Student Debt?
June 11th, 2009 | by admin |What is a ridiculous amount of student debt? I’m looking at Notre Dame, University of Michigan (out of state) and Northwestern, so probably 40-50k a year. I am unlikely to get any aid because of my dad’s income (except maybe some merit-based from Michigan?) and I know he’ll give me trouble about paying the full 40-50k, so if I took out 10k a year in loans to contribute and did a (most likely) 5 year program, would 50k student debt be absolutely unmanageable?
I wanted to say in my original post that I plan on pursuing a degree that leads to a reasonably high income. Something in architecture or real estate, engineering, maybe finance (my dad’s an investment banker at a pretty prestigious firm so I would have a foot in the door…) but I thought that that would be sort of silly sounding–of course I plan on making money. But anyway, I realize things might be rough initially getting out of school, but I still think it will be worth it.
2 Responses to “Student Debt?”
By Jose V on Jun 12, 2009 | Reply
Scholarships
By NotAnyoneYouKnow on Jun 12, 2009 | Reply
Let’s take a look.
For the sake of argument and to simplify things, let’s assume you take 5 loans of $10,000 each. Let’s also assume that each loan has a fixed interest rate of 8.5% (typical of private educational loans) and that you have 10 years to repay the loan.
Each of these individual loans would have a monthly payment of $124. For five of these, that’s more than $600 a month, or $7200 a year.
Let’s assume your first job out of college pays you $40,000. Not bad. The first 18% of your salary (almost 1/5) goes to pay off your college loans. Wow. That’s stiff.
Hmm..
$1500 a month for a place to live
$700 a month for your educational loans
$400 a month for food
$350 a month for your car payment
$200 a month for gas
$100 a month for electricity
$70 a month for your cell phone
Wow – that $3300 a month of income (and that’s before taxes) isn’t going too far, now, is it?
What you can afford to borrow depends (a lot) on how much you can anticipate earning when you get out of school. The loans don’t kill you later on in life, when you’ve been working 10 years and you have a good job and a steady income – the loans kill you when you’re just out of school and you have some entry level job that you could get laid off from next week.
If you’re going to medical school, you can afford a lot of loan debt. If you’re going to divinity school, probably not much. It’s something you need to figure out about what you intend to do for a living. Doctors can afford their Lexus payment, and they can afford a nice big loan payment too.
I hope that helps you think about this question.