I’ve taken out a total of $81,000 in student loans to pay for my education: $23,000 for my bachelor’s degree and $58,000 for my master’s. By the time everything is paid off in the next year, I’ll have spent closer to $100,000 when factoring in eight years’ worth of interest.
It’s been a long journey and one that I’m excited to finish. People often ask me if I regret taking on so much debt to go to school and I don’t really have a good, simple answer. In some ways, yes I do regret it. In other ways, I don’t.
But there are a few things I wish I knew before taking on so much student debt. Specifically, my graduate school debt, which set me over the edge of a “manageable” debt load and into another stratosphere.
If you are thinking about taking on more debt to go to graduate school, consider these five things I wish I knew.
1. The Impact of PLUS Loan Interest Rates
I was fully aware of how much additional debt I was taking on to attend my dream school, NYU. But I didn’t quite understand the impact of my PLUS loan interest rates.
My undergraduate loans were locked in at a low rate of 2.3%. My graduate loans? They ranged from 6.8% to 7.9%.
It wasn’t until I graduated and started making payments on my student loans that I realized just how much I was paying in just interest. I did the math, and at its highest point, I was paying $11 per day in interest — over $300 per month.
I hadn’t really calculated how much interest I would pay over time in comparison to how much money I would actually make. After graduating, I struggled for a couple of years and didn’t make much more than $10 to $15 per hour in the nonprofit and arts sectors.
As a borrower, it’s important to do the math and truly understand how much you will pay in interest over time. It might be more than you thought.
2. Dream Schools Are Just a Dream
It’s not uncommon for people like me, who take on a large amount of debt to go to school, to be met with a certain amount of criticism. I was repeatedly asked why I didn’t go to a cheaper school.
My answer? I wanted to go to my dream school. My dream obviously came at a cost, but I was willing to pay the price. I was stubborn and no one could tell me not to pursue my dream. However, I realized the reality of attending my dream school wasn’t so dreamy after all. I got a lot out of my education at NYU, but it was a lot harder than I imagined.
Our judgement can be clouded by fantasy — we think a certain school can bring us legitimacy, talent, and clout. But in the end, it’s just a school. Consider carefully the cost of your dream school and what price you might pay many years down the road.
3. Geography Is a Major Factor
Moving to New York City to attend graduate school felt like the right decision at the time. I was majoring in an arts-based field and would be in the center of the action.
But a few months after graduation, I moved across the country to be with my partner in Portland, Oregon. I heard it was a creative city, but hadn’t anticipated how difficult it would be to find a job in the arts here.
Geography is an extremely important factor in your career and future earnings. Whether you decide to go to graduate school or not, consider how your location will affect your post-college career prospects.
Are there jobs in your field in the area? If not, will you move and to where? Will your new city have jobs available in your field? What is the average pay? Consider how the answers to these questions might affect your ability to repay your loans.
These are all things I wish I considered more carefully before attending graduate school and then moving away afterward. Though I moved for personal, rather than professional reasons, it had an impact on my professional life in terms of pay and work opportunities I was able to get in my new city.
4. Wage Stagnation
Before attending graduate school, I had only worked in the nonprofit sector and never made more than $38,000 a year. I thought going to graduate school was my gateway to a higher income.
I was sure that it would be easy to get a new job with bigger pay. But right after the heels of the recession, I graduated and found myself making less than I ever had — and not for lack of trying. Having an obscure arts degree and moving to a smaller city had a major impact on my wages.
Just because you get a graduate degree — in any field — doesn’t automatically mean you will make more money or get a better job. In fact, I found that some employers considered me overqualified and wouldn’t even interview me. If you’re thinking of going to graduate school, consider:
- The difference between what you are making now and what you could make with a master’s or professional degree.
- The unemployment rate in your city.
- The job competition.
- Whether your desired job actually requires an advanced degree? If not, you may be better off with an internship or networking with the right people.
- The opportunity cost of being out of the workforce for several years. In other words, if you’re making $40,000 per year, you’d miss out on $80,000 in wages to pursue a two-year degree full-time. Will you make enough to cover the loss of those wages and pay off your debt?
5. Life After School
I was so singularly focused on going to my dream school that I didn’t really consider what life would be like after I graduated. I’d neglected to think about everything else in my life such as my relationship and passion for traveling.
Taking on so much debt didn’t seem like a big deal while I was in school. Once I was done and struggled to find a job, it stung. It affected other parts of my life, too.
If you’re considering going to graduate school, it’s key to consider what life will be like after you graduate. It’s hard to imagine and may seem a bit fuzzy, but think about what’s important to you and how an increased debt load will affect those areas of your life.
Taking on additional debt to go to graduate school is a personal decision. Before deciding either way, weigh the pros and cons. Think long-term, not only about your financial goals, but your life goals as well. You might find that the true cost of borrowing tens of thousands of dollars isn’t worth it.
Photo credit: Jeremy Jenum via Flickr Creative Commons
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|