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I posted on the student loans board, but it doesn't get a lot of traffic. I'd be interested in hearing the thoughts of anyone on this board.

http://boards.fool.com/Message.asp?mid=26734931

TND
Greatly respects the opinions and advice of Fools!
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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.

AJ
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AJ has already said everything I would say, with one exception: I don't view taking out loans to pay for education to take a salary-decreasing job as a bad idea. I view paying for education to take a salary-decreasing job as a bad idea. (Some may want to take salary-decreasing jobs for personal fulfillment. This is fine. It is also almost certainly possible without a new degree or, in a pinch, with a cheaper one.)

To the extent that education is not building your human capital, you can a) get it a HECK OF A LOT CHEAPER if you don't need the magic piece of paper at the end of the tunnel and b) you should consider it like you would an entertainment or other optional expense.
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>> To the extent that education is not building your human capital, you can a) get it a HECK OF A LOT CHEAPER if you don't need the magic piece of paper at the end of the tunnel and b) you should consider it like you would an entertainment or other optional expense. <<

Agreed. Depending on whether or not you intend to use it and it increases earning power, it can be an investment. If done simply for "personal enrichment" it's an expense. There's nothing wrong with such an expense IF you can afford it, but it can't really be seen as an "investment" if it doesn't improve job prospects and earning power.

And if you do use it as an "investment," you still have to consider ROI. If you can go to school for two years at a low-cost JC and improve earning potential by $20,000 a year, it probably has a high enough ROI to be a good investment in your financial future. If it costs you $150,000 over four years (including lost income) for something that might increase it $5,000 per year, probably not so much.

Personally I don't like the idea that college is ALL about getting the "right" degree to make more money, because there is a value to personal enrichment and "learning for learning's sake." But one should not go into debt to finance "personal enrichment," nor should one drain the emergency fund for it. If it's something that can be securely afforded and paid for with cash without weakening your long-term financial plan, if you really want it -- go for it.

#29
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I don't see how the additional expenses of book and other incidental expenses would be handled.

If you have credit card debt, it limits your options. If someone can afford $600-$700 a month tuition payments on a tight budget then they can afford to deal with their credit card debt.

Defer college a year and get a second job. A year from now, instead of struggling with credit card debt and additional debt from college, most of the credit card debt will be gone.

It would not be necessary to be completely debt free to start college, but creating an emergency fund and eliminating most of the credit card debt would allow starting college without taking on student loans or living on an impractical budget.

Debra
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I've only got a minute to answer this (at work).

to vkg:

I don't see how the additional expenses of book and other incidental expenses would be handled.

Books are an educational expense, so they can be paid for with loans. Living expenses are paid from working.

Defer college a year and get a second job.

...I'm at 80% time right now at work, which lets me keep all my benefits. I could go back to full time. This is what I call the "nuclear option." I didn't give you my back story. I have worked at a patent law firm for nearly four years. One year ago I had a complete breakdown because I was completely miserable at work, doing something I (1) sucked at, and (2) didn't care about. In 2006 I was promoted from Assistant Science Advisor to Science Advisor on the request of a lawyer I had worked with. I think I knew at the time that this was a terrible idea, but with a 54% salary raise, I thought maybe I could learn. Maybe I could handle it.

No, I couldn't. I couldn't handle the increased responsibility. I was expected to perform at the same level as the other Science Advisors, who all had PhDs. I have a bachelor's degree. I was simply unqualified and did not have the technical knowledge expected of the Science Advisors. I received scathing performance reviews from the lawyers I worked with. I was terrified that I would get fired. I hoped to god that I would get fired.

Long story short, I asked to switch to part time, and I asked for a demotion, both of which they gave me at the beginning of this year. Things have drastically improved, but patent law is still not something I'm interested in. I need to move on.

School is moving on. After an entire year of soul-searching and career counseling, I think that getting a master's degree is what I want to do.

I think.

TND
Sigh...still miserable deep down
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Long story short, I asked to switch to part time, and I asked for a demotion, both of which they gave me at the beginning of this year. Things have drastically improved, but patent law is still not something I'm interested in. I need to move on.

School is moving on. After an entire year of soul-searching and career counseling, I think that getting a master's degree is what I want to do.

I think.


I understand having a job that it isn't possible to handle. My husband was given a transfer. If he hadn't, he would have had to quit. We are about two years from him being able to comfortably retire, but the situation was critical and we would have handled the consequences.

The problem with moving on immediately is the debt. Returning full time at your current job doesn't sound like a great option, but can you find an additional part time job for awhile? It would allow you to build up an efund and eliminate part of the debt. Having some buffer going in would make success more likely.

Debra
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Do you have any experience as a teacher? Are you sure it's something you would enjoy doing full time? I ask this because a large percentage of new teachers switch careers within 5 years of starting their teaching career, and it would be a shame if you went back to school and went further into educational debt for something that you don't like long-term.

Another option would be for you to take a job at a private or charter school, which doesn't require the same level of certification as the public schools do. The downside to this is that the salaries are truly terrible, but it would give you the opportunity to make sure that teaching jr high-high school level kids is something you enjoy enough to do long term without having to go back to school.

I would recommend against joining loan repayment programs up front unless you're SURE this is something you would want. If you get your master's and graduate and look around at jobs and you decide you want to work in a low-income area, you can probably still enroll in some kind of loan repayment program at that point.

I understand the need for you to make a career change. But the fact that you've been so unhappy at your work makes it all the more important that your next career choice be one that will make you happy--both in the sense of achieving job satisfaction AND in the sense of having enough money to enjoy your non-working life. Be smart about this and make sure you are not running away from a bad job but running toward something that will enrich your life.

Finally, assuming you've thought about all these things extensively already and you're determined to go back to school this year--I'd go ahead and take out the subsidized loan package. I don't see any reason why you won't be eligible for it, and subsidized loans are definitely the best way to pay for school if you don't have cash in hand and can't get someone else to pay for it.
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TND
Sigh...still miserable deep down
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{{{{TND}}}}

TND, you showed a lot of courage and humility by asking for that demotion. You chose to seek an authentic sense of competency and fulfillment in your work, instead of just letting circumstances dictate your work life, or wasting a lot of energy trying to fake your way through your job. That's very esteemable. And in the long run so much better for your quality of life. I hope that bone-deep misery you are feeling dissipates, and soon; and that you don't carry it with you into the next phase of your professional life. You deserve better than that.

FIgirl
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Are you sure it's something you would enjoy doing full time? I ask this because a large percentage of new teachers switch careers within 5 years of starting their teaching career, and it would be a shame if you went back to school and went further into educational debt for something that you don't like long-term.


I can attest to that. DH got his degree in math ed and taught one year. Hated every minute of it and refused to go back for another year.

Now that we are married, he does do some substitute teaching. For him it is the fun part that he enjoyed without all the bureaucracy/paper work/parents that he hated dealing with.
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You might want to read this recent post on Headhunters about someone else's move to teaching:
http://boards.fool.com/Message.asp?mid=26738965
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Sigh...still miserable deep down

Someone already linked you to a post I made about my transition. I can certainly answer any additional questions on that as you have them. But I want to focus here -- it was mentioned in my post, but this is a critical item.

Changing jobs is not a cure all by any means. Many of the problems you have now are likely to exist in any job. They might not be evident initially as there is a honeymoon period to everything in life. But as the honeymoon starts to fade away, our old issues creep back to the forefront.

I guess I have a few comments and questions. Some of them will be personal; feel free to ignore them if you like.

(1) Does your life have balance? What do you do other than your job? What are your hobbies? Wat do you do to unwind?

(2) Have you sought counseling? You may have some level of depression; only a professional could say for sure. If you are depressed, it might help to get on some medication and try to build back to a general level of happiness.

(3) You work with lawyers, a group that has a significantly higher rate of alcohol use/abuse than other professions. For some reason, I picture you drinking your misery away. It's not something you explicitly said and I could be completely off base -- if so, I am sorry and you should ignore me -- but I worry that you might be taking solace in the wrong places. Hopefully my spider-senses are wrong on this one.




Now, as for your career path... Do you need to get a masters to transition into teaching? That would be unusual these days. Most states have programs where professionals -- especially those in science and engineering -- can get into teaching without going back to school. These programs are often called Alternative Preparation Programs and they let people like you go straight into teaching while taking some classes on the side to earn their teaching certificate. That is what I am doing.

In my case, I pay nothing for the classes. As long as I teach a total of 5 years in this county, I will never pay for my certification classes. If I bail before this, I have to pay them back the cost of the classes.

If you have such a program available to you, it will significantly reduce your costs to transition into teaching. Let me know if you have any more questions.

Acme
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