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

[Anonymous]

Took $120k, half private and half Direct Loan. On graduation, was able to consolidate the federal loan at a low rate on a 30 year repayment time-line.

Prioritized paying off the private loan, which had a floating rate. I was able to do it in about 3 years. I was a single person with simple tastes, so not a lot else to spend my salary on.

Moved to lower paying public service job after that but chose not to do the (faster) payment plan that qualified for PSLF: just kept paying the monthly payment, and double payments when I could. The last little bit became eligible for forgiveness in 2022 but otherwise I'd be nearly done now, after 20 years.

[Anonymous]

Anonymous wrote:Took $120k, half private and half Direct Loan. On graduation, was able to consolidate the federal loan at a low rate on a 30 year repayment time-line.

Prioritized paying off the private loan, which had a floating rate. I was able to do it in about 3 years. I was a single person with simple tastes, so not a lot else to spend my salary on.

Moved to lower paying public service job after that but chose not to do the (faster) payment plan that qualified for PSLF: just kept paying the monthly payment, and double payments when I could. The last little bit became eligible for forgiveness in 2022 but otherwise I'd be nearly done now, after 20 years.

So you did IDR.

[Anonymous]

The $32K annually that I took out each year of medical school covered tuition room & board and all living expenses at the time (20 years ago), at a fixed interest rate of 2.85%. Also had a $10K viable rate loan for interviews senior year. Paid off the latter right away as an intern and the rest I paid on until PSLF kicked in. It was a good investment.

[Anonymous]

Graduated in 2006 with $100K debt with 1.875% interest rate so began the 30-year repayment plan (FFEL loan) with graduated payments ($200 then $300/month). Lived my life without that being a burden, bought a house in 2012.

I switched to a fed job in 2011 and when the PSLF waiver came along converted to Direct Consolidated Loan. I had been paying my FFEL loan through Jan 2022 when the consolidation went through then was on covid forbearance. I worked for a couple years part-time when my child was a baby, so I met my 120 PSLF payments this March. Now I'm waiting for my forgiveness to be processed (will have $42K forgiven). Without the waiver I'd be plugging along with my $300 monthly payment for another 15 years.

[Anonymous]

Anonymous wrote:The $32K annually that I took out each year of medical school covered tuition room & board and all living expenses at the time (20 years ago), at a fixed interest rate of 2.85%. Also had a $10K viable rate loan for interviews senior year. Paid off the latter right away as an intern and the rest I paid on until PSLF kicked in. It was a good investment.

Wow in hindsight that was such a good deal. Less than $130K all in for med school at 2.85% fixed is ridiculous.

It's crazy how much the costs of med school have gone up. The debt burden in no way has kept up with salaries for most doctors (excluding high paying specialists).

[Anonymous]

Anonymous wrote:

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.

Great! Yes it is much easier to pay down debt when married/living together to save housing.

I just like to see there are people who take paying off debt seriously. Many people who don't are just setting themselves up for financial issues in the future. Delayed gratification is not something most follow in the US

[Anonymous]

Anonymous wrote:

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.

There are plenty of places where people were in the USA, or at least 30-40% under. We bought a house in 2015, the original owner had bought in 2007. What we paid them was still 20% less than the original purchase price, factor in the ~10% for realtor fees, and real estate transfer taxes and they lived in a great home in a great area for 8 years and took a 25-30% loss, before considering any improvements they made to the home. (Note: they had been attempting to see for 2-3 years, but this was the highest they had gotten and finally wanted to downsize) Now when we sold 7 years later we sold house for 85% more than we paid. and could have sold for 100% more just 6 months prior.

no investment is guaranteed, housing or stock market. But paying down loans is always a guaranteed return.

[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.

That is fairly obvious. But most kids work in the summers and breaks to earn money for college. In the DCUM area, a kid could live at home during the summer and earn $10-12K fairly easily if they really want to between summers, xmas break and other breaks. Get a PT job during the school year to fund spending money. If parents can kick in $5-7K/year, the kid may not need more than the $27K in fed student loans.

Main point is go to college that you can afford. It is possible to do. There are state schools that all in are ~$25-30K and if your kid has stats for T25 or T50 schools, the can get merit at some of these schools or many private schools. Do that or find a private a "tier down" that gives you great merit to make your yearly cost only $25K or less. They do exist, it just wont be T25 schools.

But it's really not smart to take out even $40K in loans for a psychology degree with the goal of getting a MSW. Go to the most affordable school you can find and graduate with minimal debt if that is the path you desire.

And even for STEM degrees, you do not need to spend a fortune.

[Anonymous]

Anonymous wrote:

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.

That is fairly obvious. But most kids work in the summers and breaks to earn money for college. In the DCUM area, a kid could live at home during the summer and earn $10-12K fairly easily if they really want to between summers, xmas break and other breaks. Get a PT job during the school year to fund spending money. If parents can kick in $5-7K/year, the kid may not need more than the $27K in fed student loans.

Main point is go to college that you can afford. It is possible to do. There are state schools that all in are ~$25-30K and if your kid has stats for T25 or T50 schools, the can get merit at some of these schools or many private schools. Do that or find a private a "tier down" that gives you great merit to make your yearly cost only $25K or less. They do exist, it just wont be T25 schools.

But it's really not smart to take out even $40K in loans for a psychology degree with the goal of getting a MSW. Go to the most affordable school you can find and graduate with minimal debt if that is the path you desire.

And even for STEM degrees, you do not need to spend a fortune.

People are going to affordable state schools and leaving with $40-50k in loans. You really think they don't work during breaks or ask parents for money?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

There are plenty of places where people were in the USA, or at least 30-40% under. We bought a house in 2015, the original owner had bought in 2007. What we paid them was still 20% less than the original purchase price, factor in the ~10% for realtor fees, and real estate transfer taxes and they lived in a great home in a great area for 8 years and took a 25-30% loss, before considering any improvements they made to the home. (Note: they had been attempting to see for 2-3 years, but this was the highest they had gotten and finally wanted to downsize) Now when we sold 7 years later we sold house for 85% more than we paid. and could have sold for 100% more just 6 months prior.

no investment is guaranteed, housing or stock market. But paying down loans is always a guaranteed return.

You’re forgetting the massive tax advantages in investing for high income people. Maxing out retirement contributions was a huge advantage over student loans given the very marginal high tax rate of highly paid professionals.

Of course as a matter of fact I came out way way ahead buying a house and investing, but even if the market hadn’t done so well, I still could easily expect to be better off investing pretax income than paying tax on it and then paying off student loans.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

That is fairly obvious. But most kids work in the summers and breaks to earn money for college. In the DCUM area, a kid could live at home during the summer and earn $10-12K fairly easily if they really want to between summers, xmas break and other breaks. Get a PT job during the school year to fund spending money. If parents can kick in $5-7K/year, the kid may not need more than the $27K in fed student loans.

Main point is go to college that you can afford. It is possible to do. There are state schools that all in are ~$25-30K and if your kid has stats for T25 or T50 schools, the can get merit at some of these schools or many private schools. Do that or find a private a "tier down" that gives you great merit to make your yearly cost only $25K or less. They do exist, it just wont be T25 schools.

But it's really not smart to take out even $40K in loans for a psychology degree with the goal of getting a MSW. Go to the most affordable school you can find and graduate with minimal debt if that is the path you desire.

And even for STEM degrees, you do not need to spend a fortune.

People are going to affordable state schools and leaving with $40-50k in loans. You really think they don't work during breaks or ask parents for money?

Yikes. I was with you until the “ask parents” part.

I went to I of Iowa and the combination of low in-state tuition and low COL meant even as a millennial I could work my way through school with very minimal loans. People in MD/VA/DC are really getting screwed compared to the many states where this is still possible. Even for kids without parental help.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The $32K annually that I took out each year of medical school covered tuition room & board and all living expenses at the time (20 years ago), at a fixed interest rate of 2.85%. Also had a $10K viable rate loan for interviews senior year. Paid off the latter right away as an intern and the rest I paid on until PSLF kicked in. It was a good investment.

Wow in hindsight that was such a good deal. Less than $130K all in for med school at 2.85% fixed is ridiculous.

It's crazy how much the costs of med school have gone up. The debt burden in no way has kept up with salaries for most doctors (excluding high paying specialists).

Kind of. I made the very difficult decision to go attend a school in a LCOL area instead of a major city. If I had made the opposite choice I would have had over $250K in debt upon graduation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

That is fairly obvious. But most kids work in the summers and breaks to earn money for college. In the DCUM area, a kid could live at home during the summer and earn $10-12K fairly easily if they really want to between summers, xmas break and other breaks. Get a PT job during the school year to fund spending money. If parents can kick in $5-7K/year, the kid may not need more than the $27K in fed student loans.

Main point is go to college that you can afford. It is possible to do. There are state schools that all in are ~$25-30K and if your kid has stats for T25 or T50 schools, the can get merit at some of these schools or many private schools. Do that or find a private a "tier down" that gives you great merit to make your yearly cost only $25K or less. They do exist, it just wont be T25 schools.

But it's really not smart to take out even $40K in loans for a psychology degree with the goal of getting a MSW. Go to the most affordable school you can find and graduate with minimal debt if that is the path you desire.

And even for STEM degrees, you do not need to spend a fortune.

People are going to affordable state schools and leaving with $40-50k in loans. You really think they don't work during breaks or ask parents for money?

Yikes. I was with you until the “ask parents” part.

I went to I of Iowa and the combination of low in-state tuition and low COL meant even as a millennial I could work my way through school with very minimal loans. People in MD/VA/DC are really getting screwed compared to the many states where this is still possible. Even for kids without parental help.

The parochialism of the major east coast metros is astounding. They have no clue that there are first class top notch people elsewhere in the country who are simply making different decisions that are in many cases more sound, not based on snobbery’s bd paying a premium for a worthless geographical pedigree.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

There are plenty of places where people were in the USA, or at least 30-40% under. We bought a house in 2015, the original owner had bought in 2007. What we paid them was still 20% less than the original purchase price, factor in the ~10% for realtor fees, and real estate transfer taxes and they lived in a great home in a great area for 8 years and took a 25-30% loss, before considering any improvements they made to the home. (Note: they had been attempting to see for 2-3 years, but this was the highest they had gotten and finally wanted to downsize) Now when we sold 7 years later we sold house for 85% more than we paid. and could have sold for 100% more just 6 months prior.

no investment is guaranteed, housing or stock market. But paying down loans is always a guaranteed return.

You’re forgetting the massive tax advantages in investing for high income people. Maxing out retirement contributions was a huge advantage over student loans given the very marginal high tax rate of highly paid professionals.

Of course as a matter of fact I came out way way ahead buying a house and investing, but even if the market hadn’t done so well, I still could easily expect to be better off investing pretax income than paying tax on it and then paying off student loans.

NP. I would not say prioritizing student loans over retirement contributions is the same thing as prioritizing buying a house or making other investments over student loans. We were very frugal in order to pay off student loans, and that meant not buying a house for a long time, but we did max out the 401k. I guess there is a spectrum of how big of a priority this is. I think the big idea for me is that I didn't want to leverage my student loan debt to make investments that might get a better rate of return, like many people do by buying a house before paying off student loans. Unless you can afford to eat your losses, which I understand many can.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

There are plenty of places where people were in the USA, or at least 30-40% under. We bought a house in 2015, the original owner had bought in 2007. What we paid them was still 20% less than the original purchase price, factor in the ~10% for realtor fees, and real estate transfer taxes and they lived in a great home in a great area for 8 years and took a 25-30% loss, before considering any improvements they made to the home. (Note: they had been attempting to see for 2-3 years, but this was the highest they had gotten and finally wanted to downsize) Now when we sold 7 years later we sold house for 85% more than we paid. and could have sold for 100% more just 6 months prior.

no investment is guaranteed, housing or stock market. But paying down loans is always a guaranteed return.

You’re forgetting the massive tax advantages in investing for high income people. Maxing out retirement contributions was a huge advantage over student loans given the very marginal high tax rate of highly paid professionals.

Of course as a matter of fact I came out way way ahead buying a house and investing, but even if the market hadn’t done so well, I still could easily expect to be better off investing pretax income than paying tax on it and then paying off student loans.

NP. I would not say prioritizing student loans over retirement contributions is the same thing as prioritizing buying a house or making other investments over student loans. We were very frugal in order to pay off student loans, and that meant not buying a house for a long time, but we did max out the 401k. I guess there is a spectrum of how big of a priority this is. I think the big idea for me is that I didn't want to leverage my student loan debt to make investments that might get a better rate of return, like many people do by buying a house before paying off student loans. Unless you can afford to eat your losses, which I understand many can.

I'm the PP, and yes I would prioritize retirement along with paying down loans. But I would not buy a home until I had most of the loans paid off. We had nearly $75K in loans and we paid them off in 2 years with a focus on redirecting one salary to them, along with bonuses, and living in a decent but not fancy apartment for 2 years. We also saved for a home downpayment at same time and funded retirement as best we could. We waited to buy a home until we had paid off the loans and saved 10% down. Yes we could have bought earlier, but we preferred to wait the extra year and felt more comfortable having the loans gone (loans were at 6-10%).