a result of a particular program or a particular student.  If SAIS is higher ranked and more prestigious, and attracts smarter/better qualified students, how much of the gain is because of the SAIS name and how much is because the student is smarter/has better work experience/etc.? 

[sklorange]

So, I tend to bang this drum quite a bit here, but I personally think that it's not wise to take out a lot of debt for an MA/IR, MPP, or MPA because the salaries in those jobs aren't that high and the rankings don't matter nearly as much as they might for an MBA or JD, for example.  A big part of my decision to attend LBJ was financial. I was accepted to a couple of DC schools, but with little financial aid. Between the higher tuition and higher cost of living in DC, I was looking at about $80,000 more over two years to go to school in DC. As much as I wanted to go to school in DC, I knew that I wanted to go in to government or NGO work and I just couldn't bring myself to spend $80k more to be in DC. On the other hand, between financial aid, working, my savings, and the lower cost of living in Austin, I graduated from LBJ debt-free which was a great feeling to have when I graduated since it meant that I had more options and didn't have to take the highest paying or first job that came along.

If you're interested in working for the federal government, where you go to school will have very little effect on your starting salary. The salary determination process is more or less an equation of education + work experience = GS level X, step Y. The brand name of a school might make a difference in opening doors at NGOs and make a small salary difference, but probably not a big enough difference to offset much extra debt since salaries are generally lower in the NGO/non-profit sector. If you've got your heart set on consulting, then the extra debt to attend a more prestigious program might be worth it, but if you change your mind partway through the program you could be stuck with consulting anyway to pay off the debt. If you come in to the masters as a mid-career student with a lot of work experience though, you could have a higher salary after graduation, so a larger debt payment might not be as big of a problem.

After graduation, I started working with the federal government at a little over 55K in DC, which is more or less average for someone with a master's and a couple of years of work experience. After taxes, social security, etc, I was left with a little less than 40k/year to live on. That's manageable in DC especially since I'm single, but if I had a large student loan payment like the $600-$900/mo payments you can incur if you take out $60K-$80K of loans or had a family, it would be really tough to live in the DC area on that. My salary has gone up a bit in the almost 5 years since I graduated, but it would still be tough if I had a huge loan payment every month. Without debt, I'm able to live comfortably, though not lavishly, save for future needs, and put away some money towards a down payment on a condo/house later on.

Also, being in DC can give you a leg up in networking, especially for the private sector and NGOs, but all of the big policy schools will have a decent alumni network in DC and the big employers of MPP/MPA/IR grads will hit the big policy schools. We had recruiters at LBJ from a lot of government agencies, several consulting firms, and many different international and DC-based NGO/Non-profits.  People in my graduating class went on to work at any number of federal agencies, UN orgs, think tanks, get PhDs, etc. and going to school outside of DC didn't really seem to hold anyone back.  So, while I was initially a little apprehensive about going to school outside of DC, I don't really think it hurt me in the long run. I got 2 great federal internships and then was eventually hired by one of them. Now, I'm in DC and have been able to take advantage of the LBJ alumni network here and build my own network through my current job and living in DC.

 

I'm not sure how much debt you'd be looking at, but 100k in loans with a 10-year repayment at 6.8% interest equals a $1,150/mo payment and, with the interest you actually end up paying $138k.  That's a house in some parts of the country and at least a decent chunk of a condo in a place like DC.  The opportunity cost is higher because if you invested that $1,150/mo in a fund with a 10% annual return, you'd have $237k after 10 years.  Even if your investment only hit 5% a year, you'd still end up with $179k in the bank after 10 years.  So, not only are you paying $138k, you're not saving or investing that same money, so you're losing out on interest and investment gains.

It's ultimately a personal decision, since everyone has a different tolerance for debt, but I generally don't think that a lot of debt is advisable or necessary for most MPP/MPA/IR grads since salaries are not usually that high. I also think that the name of the school, while not irrelevant, is not as important in the public and NGO/Non-profit sector as it is in the private sector. So, paying big bucks for a name brand is not as important as it might be for law schools or MBA programs. For example, a person that I met at an admitted student day for LBJ when I was trying to decide where to go ultimately turned down LBJ to go to HKS. We now work for the same employer, doing the same job with the same promotion potential, and my salary's actually a bit higher because I had a little more work experience before being hired. He has a ton of debt that he's trying to manage, but I don't.

I also think that, if you don't have a good match between program fit and financial aid, it is worth taking another year to work on your application package and/or research other schools. If you got in to top ranked program X with no funding, chances are good you'll get in there again or at least in to a similar program if you apply later. In the mean time, you can do things to improve your application package like trying to boost your GRE, improve your resume, improve your statements of purpose, etc. I would also strongly consider casting a wider net when you apply to schools the second time around because maybe you can get in to slightly lower ranked school Y with decent funding and have similar career prospects after graduation.  

 

Thank you SO much for this information. It is incredibly helpful. I've been accepted into a lot of really good MPP/MPA programs (HKS, GSPP, La Follete, Ford, Price, Luskin, etc.), and this information really put the debt issue into perspective. I want to work in the public sector with education policy, so the amount of loans I would wrack up at HKS or GSPP (6-digit debt for HKS and near 6-digit debt for GSPP) it SO MUCH more than I would be comfortable having after my MPP or MPA degree. I got a full-ride offer from Madison, and I've been debating accepting it relative to Berkeley or UCLA (HKS is sadly out of the question because of the price tag). Madison is similarly ranked to LBJ, so hearing the post-grad anecdotes you mentioned really left me at ease about accepting the Madison full-ride offer. The idea of leaving an MPA or MPP program debt-free sounds surreal and amazing.

[MaxwellAlum]

So which would be a "good" debt range. I mean, obviously the best would be 0 (or even better, negative numbers!), but which would be a good "maximum" amount of debt? 50K? 60K?... for an MA to work in the government/non-profit sector, I mean.

It's very personal and depends a bit on where you are in life and your willingness to be in debt for a LONG time.  For me, having between $40-50k in loans with a standard starting government salary ($50k-ish) is manageable because (not having a ton of other expenses) I am able to make noticeable dents in my balance.  A $50k balance accrues about $225 in interest every month with the current 5.41% interest rate, and the monthly payment on a standard 10-year repayment plan is $540.  With a salary of $50k your take-home pay might be $2,700-$2,900 each month depending on taxes, health insurance and retirement contributions.  If you are a single person without a lot of other expenses, you can likely make the $540 payment and maybe some extra, and still save a bit of money each month/afford a car payment.

 

If you have a loan balance of $80k, the standard monthly payment for the 10-year plan is $860 (and of that $360-ish is interest starting out). I imagine that would really be tough for most people on a $50k salary, as that starts to really crowd out any room for savings, car payments, retirement, etc.  And yes, your salary will increase some, but you'll likely not want to throw all your raises into your loans (maybe you'll want a better apartment, kids, a house, save more for retirement, etc.).

 

The income-based repayment plans do allow you to make payments that are manageable no matter what your balance is, and that gives you the option of prioritizing other things.  Student loans are great in terms of the flexibility in repayment.  The problem is that if these payments don't cover at least a very large portion of the interest, then your loan balance will be growing significantly as time goes by, which is scary.  Unless you actually miss payments your credit score will be fine, and you may be able to get loan forgiveness after 10 or 20/25 years through Public Service Loan Forgiveness/IBR, but relying on these programs being available a decade+ from now can feel stressful, and the debt may keep you from things like qualifying for mortgage.

 

I am very, very glad I attended the school that offered me more funding as my other option was to take on six-figure debt.  Of course I wish I had less/no debt ($50k is still a very large balance), but I absolutely believe that the investment was worthwhile.  I agree with others that if the choice is between a big-name school and six-figure debt versus a another reputable school with lots of funding, hands down take the funding.

[student@dss]

Hi all,

I noticed there weren't any threads addressing this topic, so sorry if this is taboo or something! As everyone is finalizing decisions now, I'd love to hear people weigh in on the realities of paying for an MA. What do you all consider to be an acceptable amount of debt? How much do brand names matter?

I personally did not receive funding, and I imagine there are others in similar situations. I feel like I'm some kind of statistical anomaly to have gotten into SAIS, but have gotten zero funding from Elliott or LSE, which are typically viewed as lower ranked schools. 

But anyway, how is it factoring into your decisions? Is anyone paying full-freight with only loans? Deferring and then re-applying? Would love to hear some opinions!

 

To comment on the original post. It's not worth the debt. My final three choices came down to the Elliot School-GWU, The Institute of World Politics-DSS, and the Fairfax Virginia based Missouri State University Defense and Strategic Studies Program-DSS, a smaller lesser known school in the D.C. area. GWU didn't offer me any funding IWP offered a little bit. When I talked to the financial services guy at IWP he basically tried to talk me out of going to the school by comparing it to buying a new car every semester. GWU and IWP were both in the $50k region. At the Elliot School open house I talked to a graduate who now works at the GAO. I asked him if it was really worth the cost. After telling him about the cost of DSS, ($24,600 overall) less than $10,000 with a work study offer, he basically said the Elliot school wasn't worth $50 grand in debt if I could get a masters some where else a for fraction of the cost.

 

At first I was thinking about the big names that come with big debt, but now I have a chance of graduating debt free. DSS offers a faculty on the same caliber as the other big name schools, some of them have taught at places like Georgetown, West Point, and the National Defense University. The only compromises for going to an affordable school were on name prestige and program size.

 

It's not too late, DSS has a really late application for the Fall, July 20th; however, April 15th is the deadline to receive priority consideration for admission and merit-based scholarships.

http://dss.missouristate.edu/default.htm

[hedong123]

I dealt with the debt issue by deferring for a year to save towards tuition.  If you currently have a decent job it's not a bad plan.

Edited April 10, 2014 by hedong123

[usdenick]

I got very lucky in that I was offered a generous scholarship to my first-choice school. I realize that this is very rare, but I also worked for several years in low-paying, high-prestige jobs and I think that helped my application (in addition to solid undergrad grades and good statements and rec letters). 

 

If I hadn't gotten a scholarship, I don't know that I would still be attending my first-choice school. It's in an expensive area of the country and you do have to take into consideration the cost of living and the extra debt you might incur in these really expensive cities like DC or New York.

 

In addition to considering deferring or going to a lower-ranked school that might give you more aid, I think there are two other strategies for advancing your career. One is finding programs that offer evening classes so that you can work during the day to at least cover your living costs and perhaps a portion of your tuition. Some non-profits even offer tuition remission programs and if you get a job at the university you want to attend you can often get nearly all your tuition covered. 

 

The other strategy that people are not discussing here is completely skipping grad school. I know this might be VERY difficult in some career fields such as IR, but there are some high-caliber jobs that can be gotten without a grad degree (some research assistant positions, jobs on capitol hill, some more administrative positions at well-known organizations) that you can potentially parlay into getting a better job down the road or could boost a future grad school application. I know this strategy may not be right for everyone, but I personally feel there is this gospel that grad school is always the right choice for everyone, and I think it's healthy to question that in certain situations. There are people who go far in life without a grad degree. Not saying it's easy, but I respect those people a lot and I don't think they're any less smart than people who get the grad degree. In fact, I've talked to several people who tell me "you don't really learn anything in grad school, it's just about checking a box and/or networking," which is such a discouraging way to look at an education!

 

The other thing that I would recommend to people who have not already done it is to actually calculate out your cost of living in the future and the impact of a large loan payment on that. Finaid.org has a good calculator that allows you to estimate how much your monthly payment might be upon graduation. If your loan payment is $500, that is an additional $6,000 per year. That may be worth it, but you must remember that the $6,000 is after-tax money, so it's probably more like an additional ~8K that you have to earn each year in order to pay that. I think it might be easier for people that have been in the workforce and have received different level paychecks to understand the impact of different monthly payments on their income.

[j023]

 

 

The other thing that I would recommend to people who have not already done it is to actually calculate out your cost of living in the future and the impact of a large loan payment on that. Finaid.org has a good calculator that allows you to estimate how much your monthly payment might be upon graduation. If your loan payment is $500, that is an additional $6,000 per year. That may be worth it, but you must remember that the $6,000 is after-tax money, so it's probably more like an additional ~8K that you have to earn each year in order to pay that. I think it might be easier for people that have been in the workforce and have received different level paychecks to understand the impact of different monthly payments on their income.

 

 

Little disclaimer: I am not a tax expert and cannot offer professional advice.

 

The claim that student loan payments are made with after-tax money is not an accurate statement, at least not in the United States or Germany. I would like to clarify this issue, as it may be helpful for anyone who is trying to map out their future costs.

 

A student loan payment (like most loans) can be split into two parts: part of it pays back the "principle" of the loan (the amount you initially borrowed), and part of it pays back the interest on your loan. Payments made on the interest of your student loan is tax-deductible (i.e. you do not pay taxes for it), whereas payments made on the principle of the loan (called "amortization") is not tax-deductible (the "after-tax money" referred to by usdenick).

 

The ratio between the two payments is not fixed. Generally speaking, when you start to make loan payments, you are paying more in interest (because the balance of your loan is still so high, so you owe more interest every month). Near the end of the loan, the reverse is true. What does this mean in practical terms? To use the $500 monthly payment example from usdenick, if you have that $500 monthly payment for 10 years, the amount of your payment that you can write-off for tax purposes changes. From a tax perspective, you will be paying less in the beginning of re-payment than in the end. This is helpful if you are taking out a student loan, buying a home, etc. because the burden of your loan payments are lower in the starting years.

 

For the excel-savvy among you, you can use the IPMT function to calculate how much of your monthly payment would be interest payment in any given period in the loan repayment.

[hedong123]

 

 

 

 

Little disclaimer: I am not a tax expert and cannot offer professional advice.

 

The claim that student loan payments are made with after-tax money is not an accurate statement, at least not in the United States or Germany. I would like to clarify this issue, as it may be helpful for anyone who is trying to map out their future costs.

 

 

 

What you say is mostly true but might might mislead others.  The money we will use to pay off student loans will be after-tax money if the amount that we pay towards interest for the year is equal to or less than $6,100 (the standard deduction).  

 

If you have a mortgage, children or are in a situation where you're better off itemizing your deductions then you might be in a position where you could benefit from the fact that the interest portion of your student loan payments will be huge write-offs.  

 

However, upon graduation, if you're single with no kids and no mortgage (which is probably most of us), then you will see no tax benefit unless your student debt is huge (in which I'll call you crazy for taking on so much debt for taking on so much debt for a degree of this type).  So yea, if you take out loans in the amount of 120 grand you'll certainly enjoy tax breaks early on.  But it won't change the fact that you owe a shit load of money (and made a terrible decision).

 

If you're like me and will owe about 50 grand and have no mortgage, kids, or other tax deductions then you'll see little or even no tax break.  

[j023]

What you say is mostly true but might might mislead others.  The money we will use to pay off student loans will be after-tax money if the amount that we pay towards interest for the year is equal to or less than $6,100 (the standard deduction).  

 

If you have a mortgage, children or are in a situation where you're better off itemizing your deductions then you might be in a position where you could benefit from the fact that the interest portion of your student loan payments will be huge write-offs.  

 

However, upon graduation, if you're single with no kids and no mortgage (which is probably most of us), then you will see no tax benefit unless your student debt is huge (in which I'll call you crazy for taking on so much debt for taking on so much debt for a degree of this type).  So yea, if you take out loans in the amount of 120 grand you'll certainly enjoy tax breaks early on.  But it won't change the fact that you owe a shit load of money (and made a terrible decision).

 

If you're like me and will owe about 50 grand and have no mortgage, kids, or other tax deductions then you'll see little or even no tax break.  

 

I was attempting to generalize about the distinction between payments on the principle and on interest, as not all people who frequent this forum live/work (or intend to live/work) in the United States, which has specific rules.

 

For the record, your understanding of the student loan interest deduction in the US is factually incorrect. The student loan interest deduction is taken as an adjustment to income (and thus can be claimed even if you do not itemize deductions). It is, as you suggest, subject to a number of restrictions and eligibility rules. For anyone who would like legitimate information regarding student loan interest tax deductions in the United States, I recommend reviewing this publication from the IRS: http://www.irs.gov/publications/p970/ch04.html

 

I also highly recommend speaking with a financial planner before taking out a large debt obligation; marriage, children, buying a home, etc. may seem like a distant and irrelevant factor for some of you, but over the lifetime of your loan (which could be as long as 25 years), there's a good chance your priorities may change.

[MaxwellAlum]

Yep, to take the student loan interest deduction just fill in the 1040A, no need to itemize deductions. I have close to a $50k balance, don't itemize, and have definitely gotten tax relief. But when planning on taking out loans, I would definitely recommend assuming you're paying with after-tax money. The tax relief is not that much and is limited to $2,500 of interest per year (you will pay that initially on $50k).