Veterinarians facing a beast of student loans

Written by WellHeeled on March 7, 2013 · 16 Comments

We hear a lot about the plight of student from law schools, med schools, and other graduate programs who are burdened by drastic amounts of debt (you might remember the studentloanasaurus drawing from that earlier post). Apparently, veterinarians are not exempt from the problem. A New York Times article, “High Debt, Falling Demand Trap New Vets” shed some light on this growing problem: veterinarians’ inflation-adjusted pay has been decreasing, but their student loans are increasing at an alarming rate.

The article profiles a young doctor, Haley Schafer, who has dreamed of becoming a veterinarian since she was 5 years old. She has fulfilled that dream and has a job that has meaning and a steady pay of $60,000. Unfortunately, as a cost of pursuing that dream Dr. Schafer has also racked up a lot of debt.

She also has $312,000 in student loans, courtesy of Ross University School of Veterinary Medicine, on the Caribbean island of St. Kitts. Or rather, $312,000 was what she owed the last time she could bring herself to log into the Sallie Mae account that tracks the ever-growing balance.

“It makes me sick, watching it increase,” she says. “There’s also the stress of how am I going to save for retirement when I have this bear to pay off.”

The average pay for vets is around $45,000-$50,000, which means, if you are to stick to the 2x your starting salary guideline, veterinary student debt shouldn’t exceed $100,000. That is going to be all but impossible, unless a student has family support or financial aid. At the same time, the cost to attend veterinary school, like most other professional programs, has increased.

And the cost of vet school has far outpaced the rate of inflation. It has risen to a median of $63,000 a year for out-of-state tuition, fees and living expenses, according to the Association of American Veterinary Medical Colleges, up 35 percent in the last decade.

But at least Dr. Schafer has gotten her DVM (doctor of veterinary medicine) degree. Another lady profiled in the article was ejected from veterinary school before she could graduate, and left with $160,000 in debt and no degree. Now she works at a veterinary technician for $18 per hour.

Dr. Schafer seems very happy to do what she does (how many of us get to live out our childhood dreams?), but $300,000 debt on a $60,000 salary? That kind of debt is mind-boggling, and maybe even feels a little hopeless. Given the financial circumstances that many new veterinarians face, I hope that veterinary schools and pre-vet programs at colleges incorporate more financial literacy education into their curriculum. This way, folks who care so much about helping and healing animals can also take good care of their own financial future.

Would you follow your dream career if it required you to take on enormous debt for decent-but-not-spectacular pay? Have you heard your vet talk about this issue?

To Cancel Student Loans in Bankruptcy, Your Future Must be “Hopeless”

Written by WellHeeled on September 4, 2012 · 12 Comments

There is nothing like being a graduate student who is potentially taking on a lot of loans to appreciate all those student loan articles that surface every fall. New York Times just published a great piece on what it takes to cancel your student loans. As many know, student loans, unlike almost any other type of loans such as home loans or credit card debt, are rarely discharged in bankruptcy. If someone wants to have his loans canceled, he would have to enter a completely separate process than normal bankruptcy and then prove to the judge that his situation is hopeless and his prospect for improvement is nil. The article describes it as such:

Most [judges] have settled on something called the Brunner test, named after a case that laid out a three-pronged standard for judges to use when determining whether they should discharge someone’s student loan debt. It calls on judges to examine whether debtors have made a good-faith effort to repay their debt by trying to find a job, earning as much as they can and minimizing expenses. Then comes an examination of a debtor’s budget, with an allowance for a “minimal” standard of living that generally does not allow for much beyond basics like food, shelter and health insurance, and some inexpensive recreation.

The third prong, which looks at a debtor’s future prospects during the loan repayment period, has proved to be especially squirm-inducing for bankruptcy judges because it puts them in the prediction business. This has only been complicated by the fact that many federal judicial circuits have established the “certainty of hopelessness” test…

Through my blog-life and real life, I knew a small handful of folks who have filed for bankruptcy. I have never, however, known anyone who has managed to get his or her student loans discharged. In fact, when I signed up for loans in college, a very colorful counselor described the loans as something we’ll have until: (1) we pay them off, (2) we die, or (3) we are so horribly maimed that we might as well be dead, which ever comes first. Not a speech a high schooler forgets.

Has anyone gotten their student loans canceled in bankruptcy? Do you think our current system for discharging student debt is too onerous?

Student Loans…. for Kindergarten?!

Written by WellHeeled on July 15, 2012 · 28 Comments

When we normally think of student loans, we imagine loans for post-high school education: community college, a bachelor’s degree, graduate school, professional programs, etc. But for some, that is no longer the case. Parents are now taking out student loans for their kids to attend KINDERGARTEN. I am usually 100% do-what-works-for-you, but this just strikes me as a little… extreme? strange? unwise?!

According to a March 2012 Smart Money article, pre-college loans are on the rise.

It used to be that families first signed up for education loans when their child enrolled in college, but a growing number of parents are seeking tuition assistance as soon as kindergarten. Though data is scarce, private school experts and the small number of lenders who provide loans for kindergarten through 12th grade say pre-college loans are becoming more popular.

Despite the risks, experts say many parents are intent on making private education a reality for their children no matter the cost. Robin Aronow, an independent educational consultant to families in Manhattan, says parents believe that private schools will give their children a higher quality of education and will help them get into a better college, which is why they’re willing to stretch.

I understand the desire to make sure your children get a good education, but it’s so risky to start taking on debt even before college. I would much rather have my kids attend public school from K-12 and then save the money for college. After all, you can go to school for free before college. Free higher education, on the other hand, is much harder to come by.

The Beast That Is Student Loan Debt

Written by WellHeeled on May 29, 2012 · 39 Comments

There’s a big $1-trillion dollar elephant (or, beast, depending on your perspective) in the room.

Sometime in the past months, student loans became the biggest non-mortgage consumer debt out there – bigger than credit card debt or auto debt. New York Times recently published an article headlined “A Generation Hobbled by the Soaring Cost of College.” An ABC News segment reported that some parents are delaying retirement to repay their kids’ student loan debt. Most of these articles focus on undergraduate debt, but the cost of graduate education has also skyrocketed. I didn’t realize how much until I talked to a mentor who graduated from the same business school I will be attending. His tuition in 2003 was half of mine. Disregarding the impact of inflation, tuition increased by 100% in 10 years. Ouch.

Then I received my student loan letter, which details what I have been approved for for the 2012-2013 school year:

$20,500 in Federal Stafford Unsubsidized Loan, with a 1% origination fee and a 6.8% fixed interest rate.
$44,000 in Federal Direct PLUS loan, which has a whopping 4% origination fee and a 7.9% fixed interest rate.
That’s almost $65,000 for ONE year! And I even got a small scholarship. If you had to pay everything out of pocket, cost of attendance would be somewhere in the high-$70,000 to low-$80,000 range.
With both loans, interest would begin accruing on Day 1 of disbursement (i.e. when I receive the loans).

Even though I’m planning to rely on savings for this year, morbid curiosity got the best of me and I plugged in the numbers into the FinAid loan calculator. For the Stafford Loan, borrowing $40,500 means that I would have to pay $476.00 per month for 10 years. I would have paid $57,191.20 in total and $16,191.20 of that would have been purely interest. The Plus Loan’s higher rates mean my monthly payment is $1,102.51 ($132,300.47 over 10 years, with $44,300.47 going toward interest).

This means that if I took out all the loans I am able to, I’d be paying over $1,500 per month for 10 years. By the end of the decade, I would have paid $60,000 in interest.

That’s a sobering, sobering reality check.

Truth be told, without the personal finance blogosphere, I think I would have been much more sanguine about student loans. After all, almost every recent graduate – law, medicine, business – I know have them. We are all going to make enough to service those loans. We are all going to be fine. Or so the thought goes. A few years back I thought that I’d be satisfied if I can graduate with under $80,000 in loans. Then I crunched some numbers, drank the PF kool-aid, and thought, why the h-e-l-l am I taking out ONE penny more of debt than I have to? My “comfortable number” moved down to $50,000, and now, to $10,000, and maybe even to a hopeful number of $0. I love my money too much to give it all away to Uncle Stafford or Auntie PLUS!

In fact, a Harvard MBA just paid of $90,000 of his student loans in less than a year. I’ve been following his blog since the beginning and it has definitely inspired me to not only pay off my debt sooner, but also to minimize the loans I’d have to take out in the first place.

Are you hobbled by student loan debt? Is it from college or graduate school?

What to do with a Windfall or Bonus

Written by WellHeeled on May 2, 2012 · 24 Comments

Thanks to a quarterly bonus, my bank account will be getting some extra love in the next paycheck. After 401K deduction and withholding for taxes, I should be seeing a $3,000 windfall. I am really happy about this boost, as I look into the future months and see only cash out without the corresponding cash in.

What to do with windfall money?

Save some

Check to see if you can have 401K / 403b taken out of your bonus checks. Or, you can always use a windfall to contribute to a Roth IRA, put into a down payment fund, or save for a shorter-term goal. 401K is taken out of my bonus check as well as regular paychecks, and although that makes my bonus look punier, it’s a good way to make sure I am “paying myself first.”

Spend some

Taking some of the windfall (5%? 10%? 20%?) to treat yourself is perfectly acceptable. And what do you know, there is NO shortage of ideas of where I can spend this money. In fact, I might use $50 or $100 to buy a bridal headband. If we were still planning on going to the Galapagos instead of raiding the kitty for graduate school, I would probably have put the whole thing into the Galapagos Fund.

Pay off debt

If you owe people / companies money, a windfall can go a long way in helping you out of indebtedness. Paying off high interest rate debt is probably the BEST return on your money in this environment (and can do wonders for your state of mind).

Here is where the bulk of my bonus check will go: directly into my MBA fund, which then will be spend down on the MBA experience. I am trying to motivate myself to minimize student loans by telling myself that every dollar I can put towards school is another dollar I wouldn’t have to repay, is another dollar that I can help CB with HIS tuition in two years is another dollar that we’d enjoy as a “free” dollar after we graduate.

How do you save/spend a windfall or bonus?

My Debt That Doesn’t Feel Like Debt

Written by WellHeeled on November 9, 2011 · 31 Comments

Many personal finance bloggers talk about their diligent debt payoff strategies. I have debt too. When I graduated college I had $19,000 in student loans and a 10-year payment plan. My current student loan balance is $11,160.

The truth is, my student loan doesn’t feel like debt.

Let me explain. I received my loan through a special program, it’s interest free for the life of the loan. There is no financial sense for me to pay off this loan one minute sooner than I have to. So I just keep making my designated monthly payments. This might be heresy, but for the most part, I even feel debt free. Even though I obviously am not. Once I take on interest-bearing debt (say, for graduate school), I am sure that my mentality will change. I am sure I will try my best to pay off the money-suck as soon as I can.

Am I just fooling myself? Would you repay a loan that has no or low interest rate faster than you have to? Do you have debt that for whatever reason, just doesn’t feel like debt?

5 Lessons From PlaySpent

Written by WellHeeled on March 8, 2011 · 8 Comments

Several weeks ago I blogged about PlaySpent, an online game that gives a taste of life as the working poor. Today, I went back to the site and played again, and I felt compelled to write a little more about the experience. In my previous post about PlaySpent, several of you pointed out the shortcomings of the game (no options to get cheaper housing, no chance to take on another job, etc.). The game is rigged to make you “lose”, I don’t disagree about that, but I think it’s still a worthwhile exercise.

5 Lessons I’ve learned from PlaySpent

1. It is so difficult to build up any types of reserves. Many times I’d run out of money by the middle of the month. Even when I won the game (i.e. had money left over at the end of the money), the money I would have – at most $500 plus – isn’t enough for the rent I’d have to pay at the beginning of the next month.

2. One small money hiccup will cause a big problem. In one scenario, I need to replace a window for $100 after a neighborhood kid smashes it with a baseball. A $100 unexpected expense would be an annoyance in my current budget. But in PlaySpent, when I only had $70 until the next payday, $100 becomes a Very Big Deal.

3. You cannot afford to give your child a head-start or a leg-up. This is probably the most heartbreaking part of the game. My imaginary child gets selected for the gifted program at school, which costs $50. The cheapest thing to do is to decline the opportunity. It is so sad when $50 is too much to give your child a push in the right direction. Or, my imaginary child is falling behind in math, and my choices are to hire a tutor (too expensive), let the kid fail (what?!), or ask a friend for help. In the game I always chose the 3rd option, but how many low-income parents have friends who have the time to tutor their kid for free?

4. You are forced to delay necessary medical treatment. One choice I faced was to pay $400 for a root canal or grin and bear the pain with numbing gel. I chose the numbing gel because $400 would absolutely wipe out my budget for the month (and then some). I seriously think my tooth throbbed as I clicked the second option.

5. In the PlaySpent universe, I was poor. The truly depressing part, however, is that under the rules of the game I will very likely STAY poor. I wasn’t progressing, I had a basic survival job, not a CAREER I was building. Instead, of moving forward, I was barely treading water. There were so many setbacks and very few lucky breaks. It felt like everything served to pull me away from my goal of financial security.

That feeling, even though it was a game (a game!) was eye-opening. I don’t pretend to understand what it’s like to be on the edge of poverty, and I hope I will never experience that. But PlaySpent.org has opened my eyes to how and why it is so darn difficult to get back on your feet when you are so far down.

Paying Debt vs. Saving Money

Written by WellHeeled on February 23, 2011 · 38 Comments

Mathematically, paying down debt and saving up money both require you to spend less than you make. The mechanics of paying off a $10,000 loan vs. saving $10,000 is the same – in both instances, you would have to have $10,000 left over after you have paid for all your necessary expenses.

Motivation-wise, though, the two goals are different. Paying debt has the added allure of “being debt-free” and saving on the interest on the debt. Saving money, however, means you are building something, instead of just digging yourself out of a hole. This obviously motivates some people (it’s easier to want to do even better when you are already doing well).

What do you think? Readers who have both paid down debt and saved up money – which one do you think is more difficult? Which one was more motivating?

PlaySpent The Online Game’s Challenge: Can You Survive A Month in Poverty?

Written by WellHeeled on February 10, 2011 · 22 Comments

via UMD

There are millions of Americans out of work and living in poverty today. Can you survive for a month when you only have $1,000 to your name, can only find a low-paying job, and have kids or pets to care for? That is the question asked by the Urban Ministries of Durham, a faith-based organization that provides food, shelter, and clothing to those in need in Durham, North Carolina. In collaboration with the interactive agency McKinney, Urban Ministries came up with this brilliant and thought-provoking online game: SPENT. (Hat tip to Stephanie for tweeting about this game).

PlaySpent.org

—————————————————————————–

What is PlaySpent?

Here are the premises of SPENT from McKinney’s press release:

Your savings are gone. You’ve lost your house. Accept the challenge to see if you can make it through the month on your last $1,000, learning quickly how changes in employment, housing, medical costs and other expenses can create an unexpected shortfall.

Play through a series of difficult challenges that require tough choices about work, where you live and what you can provide your family, seeing all too soon how decisions lead to unimagined consequences. Learn important facts about the condition of homelessness and the many services UMD provides.

Whether you quit or get to the end with no dollars or one, click “Donate to UMD” or “Get involved” and view the many ways players can contribute time and/or money via PayPal. Or play again hoping for a different outcome.

My Experience with PlaySpent

This site takes you through a month of trying to survive on little or no income – with real life obstacles that pop up along the way (Do you go to grandfather’s funeral? Should you send your child to camp? Should you pay your cell phone bill or your car note?). I played this game several times, and I pretty much failed every time. My faults came from always paying the dentist and taking the computer science class that can get me a higher-paying job. Two things that I have regarded as wise investments in my future- health care and education – have become luxuries that I cannot afford in SPENT.

In fact, the first time I tried to apply for the Administrative Temp position, I failed the typing test! Through out different iterations of the game, I had to choose between getting a root canal or suffering more tooth pain. I had to decide if I take $10 that a family friend had given my imaginary child. I had to decide if I want to attend my grandfather’s funeral or skip it. I had to decide if I want to pay my gas bill or my electric bill. This game is nothing if not sobering.

There are a lot of assumptions about poverty and homelessness. I think SPENT does an excellent job of making the experience easier to understand for a broader segment of the population. For too many people, poverty is not a game.

Becoming Debt Free is About Passion and Intensity

Written by WellHeeled on October 11, 2010 · 7 Comments

This guest post is by Brad Chaffee,the author of Enemy of Debt, a personal-finance blog about the consequences of unnecessary and excessive personal debt. He believes that personal responsibility is a key to living an extraordinary life. (As a personal aside, Brad is one of the nicest and most helpful bloggers that I have had the pleasure of knowing. Case in point – him helping me out with a last minute guest post!)

Have you ever really tried to become debt free? If so, you’ve probably experienced that feeling like you are running in place without covering much ground. Becoming debt free has been compared to running a marathon. A lot of people start, but hardly anyone finishes.

I have started a lot of things I haven’t finished so I know exactly how it feels. Frustration, anxiety, failure, and [insert emotion here], comes to mind. You’re not alone.

I don’t think your failure necessarily suggests that you don’t want what you were after. I believe that most people simply do not realize what it takes. The first mistake I think people make is that they mistakenly focus primarily on the math, without understanding that the entire process is more of a mental game.

Doing good math is certainly important, but it’s only a very small piece of the puzzle.

After becoming debt free successfully, I can say the mental and emotional side of debt elimination is very real. If you are not prepared for what it will take then be prepared to run in place.

How Bad Do You Want It?

How passionate are you about achieving debt freedom? If it’s just something you kind of sort of want, then that’s definitely not enough. You have to be mad! You have to be sick of where you are with every ounce of your being. You have to hate your debt with a passion!

Passion is the key because without it, there is no motor driving you into action. If you are tired of living paycheck to paycheck and truly want a different result, you will have to stay motivated in order to reach your financial goals.

What Are You Willing To Do To Make It Happen?

You can want to become debt free until you are blue in the face, but if you are not willing to make the sacrifices needed you will fail. Paying off your debt takes unbridled commitment. If you are still hanging on to the very habits and behaviors that got you in debt in the first place, you’ll go nowhere fast. (Hence the “running in place” feeling most people encounter.)

I can tell you from experience, the one thing that limits a person’s ability to become debt free is their inability to sacrifice. The problem is usually them. It’s not their income, it’s their stubborn mindset.

We tried to become debt free many times before we were actually successful. Each time we’d pay one or two of our debts off, only to find ourselves right back at square one 3-6 months later. The reason was very simple. Our behaviors had not changed, and quite honestly, we must not have wanted to become debt free bad enough.

We only saw an opening to run the card or debt right back up again, because after all, we had a zero balance. Our old attitude about debt deciphered that to mean we had more money to spend.

When we decided to become debt free we gave up so much. We sacrificed our big screen TV, my xbox360, and together we sold our 2004 Pontiac Vibe, stopped going out to eat, and severely cut our entertainment budget. We practically sold everything we could to reach our goals faster, and it was painful. Those changes were not easy, but we were mad, and we were willing to kick our stuff to the curb in order to do it. It was totally worth it!

Tips to Keeping the Passion and Motivation Alive

Work together as a team
Open communication
Willingness to compromise
Stop borrowing money
Set mutual goals together on paper
Set milestones and celebrate accomplishments
Don’t expect perfection
Remind yourself often why you started the process
Believe in yourself, your spouse or your loved one
Take baby steps to reach your goals
Don’t stop! It is worth it (TRUST ME!)

Debt is the Kiss of Death for a Relationship?

Written by WellHeeled on September 3, 2010 · 25 Comments

Debt isn’t just hazardous to your financial well-being, it can destroy your relationships as well. Just ask one young lady featured in today’s New York Times article. Three days after she divulged to her fiance that she had over $170,000 in student debt, he broke off the engagement. For her future relationships, she decides that she needs to share that information much sooner, because it can be a “deal-breaker.”

Still, all of this raises the question: At what point do you have a moral obligation to disclose your indebtedness during courtship? On the eighth date? When you get to third base? In your eHarmony online dating profile?

“It’s a sliding scale,” said Ms. Riesel, the Manhattan lawyer. “It depends on the person and the nature of the relationship.” Ms. Winters, the Short Hills divorce lawyer, said it might depend on your definition of a serious relationship. “But I wouldn’t wait until you were signing leases for apartments or picking out engagement rings.”

With a dual-career couple, it’s not unsurprising to have combined debt levels of hundreds of thousands of dollars. An MBA and a doctor, or a pair of lawyers, for example, can easily graduate with over half a million dollars after their studies. If both CB and I attend graduate school as planned, we will probably come out with around $100,000-$150,000 in individual debt loads, baring any unexpected windfalls (ahem, lottery, anyone?). It makes a little easier knowing that any significant debt we incur will be when we are in a relationship together, so no one is blindsided by the topic.

I wonder, though, is there a dollar amount of my significant other’s debt at which I would “walk away” from an otherwise loving and secure relationship? I would say no. But I have never been in a situation similar to what was profiled in the New York Times.

Before a relationship gets serious, I believe in a frank discussion about finances, especially on the debt burden, is certainly in order. Whipping out your student loan statement or your credit report is a bit of a mood-killer, so I’d save that discussion until at least the third date!

Questions for readers:

1. If you have significant debt, at what point would you share that information with your significant other?

2. If you are dating someone who has significant debt, at what point do you expect or would want to know that information?

3. Is there an debt amount that is a deal-breaker?

Photo by Sean Hering Photography via Flickr

Friends and Borrowing Money

Written by WellHeeled on November 18, 2009 · 34 Comments

Let’s take a hypothetical situation. Let’s say that you are good long-time friends with “Sammy” (that’s a nice, unisex name, right?)

Now, one day, a few months ago, you and Sammy had a lunch date at a small neighborhood bistro. You have agreed to split the bill. But before you started ordering, Sammy realized that he/she didn’t have any money – the wallet was left at home. Although you generally avoid lending money to friends, you couldn’t very well tell Sammy to starve while you ate! So you paid for Sammy’s tab (~$20) and Sammy told you he/she will repay you when you get together the week after.

Well, you were supposed to get together a few times, but Sammy got really busy with work and school, and now finals time is coming up, and so the second lunch never materialized.

You realize that (1) Sammy is a good and upstanding person who would never try to take advantage of you, (2) Sammy has never borrowed money from you before, (3) right now is a very busy time for Sammy and this issue probably just slipped Sammy’s mind, (4) it’s only $20 (i.e. not the end of the world) – you’d rather write it off than to create rifts in the friendship.

On the other hand, $20 is $20 is $20. You would like to be repaid for what was clearly a loan. You have gently reminded Sammy once a few weeks ago but Sammy couldn’t meet up with you. But again – on the grand scale of things, your friendship is far more valuable than $20.

What would you do?

Amazing grace (period)

Written by WellHeeled on December 13, 2007 · 4 Comments

…is ending.

Just got my first bill from good ‘ol alma mater… the due date for the first payment is January 1, 2008. Happy New Year’s! Time to pay the piper!

From now until 2017, I’ll have to commit $160 every month to pay back my college loan. NOT complaining, though, I basically lucked out with an interest-free loan. And let’s face it, <$200 a month is a very feasible repayment when I think about the many, many college grads out there who are saddled with bigger loans.

I am NEVER paying back my student loans (early)

Written by WellHeeled on April 12, 2007 · 22 Comments

You heard that right.

I just spoke to the student loan department. It turns out that because my loan was from a private foundation, they have subsdized the interest for the duration of my college education (this I knew), and for the rest of the life of the loan (this I didn’t know and was VERY happy to find out).

So, I have an interest-free loan. Not just for six months or one year or two years, but for 10 years. As long as I stay current on payments, I will never pay interest. Can you tell I’m excited? And here I was worrying about my interest rate. Ha! In addition, I get a grace period of six months. My first payment is due in 2008. This is going to do wonders for my cash flow for the rest of 2007.

I wish I didn’t have a loan, but if I HAD to be in debt, this is probably the best deal I’ll ever get.

Liberal arts to law school?

Written by WellHeeled on December 14, 2006 · 15 Comments

For a LONG time, I planned on going to a top law school, specializing in corporate law, and becoming a Big Law partner by the time I’m 35. Yes, I had that life mapped out when I was 13. I like to read, I like to write, I like to nit-pick. I’d be the perfect lawyer!

I talked about becoming a lawyer all the time when I was younger. So Mom tolerated my liberal arts degree because she always assumed that I’d go to law school. This is how I escaped the dreaded, “so, WHAT are you going to do with that degree?” question for the first couple years of college. But my focus changed. After seeing older friends struggle with the Beast (also known as LSAT), and really wanting a break from 3 MORE years of schooling, I decided that I wasn’t sure about law school. Mom freaked out. In retrospect, I couldn’t really blame her. I mean, she spent $100,000 for me to read great books and think and delve into the questions of life, which is all fine and good, but doesn’t even BEGIN to pay the bills.

But despite the tension and pressure from Mom (and myself), I am really glad that I didn’t let what-am-I-going-to-do-with-my-life-let’s-go-to-law-school! push me into applying. Because once I’m on that treadmill I would’ve ran with everything I’ve got. So I knew, if I’m serious about law school, that would require a huge investment in terms of time, money, and energy. Then AFTER I get into a school, comes writing the tuition checks for $50,000 a year. After thinking it over, I concluded that I should NOT go $150,000 into debt to be tortured by the Socratic method.

I think this is something that many liberal arts students don’t think about. If they’re smart and don’t really know what to do after graduation, law school is often the default option. A J.D. is a valuable degree, but law school is such a huge investment when you’re not sure if you want to do law. Unless you go into Big Law for several years, it’d be pretty difficult to pay back the mountain of debt that you owe to Mr. Socratic. Fortunately, things worked out for me. I got a good job. I’m happy. Mom’s happy.

My student debt just died a little

Written by WellHeeled on December 13, 2006 · 5 Comments

For all this time I thought I had $20,000 in student loans. According to my financial aid summary that I just received, however, I owe $19,000. It’s like getting a gift I haven’t been expecting. I guess my loan obligation puts me directly in line with the average college graduate. The American Council on Education has more in-depth information on amount of debt from different types of institutions and degree programs.

Also check out this 2004 report (pdf) from ACE about debt burden. It might be a bit dated as the data is from the 1990s. The report concludes that in general debt burden for students receiving their baccalaureate degree in the 1990s was manageable and unchanged at 7 percent. However, if borrowing levels continue to increase, interest rates rise, or recent graduate salaries decline, debt burden will increase.

According to an interesting article from the New York Times, apparently families equate the price of tuition with the quality of education – so that some colleges have increased their tuition (and aid) to attract more applicants.

Lucie Lapovsky, a consultant who was once president of Mercy College in New York, conducted a study asking students to choose between a college charging $20,000 and offering no aid, and one charging $30,000 and offering a $10,000 scholarship. Students chose the pricier option. “Americans seem to like college on sale,” Dr. Lapovsky said.

Have credit, will travel

Written by WellHeeled on December 12, 2006 · 5 Comments

USA Today’s Young and In Debt serie presents Tolu Adeleye, a MIT Sloan graduate who charged $35,000 in credit card debt due to travels during business school (he also has $25,000 in business school loans). Out of all the stories, his is probably the one I can most relate to. I LOVE to travel, and I can understand how it’d be easy to swipe the card for plane tickets, hotels, and dinners when you’re at a top business school with prospects for a high-paying job. Now I know it’s not smart to rack up credit card debt, but I can see Tolu’s side of the story. He’s been to 22 countries! I guess you can say the experience was priceless.

His $25,000 student loans was a good investment – Tolu has a $100,000+ post-MBA salary, with more opportunities for advancement. He lives in Minneapolis, so those six figures will go much farther than in New York or San Francisco. If he buckles down, I think he can pay off his debt relatively quickly.

I’ve heard that many MBA students take out more school loans than they need for tuition and room/board (which has a lower interest rate than credit cards), and just use the rest to travel. I know it’s not prudent, but when the travel bug bites, it bites hard! Most MBA students have worked for 4 to 6 years before school, and will be jumping back into the working pool after two years. B-school would probably be their only chance to be a globe-trotter for a long while, unless they become consultants or something.

Let’s see: I’ve been to Argentina, Bulgaria, Canada, China, the Czech Republic, Germany, Greece, Hungary, Japan, Korea, Mexico, and Uruguay. But some of these countries were only day trips, so they didn’t quite count. I’ve also had the pleasure of visiting England and Switzerland, but only if you count time spent in airport. Every time I get a new stamp in my passport I can’t help but smile. I want to visit Spain, Italy, and Morrocco within the next five years. Hopefully I’ll have saved something for a travel fund by the time I go to B-school.