<p>So, I'm deciding on a graduate school and choosing between one that would leave me with no debt and one that would probably leave me with 15-30k in debt. Having taken on no undegrad debt and having grown up in a family with no educational/credit card debt (and until recently, no mortgage debt), I'm having a hard time really conceptualizing debt in a concrete sense. I've run a loan calculator, but if someone can think of a good way to conceptualize what 30k would be like (on a ~$50k slary), I'd be all ears.</p>
<p>Well maybe you can think of it as buying a $30000 car on credit – a common enough transaction for an adult. Conventional wisdom is 36 months is a reasonable payoff cycle. So that comes out (when interest is taken into account) to $1000/month or so. I would use the same perspective for your student loan. First don’t buy that $30000 car. Payoff the loan instead. On $50000/year you would end up with $3000 net per month. Just think that $1000/month would go to pay off the student loan. And in three years you’ll be done.</p>
<p>And yes pull out the loan payment charts, and income tax tables to make all of this exact. The bottom line won’t be terribly different. It’s all a matter of discipline.</p>
<p>To me, it all depends on the field and employment prospects after you get out of graduate school. If the degree is in engineering, math or science, for example, I’d say no problem - the debt should be relatively easy to handle. If the degree is in philosophy, english lit, etc., I’d not be so enthusiastic about taking on the debt.</p>
<p>Think realistically about your employment opportunities after your graduate program. That will help put the prospective debt in context.</p>
<p>IMO, it would be ridiculous to finance a $30,000 car completely - with no down payment. The car does not last; the education does.</p>
<p>You will have ten years to pay off this debt. From your other postings, it appears that you are much happier with this program. Are you getting subsidized or unsubsidized loans? I’m not a proponent of debt at all. In this case, however, it appears to be reasonable to me if the program is that much of a better fit.</p>
<p>I have a child going on to graduate school too. And I agree with DadX; look carefully at your employment opportunities based upon the program and the debt.</p>
<p>I agree, but you don’t always have just 10 years. I’ve talked to many students that went to grad school, med school, law school and they had to extend the loans longer. It goes without saying if you take 15,20 years, the interest will be more, but it’s not as overwhelming. I would do anything to not do that, but it is an option.</p>
<p>Well, it sounds like you are used to living frugally so paying off the $30K, for you, would be doable IMO. It’s probably not $30 - figure out the interest too.</p>
<p>But - $30K would be a 20% down payment on a $150K house. It would buy a fine car outright. If you are willing to defer expenses like this until you get that debt paid off, then you should be OK.</p>
<p>Let’s say you have $30K debt at 8% interest. That means one year’s interest is $2400. The choice of going into debt roughly corresponds to a bet that you will benefit by more than $2400/year, enough to pay the interest plus part of the principal. One risk is that if you fail to pay the interest for whatever reason for a length of time, then you will have more than $30K debt and more than $2400 interest.</p>
<p>I would be very reluctant to take out that much in loans, but you’ll have to decide for yourself. I can tell you that although DH and I both got master’s degrees in engineering and then landed good jobs, buying our first house was hard, even with a little help from DH’s parents. If we’d had student loan debt, I think we would have had to wait several more years to buy a house. Living in an apartment would have gotten old really fast! Just don’t think you’ll be rolling in money even if you will be in a good-paying career.</p>
<p>I want to second dadx3–what field you will be entering makes a huge difference to your ability to repay. Also, many PhD programs advertised as taking, say, 5 years often end up taking much longer, though it’s true that many students are working part-time or even full-time in the later stages. (I don’t know from your post what degree you are planning).</p>
<p>Another thing to think about is the prestige of the institutions and whether it matters in the field you are entering. Academia, in my experience, is extremely prestige- and ranking-conscious; the corporate world, not so much. </p>
<p>Moreover, in PhD programs, rich institutions are often able to give their students opportunities that poorer ones can’t afford–for instance, supported research time during dissertation writing (poorer institutions support their PhD students by giving them teaching jobs.)</p>
<p>I faced a similar situation years ago: accepted to the top PhD program in my humanities field with a tuition + partial stipend fellowship, I chose instead to attend the fourth-ranked program on a full ride. My undergraduate faculty advisors thought I was making the wrong decision, but I did not want to take on ANY debt whatsoever given the utterly dismal employment statistics in my field. I ended up with great opportunities (probably better than I would have had at institution #1, where so many of the smartest kids attended, because it was easier for me to look outstanding). My husband, in exactly the same situation, made the opposite decision and also did well. What I think would have been a mistake, in our situations, wanting to go on to academic employment, would have been to accept a really marked difference in program quality in exchange for more money.</p>
<p>With most educational having a 10 year payoff the monthly payment is only $173 at 7%. Not a huge amount if the degree helps get a job. If it’s an MA in art history–well that probably won’t add much income. And to those who act like you would have that $30,000 in cash to but a house or car with cash as an alternative–that ain’t how it works. If they had $30,000 in their pocket this would not be a question. Just as it would take 10 years to pay back the $30K comfortably, it would take 10 years to save that much IF you could earn 7% interest which is no slam dunk today.</p>
<p>I’m not a big fan of undergrad debt…but this seems like a really reasonable amount…</p>
<p>Ask yourself, is this education worth the extra 173 dollars a month you will pay after graduation. Since you are going to become a psychologist, I’m sure you are well enough equiped to factor in all the benefits and not just the financial ones. :)</p>
<p>There is a rule of thumb that financial planners use – your total education debt can be safely as much as an expected year’s income for the field you plan to enter when you finish school. Anything more is a red flag.</p>
<p>Therefore, as others have pointed out, a chemical engineering major can afford to take on more debt than an elementary school teaching major.</p>
<p>No, the job you have does not affect how quickly Op can pay the money back. Rocket engineer or street beggar makes no difference. It makes no difference what her job is because the OP has already given us the figures for us to work with. Op says $30k debt and $50k income.</p>
<p>I agree a general rule of thumb is total undergrad debt equal or less than first yr’s income. Op needs to be careful though, not to overestimate first yr salary given particularly tough economic times right now.</p>
<p>given 7% interest it would take less than six years save the amount of money it would take ten years to pay off. interest is working in opposite directions, after all. </p>
<p>things get more complicated when inflation gets thrown into the mix. keeping the interest rates but throwing in 3.5% inflation extends the number of years closer to seven. assuming a more realistic 6% interest going out and 5% coming in, the number of years is almost eight.</p>