Maxing out federal aid at 138,500 and paying back on income contingent repayment plan

[pearspears]

Is this insane? For an MFA? On this plan you pay back at max 15% of your discretionary income (what's leftover after what they consider essentials) for 25 years and then the rest is forgiven. 

 

I know people do this, but is real life hell afterward? Or is it manageable? 

 

If I do this it would be due to mistakes I've made so I DON'T NEED A LECTURE. 

 

I got accepted into an almost free program and could finish there but would need to max out what I still can to scrape by because not everything is free in it. I've crunched numbers and I don't think I can avoid doing this. 

[GeoDUDE!]

15% is basically means you will not be putting away for retirement for the next 25 years unless you make substantial amount of money (over 100k /yr ) and live well below your means.

[TakeruK]

Is the choice between going to school and maxing out loans vs. not going to school and not having loans? Or, would you already have some federal aid loan anyways from previous education/whatever?

 

If your question is "would you take this option?", my answer would be no, for me, personally. I looked up the definition of discretionary income and it's "adjusted gross income above poverty line". The poverty guidelines are extremely low: http://aspe.hhs.gov/poverty/14poverty.cfm, so it's practically a 15% tax on your total gross income....well probably more like 10% to 15% depending how much you make. As GeoDUDE! said, this is about the same fraction of income that people try to put away towards retirement or other savings (house, car, vacation, children, children's college funds, whatever), so this means you won't have that for the next 25 years. This is not the life I would personally choose to have, so I would rather not get a graduate degree than to choose this life, but it's definitely a personal decision.

[seeingeyeduck]

Can you spell out your thinking on this a bit more? Can you apply to funded program next year? What are your reasons for going to school? What job do you plan to get to pay this off after and will it be an art job? Will you be okay with that if it isn't?

It does seem to be a lot of money for an "almost free" program. I personally wouldn't do it either. It wouldn't cost you that much to just keep making art on your own.

I have a friend who has six figure loans and she is really stressed about it all the time, and she is even in a "practical" career. Maybe if it could be forgiven in 10 years, but 25 is more than half of your working life! Saving early makes a huge difference in retirement investing due to compounding interest and waiting 25 years before starting will really ding you in the long run. I don't think art and a secure future are at odds with each other - if I really had to choose I'd pick the financially practical option since that means I can keep making art instead of picking up jobs to cover the loans.

[Koh]

You are still taxed on the amount you are forgiven. Your income based payment would probably not cover all the interest so your loan will likely give you a 135k taxable income after 25 years. How would you come up with the money to cover a 30k tax bill?