Grad School Loans: What I Wish I Knew Before Borrowing $81,000

 December 26, 2019
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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. I’m finally about to pay it all off, and I’ve spent close to $100,000 when factoring in about nine 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 grad school loans, which sent me over the line from a manageable debt load into much tougher territory.

If you’re thinking about taking on more debt to go to graduate school, consider these five things I wish I knew:

1. The impact of grad PLUS loan interest rates
2. Dream schools are just a dream
3. Geography is a major factor
4. Wage stagnation
5. Life after school

1. The impact of Grad PLUS loan interest rates

I was fully aware of how much additional debt I was taking on with grad school loans, to attend my dream school, New York University. But I didn’t quite understand the impact of my grad PLUS loan interest rates.

My undergraduate loans were locked in at a low APR of 2.3%. My grad school 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 how much I was paying just in interest alone. I did the math, and at its highest point, I was paying $11 per day in interest — that’s over $300 a month.

I hadn’t 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 — you can use our free interest calculator to find out.

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. And know, too, that there are some great schools out there which might cost far, far less.

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, Ore. I heard it was a creative city, but hadn’t anticipated how difficult it would be to find a job in the arts there.

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 grad school loans.

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 a graduate degree, and new grad school loans, was my gateway to a higher income.

I was sure that it would be easy to get a new job with higher 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?

These are all considerations that should go into deciding whether grad school is worth the debt that you’ll incur (unless you can find a way to get that advanced degree for free or low cost).

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 had 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 from grad school loans will affect those areas of your life.

Taking on additional debt to go to graduate school is a personal decision. Before deciding either way, compare 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 in grad school loans isn’t worth it.

Need a student loan?

Here are our top student loan lenders of 2022!
LenderVariable APREligibility 
1.29% – 12.99%1Undergraduate
Graduate

Visit College Ave

2.62% – 12.97%*,2Undergraduate
Graduate

Visit SallieMae

1.34% – 11.44%3Undergraduate
Graduate

Visit Earnest

1.86% – 9.39%4Undergraduate
Graduate

VISIT CITIZENS

N/A5Undergraduate
Graduate

Visit FundingU

0.00% – 23.00%6Undergraduate
Graduate

Visit Edly

* 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.

1 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community 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.

  1. As certified by your school and less any other financial aid you might receive. Minimum $1,000.
     
  2. Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
     
  3. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 8/01/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.49% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.59% APR to 11.69% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred. 

 


4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of July 1, 2022, the 30-day average SOFR index is 1.02%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.
  • Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
  • Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

5 Important Disclosures for Funding U.

Funding U Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.


6 Important Disclosures for Edly.

Edly Disclosures

1. Loan Example:

  • Loans from $5,000 – $20,000
  • Example: $10,000 IBR Loan with a 7% gross income payment percentage for a Senior student making $65,000 annually throughout the life of the loan.
    • Payments deferred for the first 12 months during final year of education.
    • After which, $270 Monthly payment for 12 months.
    • Then $379 Monthly payment for 44 months.
    • Followed by one final payment of $137 for a total of $20,610 paid over the life of the loan.

About this example

The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.

2. Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.