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Subject:  Re: Musings about grad school tuition and loans Date:  6/16/2008  8:09 AM
Author:  aj485 Number:  274156 of 312185

I will (most likely) be starting a Master of Arts in Teaching/initial teaching licensure program this fall. It's a part-time evening program at a local private college. I just filled out the FAFSA this afternoon, and started thinking about tuition payment options.

Regarding tuition: During the first year of the program, students generally take 16 credits. Tuition and fees for those 16 credits is $7,028. Payment options include paying each semester's tuition up front, or paying monthly over 10 months with no interest, with a $75 fee per year for the service. If I did the monthly payment plan, I would pay $736/month from Aug-Dec, and $668/month from Jan-May (1st semester has extra one-time fees). I don't have enough savings to pay up front, but I might be able to swing the monthly payments if I'm very frugal, and postpone my aggressive CC debt paydown. However, I would just barely be scraping by, and would have to use my credit card if any large expenses suddenly came up (e-fund is at $1500 while I pay down $3500 CC debt).

Regarding loans: I currently have $21,538 in Direct Loan federal student loans from undergrad, 7 years until paydown. If I'm reading my account summary right, it's consolidated at 3.5%, but $17,904 of it is a subsidized consolidation loan, and $3,634 is an unsubsidized consolidation loan. Right now I'm paying $288/month on that, with about $60/month going to interest. I would like to defer this loan starting in the fall, and I think that I will not have to pay principal or interest on the subsidized portion while it's in deferment. From how I understand it, I would only have to make quarterly interest payments on the unsubsidized $3,634.

Okay, so you have about $25k in debt. You say you have 7 years til paydown on the student loan - is that with snowballing or minimum payments? What is your paydown plan on the CC debt, if you go to school vs. if you don't go to school? Putting student loans in deferment when you go back to school can be a good idea if you expect the schooling to increase your income. It's a REALLY BAD idea when you expect to decrease your income when you're done with your education.

The FAFSA says that my Expected Family Contribution (EFC) is $15,000. "The EFC is not the amount of money that you or your family must provide. Rather, you should think of the EFC as an index that schools use to determine your eligibility for federal student aid." FAFSA also told me I'm not eligible for a Pell grant. Oh well.

Hypotheticals: If I could get a federal subsidized loan that would cover all of my tuition and books for the year, AWESOME. That's interest-free money. I would definitely put the entire tuition on that loan, and I could continue the aggressive CC debt paydown, after which I would aggressively fatten my savings account to pay back those student loans when they come due.

If I could get only part of the tuition/fees covered with a federal subsidized loan, I would probably just pay the rest of the tuition in cash.

If I couldn't get a federal loan, and I had to get, for example, a private loan at 10% interest that I would have to start paying back right away... I would not even go to school until I could pay in cash. I fear private education loans.

So you think that the AWESOME possibility is to add $15k (assuming a 2 year program) or so more to your student loan debt? That would give you a student loan debt of $40k.

Don't know what a beginning teacher's salary is where you plan on teaching, but in many cases, it's not $40k. The times that I have seen people on this board talking about having a difficult time paying back their student loans is usually when they have more than their current year's salary in student loans.

Presumably, your salary is higher than a teachers's salary now? I think that adding to your debt to pay for an education that will buy you a lower salary is a foolish idea, not a Foolish one or an AWESOME one.

Also: There's a new grant program called TEACH that gives students in licensure programs up to $4,000/year. The catch is that you have to work for FOUR years in a school that serves low-income students, within eight years of licensure. I'll be eligible because I'm going to teach science. If you don't fulfill the teaching obligation in that time, the grant gets converted into an unsubsidized loan at 6.5% and you have to pay all the interest going back to when the money was first disbursed.

I don't know whether I would be able to make it 4 years in an urban school. I just don't know.

Well, it's 4 years within 8 years - so you could theoretically do a couple of years, teach 3 - 4 years elsewhere, and then go back and do your last couple of years. It's tough, but it's an effective pay raise. However, you need to be sure you can fulfill the commitment, and it doesn't sound like you are sure. If you can't fulfill the commitment, it's back to increasing your debt while aiming for a lower salary.

Of course I also have to think about my ability to pay back my loans on a teacher's salary...

Not only your new loans, but your current debt, too. Plus any 'emergencies' that you end up putting on your credit card.

Here is what I would recommend.......

Do a version of 'playing house' - except, in this case, it's 'playing student'. Postpone your entry into the Master's program for a year. Pay down your debt aggressively until Aug - making sure your snowball amount is at least $736. During Aug - May, put $736 into an untouchable savings account. June & July, pay down your debt agressively again, making sure your snowball is at least $736. If you make it through July 09 without having had to touch that account, and not having added to your CC debt, you should be very close to paying off your CC debt, if you haven't paid it off by then. And you will have proved that you can manage the cost.

Put the $7500 or so from your untouchable savings account into your e-fund - that will give you a $9k or so e-fund.

Pay for your tuition on the monthly plan - the $75 fee is an effective 1.3% interest rate - even at the bottom of the savings account rates, ING was still paying 2%. During the two months a year that you don't have to pay for the tuition/fees, pay down agressively on your student loan debt.

If you have to dip into your your savings account, you can't afford this program yet.

And don't try to say "Well, I'll only put $448 a month into the savings account because I'm going to defer the student loans" - as I said, deferring student loans when you are educating yourself toward a decrease in income is a REALLY BAD idea. If you can't afford the program, plus your student loans on the current program, why do you think you will be able to afford the payments on the student loans on a decreased salary?

This way, when you get done with your program, you won't have added any debt to your student loans, and you should have almost enough in your e-fund to pay off your student loans completely. At that point, depending on what your new salary will be, you can decide if you want to pay off the student loan, or keep the e-fund, and continue paying on the student loan.

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