Schools Managing College Loans: Tips for Paying Off Debt and Planning for Grad School

[Benzoate]

I'm sure most of you have college loans to pay , with the exception of a few students who were offered scholarships or grants. Without getting into specifics , how long does it take most of you to pay off your college loans. tuition at my school cost at least 10,000 dollars a year. I know I won't graduate in 4 years, maybe 5 or even six years. Should I go ahead and attend grad school after I've completed undergrad in the projected years or should I take some time off to pay for college loans and then apply to grad school?

 

[Asphodel]

Everyone in my school gets financial aid at least up to their tuition.

The ones with lots of scholarships end up going home with $15,000 or so for their expenses.

 

[Benzoate]

Everyone in my school gets financial aid at least up to their tuition.

The ones with lots of scholarships end up going home with $15,000 or so for their expenses.

what about the ones without scholarships?

 

[Asphodel]

They get work-study, live with their parents, have their parents pay for their dorm fees...*shrug*

 

[Greg Bernhardt]

College loans usually have very low interest rates. So don't fret on getting them paid off. Concentrate on your studies and pay them off slowly over the next few years after you graduate if you have to.

 

[gravenewworld]

I'm sure most of you have college loans to pay , with the exception of a few students who were offered scholarships or grants. Without getting into specifics , how long does it take most of you to pay off your college loans. tuition at my school cost at least 10,000 dollars a year. I know I won't graduate in 4 years, maybe 5 or even six years. Should I go ahead and attend grad school after I've completed undergrad in the projected years or should I take some time off to pay for college loans and then apply to grad school?

Graduated with ~$40,000 in debt, at the rate I'm paying it off now I won't be done paying it off until about ~2030 (started payments in 2006).

What do you want to go to grad school for? Master's or PhD? Masters degrees are extremely attractive if you just want to go to work in industry. PhD is not necessary. If you do decide to get a masters you could simply find a job first, and work full time while studying for your masters and have your company pay for it. Don't forget that interest never stops building on your student loans. I expect to pay almost $40,000 in just interest alone on my loans, so yeah that $40,000 loan I took out really cost $70,000-$80,000. I moved back home to my parents house (yes lame I know) to save money and pay off my loans faster. Having a large amount of student loans makes it extremely difficult to save for a down payment on a house.

 

[Benzoate]

Graduated with ~$40,000 in debt, at the rate I'm paying it off now I won't be done paying it off until about ~2030 (started payments in 2006).

What do you want to go to grad school for? Master's or PhD? Masters degrees are extremely attractive if you ju is not necessary. If you do decide to get a masters you could simply find a job first, and work full time while studying for your masters and have your company pay for it. Don't forget tst want to go to work in industry. PhDhat interest never stops building on your student loans. I expect to pay almost $40,000 in just interest alone on my loans, so yeah that $40,000 loan I took out really cost $70,000-$80,000. I moved back home to my parents house (yes lame I know) to save money and pay off my loans faster. Having a large amount of student loans makes it extremely difficult to save for a down payment on a house.

I think I am just going to go for my masters and then phD.
Well I don't want a house right after I graduate from college. Other than having trouble of borrowing money for a payment on a house, Will having a large amount of loans affect your graduate and postgraduate education if you immediately want to go grad school after college?

 

[Laura1013]

My undergrad grant only covered a third of my tuition. I graduated with about $60,000 in student loan debt, some of which are low-interest government loans, but the bulk of it are evil Sally Mae loans with a higher interest rate that compounds even while my loans are in deferment.

I'm actually in the process of paying off my student loans while I'm in grad school. I don't make much money, but I budget well, so I make payments on the evil loans even though I'm not yet required to. Unless I go through a terrible unemployment period after grad school or some unforeseen major expense pops up, I should be able to pay them off within 6 years or so after graduating with my bachelor's. *crosses fingers*

 

[makethings]

I intend to declare bankruptcy when I graduate. My credit will be wiped clean after seven years which is better than trying to pay off the loan over twenty.

 

[Asphodel]

I intend to declare bankruptcy when I graduate. My credit will be wiped clean after seven years which is better than trying to pay off the loan over twenty.

1) I don't think that means what you think it means.
2) Student loans are exempt from bankruptcy proceedings anyway.

 

[stewartcs]

I intend to declare bankruptcy when I graduate. My credit will be wiped clean after seven years which is better than trying to pay off the loan over twenty.

Not in the US.

Recent bankruptcy reforms prevent this type of activity in the US. You'll still have to pay it back.

CS

 

[thinkies]

I intend to declare bankruptcy when I graduate. My credit will be wiped clean after seven years which is better than trying to pay off the loan over twenty.

Haha. Good luck .

 

[Vanadium 50]

I intend to declare bankruptcy when I graduate. My credit will be wiped clean after seven years which is better than trying to pay off the loan over twenty.

To add to the previous messages, taking out a loan with the intention to declare bankruptcy instead of paying it back is called "fraud". People can be imprisoned for it.

 

[gravenewworld]

My undergrad grant only covered a third of my tuition. I graduated with about $60,000 in student loan debt, some of which are low-interest government loans, but the bulk of it are evil Sally Mae loans with a higher interest rate that compounds even while my loans are in deferment.

I'm actually in the process of paying off my student loans while I'm in grad school. I don't make much money, but I budget well, so I make payments on the evil loans even though I'm not yet required to. Unless I go through a terrible unemployment period after grad school or some unforeseen major expense pops up, I should be able to pay them off within 6 years or so after graduating with my bachelor's. *crosses fingers*

Pay off 60 grand in 6 years? I would like to know how. That is $10,000 per year completely ignoring the interest. Assuming you make $80,000 right after school is over (which is most unlikely), you will take home would be ~ $60,000 after taxes (assuming too that you don't save in any 401 (k)s, or pay for health insurance etc). $10,000 per year would be almost 20% of your disposable income. I hope you don't have any rent, car payments, utilities, and insurance payments. I plan on paying off $38,000 in hopefully 3 years, but the only possible way I am able to do it is by living at home rent, utility, and food expense free. Lame and free loading yes, but student loans were just suffocating me when I was living on my own (BTW I make ~$52,000). My parents understand and I plan on paying them back somehow in the future.

 

[Laura1013]

Pay off 60 grand in 6 years? I would like to know how. That is $10,000 per year completely ignoring the interest. Assuming you make $80,000 right after school is over (which is most unlikely), you will take home would be ~ $60,000 after taxes (assuming too that you don't save in any 401 (k)s, or pay for health insurance etc). $10,000 per year would be almost 20% of your disposable income. I hope you don't have any rent, car payments, utilities, and insurance payments.

I currently pay about $10,000 a year towards my loans on a grad student's salary, and I have a relatively low stipend. It's all about budgeting. And cost of living is low where I currently live.

 

[Poop-Loops]

I plan to have about $30k loans after I graduate with my bachelors.

Does anyone know how I could make it work so that I go to school (I'm from the US) to Europe for my graduate degree (hopefully Ph.D.) without being harassed for loans payments? Would the school defer my payments or what?

Do I just have to suck it up and get a job first?

 

[gravenewworld]

I plan to have about $30k loans after I graduate with my bachelors.

Does anyone know how I could make it work so that I go to school (I'm from the US) to Europe for my graduate degree (hopefully Ph.D.) without being harassed for loans payments? Would the school defer my payments or what?

Do I just have to suck it up and get a job first?

Nah as long as you are getting and education you should be able to defer your loans, no matter if you go to school in the US or not. But you have to eventually pay off your loans.

I know of 1 kid who skipped out on paying his loans by moving to Europe. He is currently never allowed back on US soil ever again to visit his family.

 

[Laura1013]

Does anyone know how I could make it work so that I go to school (I'm from the US) to Europe for my graduate degree (hopefully Ph.D.) without being harassed for loans payments? Would the school defer my payments or what?

You should double-check this (don't take my word), but I believe that the student loans are deferred for as long as you're a student, no matter where you attend university. You just need to ensure that your grad school sends notification of your enrollment to the correct offices.

 

[Poop-Loops]

Nah as long as you are getting and education you should be able to defer your loans, no matter if you go to school in the US or not. But you have to eventually pay off your loans.

I know of 1 kid who skipped out on paying his loans by moving to Europe. He is currently never allowed back on US soil ever again to visit his family.

I don't plan on coming back to the US, but I'd still payback my loans.

I figure by the time I graduate with a Ph.D., I could easily find a job worth $70k/year.

Knowing me, I could easily live off of my Ph.D. stipend +50% for comfort, so if I made ~$20k/year (I'm using all dollars, even though I'd live somewhere else obviously, this is just for ease of comparison) as a grad student, I could live off of $30k comfortably.

No, I'm serious. I'm one of those "where I lay my head is home" people. As long as I have my bass, some sort of gaming console, and enough to eat and wear, I'm fine. I don't even drink alcohol or go on dates.

So after taxes let's say I get $55k/year, I can devote $25k/year towards the loans. Maybe progressively less and less.

 

[Cyrus]

Nah as long as you are getting and education you should be able to defer your loans, no matter if you go to school in the US or not. But you have to eventually pay off your loans.

I know of 1 kid who skipped out on paying his loans by moving to Europe. He is currently never allowed back on US soil ever again to visit his family.

What the hell!

 

[Beeza]

Pay off 60 grand in 6 years? I would like to know how. That is $10,000 per year completely ignoring the interest. Assuming you make $80,000 right after school is over (which is most unlikely), you will take home would be ~ $60,000 after taxes (assuming too that you don't save in any 401 (k)s, or pay for health insurance etc). $10,000 per year would be almost 20% of your disposable income. I hope you don't have any rent, car payments, utilities, and insurance payments.


I plan on paying off $38,000 in hopefully 3 years, but the only possible way I am able to do it is by living at home rent, utility, and food expense free. Lame and free loading yes, but student loans were just suffocating me when I was living on my own (BTW I make ~$52,000). My parents understand and I plan on paying them back somehow in the future.

I don't understand how its going to take you until 2030 to pay them off when you make 52000$ a year while living at home.

 

[gravenewworld]

I don't understand how its going to take you until 2030 to pay them off when you make 52000$ a year while living at home.

That's because I just moved home. $52,000 after tax, 401k, and health insurance is only about $35-40,000 of disposable income. Plus I have to pay off loans on a car.

When I was living on my own I had the expenses of rent, utilities, food, gas, and car insurance.
Student loan payments are about $400 per month, 50% of those payments every time end up going to just the interest. Some months I pay $180 on just 1 of my loans and only $80 of that goes towards the principal (which is $33,000). When you are just paying $80 towards the principal on a $30,000 loan, you can understand why it will take so long to pay it off.

That is why I moved back home, to save money so that I can afford to pay more than just the minimum on each loan.

When you factor in interest that $40,000 loan I took out is going to really costing $70,000 at the rate I am paying it now.

 

[RufusDawes]

From what I understand excessive student loands = state owned slavery.

So be very, very careful how much you borrow.

 

[makethings]

I was merely joking on my previous statement. I am well aware that student loans cannot be defaulted.

My suggestion to those worried about graduating with large debt is to negotiate a significant signing bonus on your first grad job that will allow you to pay off your loan. Take a drop in starting salary if need be. Then quit the job after several months and pursue graduate studies if that is your goal. If you're unable to do this, well then you either don't have the guts to negotiate or your degree wasn't worth the thousands of dollars you spent on it.

 

[electrifice]

A single person should be able to pay off ~10k on loans each year (easily) with proper budgeting if they make anything close to 50k (take home), in my opinion.
I belong to a family of 6, living in California (crazy cost of living), with less than 50k of total earnings... so it shouldn't be too hard to save 10k a year if you're single, as long as you don't buy a nice big house, a bimmer, and eat out at fancy restaurants each night.

 

[gravenewworld]

A single person should be able to pay off ~10k on loans each year (easily) with proper budgeting if they make anything close to 50k (take home), in my opinion.

I belong to a family of 6, living in California (crazy cost of living), with less than 50k of total earnings... so it shouldn't be too hard to save 10k a year if you're single, as long as you don't buy a nice big house, a bimmer, and eat out at fancy restaurants each night.

That translates into a $70k job before tax. That's almost impossible to find as a new college grad, especially in the sciences. If you made $70 grand right out of college, then yeah, you could pay $10k a year to loans.

The average salary for a brand new college grand ranges on average anywhere from $30k-$55K depending on major.

$55 K would roughly translate $40 k after tax (completely ignoring any city wage taxes, health insurance payments, and 401 k contributions). Go ahead and play with a loan calculator.

http://www.finaid.org/calculators/scripts/loanpayments.cgi

If you tried to pay off a $40 K loan in 4 years, assuming a 4% interest rate, you would have to pay almost $1000 a month to pay it off. A $50 K loan, with a 4% interest rate would mean a monthly payment of $1200.

That would be simply ridiculous. That is almost the same size as a mortgage payment on a house!

 

[Barfolumu]

It took my father, an aeronautical engineer, roughly 10 years to pay off his loans, and he got out in 4 years. Expect to pay for awhile -- it's just part and parcel with earning a career (For most of us). (Unless you take the management job at your local Applebees... not really that appealing, if you ask me).

 

[Laura1013]

If you made $70 grand right out of college, then yeah, you could pay $10k a year to loans.

I've already stated that I make roughly $10k in student loan payments each year since I started grad school. My only income is a grad school stipend of $18k (before taxes) + a second fellowship of $6k (non-taxed). Granted, I'm unmarried with no dependents (aside from a cat), no car payments, no medical bills, no mortgage, and a low rent. But it's absolutely do-able; I do it.

As long as you're not going into it blindly or ignorantly, student loans can be very beneficial. Just do the research and calculations before-hand to know what you're getting into.

 

[AsianSensationK]

I enrolled in an income contingent repayment plan. I'm paying <$100 a month on my $23000 in loans while I look for a full-time job or for more loans to pay for the law school seat I've been offered. I'm definitely letting the interest pile on this year.

The government isn't out to break students with loans. But it will take a while for some to pay back (like me).

 

[lisab]

You could work in AmeriCorps. They help with student loans:

http://www.americorps.org/for_individuals/benefits/index.asp

With a physics degree, you might end up teaching physics to high school students.

 

[mgiddy911]

Peacecorps will also help you with your student loans. It is an option I am very much considering after graduation with B.S in Math + Physics

 

[Benzoate]

Is there a deadline you have to meet for paying your college loans back or do you pay college loans back until you die?

 

[Poop-Loops]

There's usually a deadline. I think mine give me 10 years after I am officially required to start paying.

 

[Benzoate]

You could work in AmeriCorps. They help with student loans:

http://www.americorps.org/for_individuals/benefits/index.asp

With a physics degree, you might end up teaching physics to high school students.

You think it is possible to serve for Americorps while studying in grad school at the same time?

 

[Benzoate]

You could work in AmeriCorps. They help with student loans:

http://www.americorps.org/for_individuals/benefits/index.asp

With a physics degree, you might end up teaching physics to high school students.

also, would you need previous teaching skills to teach high school students? Or would Americorp trained you to be a teacher?

 

[gravenewworld]

Student Debt Is Piling Up

* Tuition costs have climbed 60% since 2000, and the average graduating senior now owes more than $20,000, according to the National Center for Education Statistics -- twice as much as graduates owed a decade ago.

* Nearly a quarter of recent grads owe in excess of $25,000.

* While student debt rose 8% from 2005 to 2006, starting salaries rose only 4%.

http://news.yahoo.com/page/parade-earn/your-money





Yeah, that $45,000 job that you get out of college simply doesn't buy what it used to.

 

[huckmank]

A single person should be able to pay off ~10k on loans each year (easily) with proper budgeting if they make anything close to 50k (take home), in my opinion.
I belong to a family of 6, living in California (crazy cost of living), with less than 50k of total earnings... so it shouldn't be too hard to save 10k a year if you're single, as long as you don't buy a nice big house, a bimmer, and eat out at fancy restaurants each night.

I really don't understand why anyone would want to quickly pay off loans with interest rates at ~6%. The money spent quickly paying off these low interest loans would be put to much better use in a index fund averaging 10% over the long term. With rates where they are, people should be getting 40 year home loans and slowly paying off their student loans.

If you have a loan at 6% and a fund averaging 10%, every dollar you use to pay off your loan will cost you 4% a year in expected returns.

 

[bravernix]

I really don't understand why anyone would want to quickly pay off loans with interest rates at ~6%. The money spent quickly paying off these low interest loans would be put to much better use in a index fund averaging 10% over the long term. With rates where they are, people should be getting 40 year home loans and slowly paying off their student loans.

There are always risks in investing money and it's also nice to not have any large debt.

 

[Poop-Loops]

Plot two graphs. One doing what you described, paying off a 6% loan slowly and investing in a 10% return investment. See how long it takes and see what amount of money you end up with after you pay off all of the student loan.

Next make a graph showing what would happen if you paid off all the loan first, then put all the money you'd spend on the loan into the investment fund. After the same amount of time, see how much money you end up with.

No, I don't know what to expect, I'm just interested in seeing the results and don't feel like graphing it myself. :p

 

[huckmank]

There are always risks in investing money and it's also nice to not have any large debt.

There are always risks in life, but an index mutual fund w/ a rebalancing asset allocation of 40/60 bonds/stocks has an average return of 8% with the same standard deviation of US bonds. A 60/40 blend has only slightly increased standard deviation w/ 10% return.

I'm sorry, but paying off <6% fixed loans quickly when inflation is 4% and rising is just foolish.

 

[lubuntu]

I have a follow up question not sure if this should be a new thread.

In general, are you able to defer your undergrad loans while pursuing a Ph.D.?

 

[AsianSensationK]

Plot two graphs. One doing what you described, paying off a 6% loan slowly and investing in a 10% return investment. See how long it takes and see what amount of money you end up with after you pay off all of the student loan.

Next make a graph showing what would happen if you paid off all the loan first, then put all the money you'd spend on the loan into the investment fund. After the same amount of time, see how much money you end up with.

No, I don't know what to expect, I'm just interested in seeing the results and don't feel like graphing it myself. :p

This is the right thought process.

Certainly, you will return more earlier with that investment strategy than you would save in interest expense. but you also want to show that your total savings in interest expense over the life of the student loans can't outweigh the gains you expect to make using this investment strategy instead of paying off the loans. I'd be curious to see the results too.

 

[bravernix]

I'm sorry, but paying off <6% fixed loans quickly when inflation is 4% and rising is just foolish.

Inflation is what would actually convince me of this more. I do understand the concept of interest rate spread and taking both into account certainly makes for some interesting possibilities. I also recall seeing something about student loan interest rate tax deduction as well, now that I think about it.

 

[Benzoate]

please somebody tell me the best way to pay off loans that will amount to $60000. Right now , I cannot afford that much. I only make $7 an hour . Do you ever think about how you you will pay off college loans as an undergrad

 

[huckmank]

This is the right thought process.

Certainly, you will return more earlier with that investment strategy than you would save in interest expense. but you also want to show that your total savings in interest expense over the life of the student loans can't outweigh the gains you expect to make using this investment strategy instead of paying off the loans. I'd be curious to see the results too.

Open up Excel and do it. If you invest money at .00000001% higher rate of return than you borrow, you will come out on top.

Think of it this way. Say I have $100,000 in loans at 6% and I have a net income of $100,000 a year. I have a fund that returns an average of 8%.

If I pay off the entire loan on day one and then invest all of my income for the next 29 years I will be investing 100k a year for 29 years at 8% interest. Using interest tables, my final balance is 103.9659*$100k ~ $10,400,000.

If I pay off the loan over 30 years I will be paying 0.0736*100k = $7,360 a year in interest/principle payments. That leaves $92,640 a year for 30 years that I'm investing at 8%. Using the tables once more 113.2832 * $92.64k ~ $10,500,000.

This ignores the fact that interest payed on qualified student loans and primary home mortgages are tax deductible which also works to the advantage of slow pay-downs of these loans.

 

[Poop-Loops]

Okay, we understand that, but what we don't know is what would happen if you simply paid off the loans really fast and then jumped into investing. You'd start off later, but you'd get 10% instead of 4% net profit, right? So we would like to know which one makes more sense.

 

[huckmank]

Okay, we understand that, but what we don't know is what would happen if you simply paid off the loans really fast and then jumped into investing. You'd start off later, but you'd get 10% instead of 4% net profit, right? So we would like to know which one makes more sense.

But that's exactly what that example addresses. Under any circumstance, if your loan has a lower interest rate than the rate of return of your investment, it is always better to invest. If you didn't care about carrying the debt throughout your life you could actually just pay the minimum forever and ever, NEVER pay off the loan, and invest the money instead. You see, unlike other loans, federally backed student loans vanish with the death of the loanee and don't get transferred to the estate. I wouldn't seriously suggest this, as it's somewhat sleazy, in that you're basically forcing the taxpayers to pay for the default on your loan (aka, your death).

Keep in mind, that these examples ignore risk. It is of course riskier to invest. But over the long term (think retirement), index funds have historically returned ~10%. If you assume a growing economy, then it makes sense to invest in the economy as a whole, which is what is happening with an index fund. They're not trying to beat the market; they are the market.

 

[huckmank]

Here's an Excel graph. The y-axis is ending balance of the fund and the x-axis is the amount of years taken to fully pay off the 100k loan. It assumes that all 100k that isn't payed toward the loan in a period is payed instead to the fund. Again, I assume 6% loan and 8% return.

The numbers may be slightly off by much less than a percent, because Excel does something strange with fv/pv functions and I didn't want to look up the proper usage. The difference doesn't matter and should affect all plots equally.

http://uploader.ws/upload/200804/Fund.jpg

I'm done with this diversion, btw. Sorry for the spam. Suffice to say that if you can safely invest at a rate higher than your cost of money, I would suggest you do it.

 

[Laura1013]

In general, are you able to defer your undergrad loans while pursuing a Ph.D.?

Yes, since you'll still be a student. I'm not sure if full-time student status matters.

I also recall seeing something about student loan interest rate tax deduction as well, now that I think about it.

That is correct, but deductible interest is capped at $2500.

 

[Barfolumu]

please somebody tell me the best way to pay off loans that will amount to $60000. Right now , I cannot afford that much. I only make $7 an hour . Do you ever think about how you you will pay off college loans as an undergrad

Winning the lottery might be the best way, but I'd recommend consolidation and one month at a time.

*shrug* It's all about what you want to do. I could've lived debt-free, with room mates, if you'd signed on at your local Wal-mart right out of High School, but I didn't want to do that. So, I keep doing what you want to do, since the opportunity is right before me with the help of loans, because if I'd been more inclined to make decisions based upon my economic welfare, then I would've majored in business or pre-med.