what am i missing?

Paying for College
1

<p>my family is just starting to think about college debt so im trying to think ahead to after college. Please tell me if the following makes sense or if im totally off. </p>

<p>I will (hopefully) be attending a five year BS/MS. The college I am (hopefully) going to has a 100% employment rate over the last few years for this program, with the avg salary being 70,000. So lets say after 5 years I have 100,000 dollars in debt. (hopefully less than that but im being conservative in this scenario) If I pay 20,000 dollars a year towards my debt, I will have paid this off in 5 years. I plan on getting an apartment in pittsburgh, and the highest iv seen for a one bedroom is 2000/m. so that comes out to 18,000 a year, leaving me with 32,000 to do with as I please for those five years. To me, this seems like i would be able to live relatively comfortably and pay off my debt quickly while still graduating with such a massive debt. This doesn't even take into consideration a pay increase. So in my scenario, is 100,000 dollars an acceptable amount of debt?</p>

2

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<p>Interest . . . you’re not counting the interest that will accrue on any unpaid balance.</p>

<p>You’re also not considering the income tax that you will owe on that $70k each year.</p>

<p>Add in the cost of utilities, cell phone, cable, etc., transportation, car insurance, and FOOD for a year . . . as well as taxes . . . then recalculate your annual expenses.</p>

<p>Then calculate the interest you’ll be paying each year on that $100,00 debt.</p>

<p>It seems to me your margin for comfort may not have disappeared . . . but it appears to have shrunk considerably.</p>

3

<p>Figure that you will lose 30% to various taxes. And keep in mind that you can’t take out $20,000 per year in loans. The Stafford Direct loan limits are $31,000 total, a bit more if your parents are turned down for a Plus loan. </p>

<p>The $31,000 is the max anyone should borrow and even that is too much.</p>

4

<p>Make sure the employment rate is 100%. Generally it’s % students employed or continuing their education…And $2000/month x 12 months is $24,000. Although 2k/month is pretty pricey for a starter 1BR apartment in Pittsburgh.</p>

5

<p>That’s waayyy too much debt even if you make that much.</p>

<p>Single people earning that much get hit HARD with fed and state taxes…and FICA. I think the tax estimate of 30% is a bit low for a single person with no dependents. </p>

<p>you’ve also neglected to account for: utilities, cell phone, cable, internet, car payment, car insurance, car repairs, gasoline, food, clothing, health insurance, entertainment.</p>

<p>I can tell you that food costs for a working single professional will be HIGH. Unless you’re the cheap/unsocialable type, you’ll be going out to lunch with co-workers, meeting for drinks/dinner after work on Fridays, etc, etc, etc. Then there’s weekend eating/dating/etc…oh my.</p>

6

<p>As others have said, you’ll have a lot more expenses than just rent.</p>

<p>It is possible to be extra-frugal and prioritize paying down your debt. But that doesn’t involve living in comfort with no financial worries. Here’s the extreme example: [About</a> | No More Harvard Debt](<a href=“Private Site”>Private Site) Of course, most people aren’t willing to go to those extremes…</p>

7

<p>There are calculators on the finaid site that will give you guidelines for the salary needed to comfortably pay off a given level of debt.</p>

<p>Given your scenario I would be more worried about your ability to borrow that amount…your ability to borrow in your own name is far lower as others have pointed out.</p>

8

<p>Lets just use easy numbers:</p>

<p>You are making this 70k a year
Calculate 30% in taxes this leaves you with 49k
you say that rent is 2000/month (24K) leaving you with 25k
you plan on paying 2000/month for your loan repayment (24k) leaving you 5k</p>

<p>what are you missing or what you plan on doing with the remaining 5k:</p>

<p>Ya gotta eat
You need electricity and gas
You need a bed to sleep in (unless you are sleeping on an air mattress, then ignore the bed)
You have to get to work whether it is mass transit or driving. If you are driving, you have to calculate all of the expenses that come with a car; insurance, maintenance, gas, tolls, parking
you need a work wardrobe
Your own maintenance (basic grooming items, haircuts, etc)
Do you have friends? Do you plan on going out with those friends?
Health insurance costs and co-payments
monies paid in to a retirement account
a slush fund where you need to start saving at least 4 months of expenses</p>

9

<p>Most of these responses point to the errors in the specifics of your plan. I would argue that your plan assumes a best case scenario.</p>

<p>What happens if you get into your sophmore year and you decide that your intended major makes you miserable? You might decide that studying Greek appeals greatly to you, but you realize that you are already $40,000 in debt. Greek majors do not earn anywhere close to $70k per year when they graduate.</p>

<p>Another realistic scenario is that you get into your third or even fourth year when disaster strikes. You get sick or get hit by a drunk driver or any other disabling event. You already have $60-80k of debt that continues to accrue interest but you do not have your degree.</p>

<p>Real life is hard and generally unfair. Remember that student loans cannot be discharged in bankruptcy so you will be on the hook for these sums for the rest of your life, regardless of your earning potential (or lack thereof).</p>

10

<p>What kind of job does this provide that is such a sure thing? Things can change a lot in 5 years. This is something you and your family are going to have to work out together because, YOU, as a student cannot take out those loans yourself. Your parents are going to have to borrow or cosign (which is really the same as taking them out themselves since it just puts the as well as you on the hook for them). So your parent are going to somehow have to take a lot of this loan burden and if you go the private cosigned loan bit, they will be stuck if you die, become disabled or drop out. Yeah, kids do that, especially the drop out part. Most of these programs do have a high drop out , or change the major, rate. My dear friend’s daughter who was a very bright, great stats, high achieving young lady, entered a program with great job prospects and then transferred out of it, now stuck with about the same amount of debt you are contemplating and her parents stuck with here since they cosigned a lot of the loans. She works at a coffee shop part time and cannot pay what she owes, so the private lenders have descended on her parents. Yes, that is how it works with those loans.</p>

<p>I’m not saying not to do this, but to think it out, and if it looks like you are not going to continue on this path after your first year, get out while you can with minimal debt.</p>

<p>Understand that interest jacks up those amounts rapidly, and that costs go up in these program. You also do have to live and deal with deposits, travel expenses and all sorts of things that I cannot begin to list. We are high income and we got hit by several things this year, and my freshman is hurting financially even with a nice buffer he had. Broken glasses, a filling that falls out = root canal + cap, higher expenses for next year, some printed materials very expensive that could only be bought new at the source, a more expensive place this coming fall because of a bad number in the room lottery, all add up. Some medical things here, plus some damaged from the weather and an old car that is giving us trouble have been draining us. </p>

<p>Also most of us are not so disciplined to be able to stay so tightly budgeted. </p>

<p>I am curious as to what this field of study is and if there is a less expensive way for you to get the same thing. Sometimes there is not, but a lot of times there are less costly alternatives. If your parents and you cannot get that borrowing gap down so that you owe about what the Stafford maximums are, this really has to be a pretty sure thing for you to to do this. The 100% rate does not do a thing for me, as who knows the percentage of those completing the program? It’s like saying a school has a 100% employment stat for those premeds making it to med school.</p>

11

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<p>Physician’s assistant. See the the OP’s parallel thread [url=<a href=“http://talk.collegeconfidential.com/parents-forum/1372202-what-am-i-missing.html]here[/url”>what am i missing? - Parents Forum - College Confidential Forums]here[/url</a>].</p>