A few weeks ago I posted the latest in my student loan drama.
A reader asked if I’d write a post explaining why I ever borrowed so much money for school in the first place. What was my thought process like when I took out the loans? What were my plans for a repayment timeline? And, just generally…what was I thinking?
I will speak only for myself, as every person is in a different situation.
First, if you’re a new(ish) reader, I recommend checking out my debt story to explain how I acquired so much debt in the first place (I haven’t always had debt! It all came while I was in grad school). And if you are curious, I’ve broken down all my Navient student loans in this post (keep in mind, that does not include loans from ACS). My latest debt update (with all debts) can be found here.
Why did you take out student loans in the first place?
I was so lucky to have parents who were financially able to help me through my undergraduate degree. For my first year (living on campus), they paid for everything – tuition, books, room, board, meal plan, etc. I worked part-time for fun money. Over time I took on more responsibility for paying my own bills. By my senior year of college they were still helping pay all my tuition and books, but I had been working a lot more to pay for my living expenses (rent, utilities, car, food, etc. etc. etc.) This worked well for me because I was able to gradually take on more responsibilities associated with “ adult life” instead of having it happen overnight when I turned 18. Not everyone is so fortunate and I am forever grateful for the gentle scaffolding I received in that regard. But one thing I always knew is that I would hit the end point of financial assistance once I graduated. My parents knew I wanted to pursue an advanced degree (I’ve always wanted to be a college professor, which requires a PhD), but we had all discussed it and I knew I’d be on my own in terms of paying for the degree. Perhaps interestingly, my stepdad (who married my Mom when I was 16, but has been in my life since 14) has a Ph.D. But things were so, so different when he’d received his advanced degree. So we never had a talk about how to avoid student loan debt, or the best way to minimize student loan debt. I don’t want to bash my parents – they did the best they could with the information they had (they really didn’t know how much it could cost to earn a Ph.D. today). But I do wish someone had pulled me aside and had a financial conversation with me about student loan debt. Instead, I simply viewed student loans as the only logical way to pay for my advanced degrees. There was never a question of doing anything differently.
But why so much student loan debt? How did it get so out of control?
Most of my student loan debt was incurred in my first two years of graduate school while I was living in Florida. I talk more about it here. Basically, tuition was insanely expensive for an out-of-state graduate student and I didn’t receive tuition reimbursement from the university. I racked up nearly $50,000 in student loans those first two years, alone. It all happened so quickly I never really wrapped my brain around it. At the time I had a good friend pursuing a medical degree (which we know is $$$$), and we talked about student loans one time. She talked about how she mentally compartmentalizes the money so she doesn’t stress about it. She actually made some metaphor of the money being “fake” – like Monopoly money or something. It made her feel better psychologically and it was easier to cope with racking up the kinds of loans she was taking out. I basically followed suit with the same strategy. The common (mis)conception I’d always been told was that “education is always valuable” and “student loans are ‘good’ debt.” Note, these are two things I vehemently disagree with now, but I bought into the myths at the time (along with all my grad school buddies).
So education isn’t always good? What do you think now?
I’m in higher education, so obviously I’m pro-college (I teach college courses so I’d be out a job if no one went to school!) BUT I know so many people who went to college just because that’s what they’d always been told to do. My belief now is that education just for the sake of education is a LUXURY. There’s nothing wrong with it. I love to learn! But unless you can afford to pay cash, it should be in the same category as a luxury vehicle. You don’t need it. Just going to school blindly with no plan for the future (in terms of career, projected earnings, etc.) is not wise in my opinion. Instead, high schools should offer prep courses or parents should sit their kids down and think about costs of college versus projected salary. They need to be in-sync. You wouldn’t take out $100,000 of student loan debt for a degree in German Polka History (Dave Ramsey’s example). You need to be sure that you’ll be employable after graduation! Are there jobs in your degree area? What is the starting salary? What is the average salary? How much is your degree going to cost? These are questions that young people should be examining before selecting a major and enrolling in classes. If you’re unsure, it’s not the worst thing in the world to wait a year before going to college! If parents are okay with helping a child financially and the kid wants to take general courses while they figure out what subject to major in, then that’s fine. I’m not going to judge anyone else. But for me and my children (when they reach college-age), we’re going to have some serious financial and career-oriented discussions prior to ever registering for that first college hour.
When you were taking out student loans, what did you think would be the timeline for repayment?
Honestly, this is a subject my grad school friends and I talked about frequently. And you know what the common thought is? “I’ll have these loans forever.” When you graduate you’re put on a 30-year plan, the same as a mortgage, and you just assume they’ll be around forever. Maybe not everyone thinks this way but this was the overwhelming majority of opinions that I have experienced (that goes for grad students at both universities I attended, so it wasn’t limited to a specific place). I really didn’t think specifics in terms of payments and interest while I was in school. I never even knew the full amount I owed until after I graduated as I was doing my exit loan counseling. I knew I owed a lot, but I’d never had it all added up before in a single place until then. I had no idea that my monthly payments (before applying for IBR) would be over a thousand dollars a month, and that over a third of the payment would be going straight to interest. It’s incredibly overwhelming and scary to find yourself newly graduated, no job yet, and to discover you are responsible for a mortgage-sized debt.
Million dollar question…. Would you do it again?
I would definitely still earn my advanced degree (Ph.D.) because its required for the type of jobs that I want (and for the job I recently accepted!). Even if I hadn’t landed my new job, I wouldn’t say the degree, itself, was a waste. But if I had fully understood the implications of my sized student loan debt, I would have done everything in my power to avoid them or minimize them to whatever extent possible. Here are some real life things I would have done differently (that may or may not apply to other peoples’ situations):
- Work while in school. I did this in undergrad, but graduate school felt so all-encompassing that I didn’t think it was possible. You know what? It was. Eventually I came around while pursuing my Ph.D. and I taught several classes at the local community college. But the whole time I was in Florida (where, again, most of my debt is from), I didn’t do a single thing other than school. What a wasted opportunity to try to earn some money and minimize the loans I was taking out.
- Work on campus. Especially in Florida where I did not receive any tuition reimbursement, working on campus would have been invaluable. They paid pretty poorly (I think minimum wage at the time – about $8/hour) BUT they gave tuition reimbursement! At $1,000 per credit hour, that tuition reimbursement would have been worth it even if I had been working for free! I should have gotten a job on campus.
- Work (even for free) through any company that will pay for your education. This tends to be less common if you want to go into academia (like me), but I had several friends who worked for places (or interned, where they earned no paycheck at all), in exchange for a partial or full college tuition reimbursement. Think about your career trajectory and see if this can somehow work for you. Even many retail stores offer tuition reimbursement of some kind. You just have to do a little digging and asking around to find out if it would work for you!
- If your desired school is out-of-state, move there first! This is a big one that not many people know about. If you move somewhere (out-of-state) for school, you will be considered an out-of-state student for tuition purposes the entire time you stay there (not just first semester or first year). I learned this the hard way when I went to a school in Florida. We lived there full-time, hubs worked there and paid taxes there, we were considered residents in terms of our licenses and for jury duty (I even served on a jury while living there!) But we were NOT considered residents for tuition purposes. The way around this is that if you know you want to attend an out-of-state college, you can actually move there a semester (or year) before you plan to attend! A big secret tip for grad students, specifically… I know more than one person who did not get into their dream university. So they moved to the school’s city and started attending lab meetings and discussion groups on their own time. They even took a few classes as non-degree seeking students. And as long as they made a good impression and forged relationships with faculty members they were always, without exception, admitted the following year. Why? It shows extreme dedication to move cross-country and start attending a school without officially being accepted there! So for any future grad students who didn’t get into the dream program – there’s still a chance! Build those connections prior to matriculation and you’ll (1) likely get in the following year, and (2) be considered in-state for tuition purposes since you moved to the state before starting school!
- Look at tuition when determining a school to attend. I can honestly say I never once looked at tuition rates when deciding where to apply to and where to eventually attend. That is so, so, so silly on my part! This is REAL money that is going to take REAL years to repay, not to mention interest, etc. So look for places that are inexpensive and affordable! At the undergrad level, start with a community college (bonus – you can likely work full-time and take classes at night and on weekends). Then transfer to an inexpensively priced in-state university to finish up your bachelor’s degree. This will help minimize the amount of loans that are taken out to cover the tuition.
- Get involved in a cause! And apply for related scholarships. Really you should apply for every scholarship or grant known to man-kind. But I’ve found that it helps increase your odds if you get involved in some specific group (often a philanthropy of some kind) and apply for scholarships specifically targeted toward the group. As an example, when I was a grad student I joined an organization specifically for women in academia. I attended bi-annual meetings, mentored an undergraduate girl, served on annual committee panels and even organized a symposium one year for middle-school and high-school aged girls. As a grad student, I found various women’s organizations that offered grants and I was able to win several due to my extensive involvement in the women’s organization at my university. They weren’t huge grants, but they covered my costs to attend various conferences, paid for travel, lodging, conference costs, etc. etc. etc.
Those are my tips. Feel free to leave any additional tips in the comments section.
And if you are a parent or mentor to a young person about to graduate high school, don’t be scared to pull him/her aside and have a frank discussion of the long-term implications of student loan debt (and all the drama that accompanies them). Knowledge is power! : )