If you took out six figure student loans for a professional degree, what was your strategy

[Anonymous]

Anonymous wrote:I've heard, for a graduate degree, you should never take on more debt than the salary you would earn during the first, full year after obtaining the degree.

Then we would not have MBA graduates, doctors, PAs, PTs, lawyers, etc. The MBA is the "cheapest" of those.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I've heard, for a graduate degree, you should never take on more debt than the salary you would earn during the first, full year after obtaining the degree.

Actually, that's the advice money managers give for bachelor's degrees --- never take out more for college than you expect to make in your first year doing the job you are trying to prepare for.

For a bachelors that makes total sense. CS majors could take out $80K, don't recommend it as it is not needed, but they could and do ok. History/English/psychology majors probably shouldn't take more than $40K for undergrad.

[Anonymous]

My spouse and I graduated into the recession (2010) with $250K law school loans, 5+% interest rates, and a pulled offer. We therefore were more risk averse than some others and focused on paying our loans down aggressively for 5+ years. Then focused on getting pregnant (worried about fertility) and saving for a down payment (tough with double daycare). That left us poised to buy in spring 2020 but then Covid happened and we waited a year to see whether we actually wanted to move out of the region to be closer to family. Ended up buying a house in the DMV in 2021. It’s worked out okay but if we had been less risk averse we likely would have gotten on the property ladder sooner which would have been much better for our net worth. I’m at peace with our approach but not sure I’d recommend to others.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've heard, for a graduate degree, you should never take on more debt than the salary you would earn during the first, full year after obtaining the degree.

Actually, that's the advice money managers give for bachelor's degrees --- never take out more for college than you expect to make in your first year doing the job you are trying to prepare for.

For a bachelors that makes total sense. CS majors could take out $80K, don't recommend it as it is not needed, but they could and do ok. History/English/psychology majors probably shouldn't take more than $40K for undergrad.

+1 This makes sense to me too. I've met a lot of people who are saddled with debt because they wanted to go to the more exclusive school, but they don't earn much money. Top school doesn't always = high salary (especially for certain fields).

We told our kids that we'll pay for in-state schools or give them that amount towards tuition elsewhere, and they should only consider pricier schools if it will lead to a higher paying career or they get scholarships. I know this goes against the DCUM grain, but we're not sacrificing our retirement plans just to get them expensive degrees to get a career with a low ROI. It makes sense to take out loans for a top law school, but not to max out your salary at $90K at some SJW nonprofit.

[Anonymous]

Came out of law school in 2007 with $175k in loans, most at 6.8%. Paid as agreed the first few years while maxing out retirement and investing, using my stub bonus for cash savings. Then I got laid off and had to do the contract attorney thing but did not put the loans in forbearance, which was tough but I knew the interest would create a snowball if I took a year (or more) off. Got another, lower-paid job for a couple of years and continued to pay as agreed while building back my emergency fund.

Then I got another Biglaw job and paid off each of the >3% loans, one after another, in like 18 months. I didn't trust the income to last and wanted something tangible to show for it if it disappeared again. When DH & I combined finances I paid this off too.

[Anonymous]

Anonymous wrote:My spouse and I graduated into the recession (2010) with $250K law school loans, 5+% interest rates, and a pulled offer. We therefore were more risk averse than some others and focused on paying our loans down aggressively for 5+ years. Then focused on getting pregnant (worried about fertility) and saving for a down payment (tough with double daycare). That left us poised to buy in spring 2020 but then Covid happened and we waited a year to see whether we actually wanted to move out of the region to be closer to family. Ended up buying a house in the DMV in 2021. It’s worked out okay but if we had been less risk averse we likely would have gotten on the property ladder sooner which would have been much better for our net worth. I’m at peace with our approach but not sure I’d recommend to others.

Say you finished law school in 2005, worked to pay loans down for 2 years, then said let's buy a house now before we are debt free. So you spend $600K on a home in 2007, watch it go up in value for 1 year then watch the bottom drop out, so your home is only worth $300K and it takes another 7-8 years to be worth $600K again. So in 2009 you have a home worth half what you paid for it, you still have at least half your loans, you are thinking of getting pregnant or have a kid already paying for daycare, no choice to move as you cannot sell your home, you would owe the bank if you wanted to move out.
It's all about timing----for you you missed out on the years of increased home values. But it just as easily could have been missing out on the bottom dropping out and you being so happy you were still renting and focused on reducing debt and not being underwater by 40-50% on your home.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've heard, for a graduate degree, you should never take on more debt than the salary you would earn during the first, full year after obtaining the degree.

Actually, that's the advice money managers give for bachelor's degrees --- never take out more for college than you expect to make in your first year doing the job you are trying to prepare for.

For a bachelors that makes total sense. CS majors could take out $80K, don't recommend it as it is not needed, but they could and do ok. History/English/psychology majors probably shouldn't take more than $40K for undergrad.

+1 This makes sense to me too. I've met a lot of people who are saddled with debt because they wanted to go to the more exclusive school, but they don't earn much money. Top school doesn't always = high salary (especially for certain fields).

We told our kids that we'll pay for in-state schools or give them that amount towards tuition elsewhere, and they should only consider pricier schools if it will lead to a higher paying career or they get scholarships. I know this goes against the DCUM grain, but we're not sacrificing our retirement plans just to get them expensive degrees to get a career with a low ROI. It makes sense to take out loans for a top law school, but not to max out your salary at $90K at some SJW nonprofit.

You should never jeopordaize your retirement for your kid's education...find a place that is affordable for the kids. No school is worth $80K/year if you don't have the money saves or cannot easily cashflow it (and that means you also are adequately prepared for retirement for your age). Nobody cares where you went once you get your first job, and really even for that there are plenty of Non-T20 schools where kids go onto great jobs. The elite schools don't have a lock on that. Sure the elite schools send kids to FAANG, but so do non-elite state schools and private schools. Go where you can afford, work hard and take advantage of all opportunities. 99% of success at college is what you do while there, not where you are. If your kid "can buy a lottery ticket for T25 admissions" then they should have the drive to succeed anywhere

We do our kids a disservice when we don't help them understand what their initial salary, 5 year salary and 10 year salary might be for their major/degree. We need people doing all types of jobs, and most who major in social work would be miserable/suck at CS/engineering. So go do what you want in life, be happy, but set your expectations for lifestyle and finances accordingly. If you are going to come out making only $35K, try to avoid student loans as much as possible. Also plan that your lifestyle needs to fit within your earning power---if you desire taking beach vacations (that you fly to) and a trip to Europe each year and that really is what you need to be happy, then being a social worker or teacher might not be the best career path for you. But don't do something STEM just to make more money, unless you would enjoy that, because that is a miserable path. So search to find something you will love

[Anonymous]

Anonymous wrote:Came out of law school in 2007 with $175k in loans, most at 6.8%. Paid as agreed the first few years while maxing out retirement and investing, using my stub bonus for cash savings. Then I got laid off and had to do the contract attorney thing but did not put the loans in forbearance, which was tough but I knew the interest would create a snowball if I took a year (or more) off. Got another, lower-paid job for a couple of years and continued to pay as agreed while building back my emergency fund.

Then I got another Biglaw job and paid off each of the >3% loans, one after another, in like 18 months. I didn't trust the income to last and wanted something tangible to show for it if it disappeared again. When DH & I combined finances I paid this off too.

Curious when you and DH decided to add homeownership into your financial picture...

[Anonymous]

I graduated with about $150k in law school debt in 2012. Consolidated rate for PSLF was over 7%. Did the math, accounting for the uncertainty with that program at the time, and refinanced to a private loan at 5%, now down to somewhere around 3.5%. Live(d) below our means and counted it like a second mortgage payment. Last loan payment is in less than a year and we’ll divert that money directly into retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Came out of law school in 2007 with $175k in loans, most at 6.8%. Paid as agreed the first few years while maxing out retirement and investing, using my stub bonus for cash savings. Then I got laid off and had to do the contract attorney thing but did not put the loans in forbearance, which was tough but I knew the interest would create a snowball if I took a year (or more) off. Got another, lower-paid job for a couple of years and continued to pay as agreed while building back my emergency fund.

Then I got another Biglaw job and paid off each of the >3% loans, one after another, in like 18 months. I didn't trust the income to last and wanted something tangible to show for it if it disappeared again. When DH & I combined finances I paid this off too.

Curious when you and DH decided to add homeownership into your financial picture...

He already owned a condo when we met, and we bought a home together about 6 months after paying off the loans. If we had met sooner it might have been different - it's not like we lived together for 5 years very frugally paying everything off. I paid at least 50% off before we met, 90% before we combined finances.

[Anonymous]

DH and I graduated in 2012 with over $375K in loans between our two graduate degrees and remaining undergrad loans. We both had relatively high-paying jobs, and prioritized paying down the loans in less than 5 years, while saving for a down payment and buying a modest (by DCUM standards) house and having a baby a couple years post-graduation. I refinanced our loans several times, and think the final interest rate was around 3-3.5%.

We did still take the occasional nice vacation and ate out a decent amount, funded a 529 and our retirement, though we drove our existing used car into the ground, didn’t spend excessively on discretionary expenses, and funneled a lot of extra money to our loans, versus a brokerage. Our income also increased a lot every year. Looking back, I do kind of wish we were a little less aggressive in paying them down so quickly and had put more into the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For the first few years, I paid on a 20 yr plan. Then I got married and we used all of my income to pay down the debt -- which was gone in 2 yrs. When the debt was gone, THEN we started a family. Not having that debt is CRUCIAL to having freedom in your life.

I highly recommend paying it all down and living without the next purchases for a few years. You will NOT regret getting that monkey off your back.

I highly recommend the exact opposite. I definitely would have regretted it.

Why would you regret taking only 2 years to get your debt to zero and then start living a very nice life? Why can't you do 2 years of delayed gratification?

Because I ended up richer not doing that. In addition to having my kids when I wanted to.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My spouse and I graduated into the recession (2010) with $250K law school loans, 5+% interest rates, and a pulled offer. We therefore were more risk averse than some others and focused on paying our loans down aggressively for 5+ years. Then focused on getting pregnant (worried about fertility) and saving for a down payment (tough with double daycare). That left us poised to buy in spring 2020 but then Covid happened and we waited a year to see whether we actually wanted to move out of the region to be closer to family. Ended up buying a house in the DMV in 2021. It’s worked out okay but if we had been less risk averse we likely would have gotten on the property ladder sooner which would have been much better for our net worth. I’m at peace with our approach but not sure I’d recommend to others.

Say you finished law school in 2005, worked to pay loans down for 2 years, then said let's buy a house now before we are debt free. So you spend $600K on a home in 2007, watch it go up in value for 1 year then watch the bottom drop out, so your home is only worth $300K and it takes another 7-8 years to be worth $600K again. So in 2009 you have a home worth half what you paid for it, you still have at least half your loans, you are thinking of getting pregnant or have a kid already paying for daycare, no choice to move as you cannot sell your home, you would owe the bank if you wanted to move out.
It's all about timing----for you you missed out on the years of increased home values. But it just as easily could have been missing out on the bottom dropping out and you being so happy you were still renting and focused on reducing debt and not being underwater by 40-50% on your home.

This is a pretty asinine comment. As it happened I bought my house in 2016 which has worked out very well for us but I wouldn’t have said no to paying 2007 prices instead! Especially since no one was ever 50% underwater on their DMV home.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've heard, for a graduate degree, you should never take on more debt than the salary you would earn during the first, full year after obtaining the degree.

Actually, that's the advice money managers give for bachelor's degrees --- never take out more for college than you expect to make in your first year doing the job you are trying to prepare for.

For a bachelors that makes total sense. CS majors could take out $80K, don't recommend it as it is not needed, but they could and do ok. History/English/psychology majors probably shouldn't take more than $40K for undergrad.

Even with a full tuition scholarship, $40K would not cover room and board for 4 years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've heard, for a graduate degree, you should never take on more debt than the salary you would earn during the first, full year after obtaining the degree.

Actually, that's the advice money managers give for bachelor's degrees --- never take out more for college than you expect to make in your first year doing the job you are trying to prepare for.

For a bachelors that makes total sense. CS majors could take out $80K, don't recommend it as it is not needed, but they could and do ok. History/English/psychology majors probably shouldn't take more than $40K for undergrad.

Even with a full tuition scholarship, $40K would not cover room and board for 4 years.

DP but yes, obviously the only people who should pursue a track that will result in a job like that are trust fund babies.