How Do I Get a Loan to Pay My Rent While in College?

If you're like millions of American college students, you're using multiple loans to finance your education. Each semester, you probably take out several federally-backed loans in order to offset your ever-rising tuition costs. After tapping federal grants worth over $5,000 per semester and additional credit facilities like Stafford and Parent PLUS loans, you could be well on your way to making your education an affordable and rewarding experience. If you're attending a low-cost public university or community college, you might not need any additional streams of funding.

On the other hand, you may be attending an expensive elite university that could cost far more than you're able to borrow. If this is the case, you might be scrambling to find additional sources of funding. To make matters worse, you'll need to worry about additional expenses like school supplies, food and off-campus housing.

You can pay for these expenses in several different ways. The easiest and least confusing method by which to do this is to use the financial aid disbursement that your school is required to provide to you. This disbursement is the financial "surplus9quot; that's left over after your tuition costs have been subtracted from your financial aid package.

Since the student lenders with which you'll be working will almost certainly forward your loans directly to your school's financial aid office, you'll need to keep close tabs on the exact amount of your disbursement. In some cases, your financial aid office may overestimate your tuition costs and keep too much of the money that your lenders send. It's your responsibility to notice this discrepancy and ask your financial aid office for a refund. You can use this refund to pay for miscellaneous expenses like food, rent and school supplies.

If you're not eligible for a student loan refund, you may need to take out an additional loan in order to cover your living costs. Unfortunately, these loans have several important drawbacks. First, they're "unsecured.9quot; In other words, they're not backed by the federal government. Since your lender can't rely on the government to offset its potential losses on these loans, unsecured student loans usually come with high interest rates. What's more, they may begin to accrue interest immediately after being issued. This can add hundreds or even thousands of dollars to the final cost of these loans. Finally, these loans may not be eligible for federal refinancing programs. Once you take one out, you'll need to repay it in full.


Applying for Student Loans: Everything You Need to Know and Do

Which loan type requires you to make loan payments while you’re attending school?

In your search for the perfect school, you’ll probably come across some really expensive options. There are affordable options as well, but of course, “affordable” is a relative term when you’re figuring out how to pay for college. Even if $20,000 a year is a good deal for your state’s public university, that isn’t exactly chump change for the average family.

Fortunately, there are a lot of ways to offset this cost, at least while you’re in school. The biggest player here is the U.S. government, which hands out an enormous sum of money every year to aspiring students in the form of loans and grants. According to recent reporting, the Department of Education dispersed $125.7 billion to roughly 13 million students in 2016.

This sum doesn’t include the additional billions that students borrowed through private lenders on their way to a college or post-graduate education.

So how can you get a sweet slice of that big loan pie? We’ll tell you everything you need to know, including, how to:

  • Determine Your Eligibility;
  • Complete Your FAFSA;
  • Pursue State- and College-Specific Aid Options;
  • Identify Different Loan Types, and ultimately;
  • Determine which loan, or combination of loans, is best for you.

We’ll do our best to simplify a process that can be bureaucratic, confusing and even a little scary by laying out the steps you’ll need to take and what you can expect along the way.

First things first. Complete your Free Application for Federal Student Aid (FAFSA). Everything starts with your Free Application and frankly, there aren’t a lot of things that come without a price tag during this process, so try to make the most of it.

The FAFSA is a form that both current and prospective college students must fill out annually to determine individual eligibility for student financial aid. This means that you’ll fill out a FAFSA not just at the start of your college career but for every year thereafter as well, so get to know it.

The FAFSA is made available by the Department of Education. All students seeking assistance for undergraduate or graduate studies have the right to fill it out. In fact, you should complete your FAFSA even if you don’t think you’ll be eligible for a need-based loan. There are unsubsidized loans which are available to all, regardless of income.

You can fill out a FAFSA for the 2017-2018 school year between Oct. 1, 2016 and June 30, 2018. That said, the sooner your complete your FAFSA, the better. Some federal student aid programs have limited funds, and therefore distribute these funds on a first come-first served basis. Get yours while supplies last.

Many states also offer their own financial aid packages. You’ll definitely want to explore this option as well. The National Association of Student Financial Aid Administrators (NASFAA) offers a portal that allows you to view state-by-state financial aid opportunities.

You can also check out FAFSA’s inventory of state-specific deadlines. Here, you can enter your state of legal residency and the school year for which you are applying to find out about relevant deadlines.

Colleges may also have their own FAFSA submission deadlines for the coming school year. Be sure you keep these deadlines on your calendar as you prepare your financial aid information. Know the cutoff date for your college(s) of choice and be sure to get your FAFSA completed accordingly.

You can select to have your FAFSA information submitted to up to 10 colleges or universities. For every college you enter beyond 10, you will need to eliminate one of your original selections. Each college is identified by a Federal School Code. The FAFSA application site provides a Federal School Code Search tool. In addition to providing you with the School Codes you’ll need to complete your FAFSA, this tool provides detailed information on selected colleges including tuition, fees, and graduation rates. The tool also allows you to compare information for up to 10 colleges at a time.

For even more detailed information about college costs, graduation data and post-college earnings, check out the College Scorecard, a school-by-school assessment of college performance provided by the Department of Education.

Before you fill out your FAFSA, you should also be aware of the conditions for eligibility. Your eligibility to receive a loan of any kind is based on the following criteria:

  • Maintenance of Satisfactory Academic Progress (SAP);
  • U.S. citizenship, or status as a U.S. national or eligible non-citizen;
  • A valid Social Security number;
  • A high school diploma or GED;
  • Certification stating an absence of default status on federal student loans, no money owed on federal student grants, and the promise that all moneys loaned will be spent on education;
  • Registration, between the ages of 18 and 25, with the Selective Service System for military conscription for all male applicants; and
  • The absence of a guilty plea in the sale of illegal drugs during the period of federal aid receipt.

Before you prepare your FAFSA, you can take an at-a-glance look at the likely student loan packages available to you. The Office of Federal Student Aid provides an instrument called the FAFSA4caster. Use this to estimate the aid for which you are likely to be eligible. This free calculator can help you plan not just for this year of college but for the years ahead, by projecting the amount of assistance you are likely to receive for the duration of your studies.

Now that you’ve got the lay of the land, it’s time to fill out your FAFSA. Don’t sweat it though. We’re still here to guide you. Let’s start with your filing options:

Beginning in the 2017-2018 academic year and going forward, the FAFSA will be made available to the public on October 1st of the preceding year. Stated more clearly, the FAFSA for 2017-2018 was released in October of 2016. The FAFSA for 2018-2019 will be made available in October of 2017, and so on. If you’re into boring history trivia, the annual FAFSA release date used to be January 1st. The decision to make the FAFSA available to applicants three months earlier was done to more closely coordinate the timing of the federal financial aid application process with the timing for the typical college admission application process.

But that doesn’t really effect you. All you need to know is that you can start the application for the coming school year as early as October 1st.

  • Online at fafsa.ed.gov. Log in here.
  • By telephone at 1-800-433-3243; or
  • By mailing a paper application to:

Federal Student Aid Programs

London, KY 40742-7654

(This address pertains to the 2017-2018 application. The address may change annually.)

So now that you’ve clicked “submit,” or alternately slapped a stamp on your envelope and dropped it in the mail slot, what’s next?

Depending on how you submitted your FAFSA, you will receive your SAR either by paper document or electronic mail. The SAR contains a review of the information you provided on your FAFSA as well as some basic information about your eligibility for federal student aid. You should receive an email link to your SAR within a week of submission or, if you elect to receive a hard copy by mail, 1 to 3 weeks.

Naturally, you will receive your SAR faster if you elect to have it sent by electronic mail. If you do elect to receive your SAR by email, the Federal Student Aid office advises that you add the email address FederalStuentAidF[email protected] to your contact list so that your SAR doesn’t wind up in your SPAM folder.

Your Student Aid Report will include your Expected Family Contribution (EFC), a legally established formula measuring your family’s financial strength based on taxed and untaxed income, assets, and benefits like unemployment or Social Security. Your EFC will display in the upper right-hand corner of your SAR. If your FAFSA was incomplete, your EFC will not appear but your form will provide instructions on what is required of you to resolve the issue.

Your SAR will also include your Data Release Number (DRN). This is also included in the upper right hand corner on your paper SAR. For electronic SARs, the DRN appears in the Application Receipt date box, just below your EFC. This DRN will be necessary if you choose to allow your chosen college to alter information on your FAFSA.

Your SAR also gives you the opportunity to make any necessary corrections to your FAFSA. The first thing you should do when you receive your SAR is review the document for accuracy. If there is any information which is inaccurate or which has changed since your submission, you may log in to fafsa.gov to submit your corrections.

It is important that you do so promptly because the school or schools that you’ve listed on your FAFSA form will have electronic access to your SAR within a day of its processing. Corrections may be made under the following circumstances:

You have the ability to correct most factual errors. However, the Office of Federal Student Aid notes that an incorrect Social Security Number usually cannot be corrected. In this case, you’ll want to contact the financial aid office of the school you plan to attend to find out if you can correct this error or if you simply must start a brand new FAFSA. Most other errors can be readily corrected through the fafsa.gov page.

Your Situation Has Changed

You can update certain items on your FAFSA in the event that information has changed. This may include a new mailing address, email address, dependency status, marital status, change in the number of family members in a household, or a change in the number of people in your household who are in college. The latter two will typically only require correction when verification is requested by your school’s financial aid office.

Some information can’t be altered. For instance, it’s possible that you wouldn’t be permitted to update information regarding changes in your family’s savings or income. In the event that there are significant changes to your financial outlook which cannot be corrected or reported on a FAFSA, your best move is to contact your school’s financial aid office to seek advice.

You Wish to Add or Delete a School

You may add additional schools to (or remove schools from) your FAFSA even after submission by using the “FAFSA Corrections” option. As with your original filing, you can locate any prospective schools by using the Federal School Code tool provided by the fafsa.gov website.

And once again, you may include up to 10 schools at once. For every college you enter beyond ten, you will need to eliminate one of your original selections.

If you have corrections to make that fall under any of the preceding three categories, follow the instructions here below to file your corrections:

  • Login at fafsa.gov
  • Click “Make FAFSA Corrections”
  • Enter your FSA ID (which you should have created during the application process)
  • Change Your Information
  • Submit Your Information

If you wish to make corrections and you’ve elected to receive a paper copy of your SAR, write your corrections and updates directly on the document, sign it, and mail it to the address provided.

Your school of choice might also be able to make changes to your FAFSA. If you have already selected to attend a specific college, you might be able to contact the financial aid office for assistance in correcting or updating information.

Ok, by now, you’ve probably read “FAFSA” so many times that the word has lost all meaning. I can’t promise you it’s the last time we’ll mention it. (Actually, I can pretty much guarantee it won’t be). But at least you’re done filling it out. Now we can move on to the subject of grants and loans.

To review, your SAR will indicate your Expected Family Contribution (EFC). Your EFC determines the grants or loans for which you are eligible. Eligibility for certain common grant and loan types will vary depending upon your needs, qualifications, and expenses.

The Pell Grant is awarded to students with demonstrated financial need. The Pell Grant is an award with a maximum amount of $5,815, (though it bears noting that the number does increase every few years depending on legislation and federal budgetary allocation). If you have already earned a bachelor’s degree, you are likely not eligible for a Pell Grant, though exceptions may apply to some baccalaureate programs. Technically, the Pell Grant is not a loan as the recipient is not responsible for paying back the borrowed sum. Your EFC will determine whether or not you are eligible for this grant. After completing your FAFSA, you will receive emailed or written notification indicating whether or not you are eligible for a Pell Grant.

The Stafford Loan is a Federal Direct loan with a fixed interest rate of 4.29% (as of the 2015-2016 academic year). The Stafford is available in both subsidized and unsubsidized forms. For subsidized loans, which are granted on the basis of financial need, the interest on the loan is paid by the federal government as long as the student is enrolled in college at least half-time. The borrower becomes responsible for repayment of interest upon leaving or completing his or her studies. For unsubsidized loans, the interest amount accrues while the student is enrolled, and must be repaid along with the principal loan balance after a student leaves school, graduates, or drops below half-time enrollment. There are several options for how to structure the repayment process which may include some deferment period (typically a grace period of six months following departure from school).

Similar to the Stafford Loan in most regards, the primary difference is that the Federal Perkins Loan is lent directly by Title IV-eligible schools (as opposed to the Federal Government) and must be repaid at a fixed interest rate of 5%. It also bears noting that because financial eligibility requirements for Perkins loans vary from school to school, your eligibility for this type of loan won’t be determined until you receive your financial aid package from your specific school of choice.

Federal Supplemental Educational Opportunity Grant (FSEOG)

The Federal Supplemental Educational Opportunity Grant (FSEOG), like the Pell Grant, is awarded on the basis of financial need and repayment is not required. However, like the Perkins Loan, this is one that you must apply for directly though the financial aid office of the university you plan to attend. The FSEOG is reserved for those students with the greatest level of financial need and the disbursement amount will depend on the depth of that need. The amount may vary between $100 and $4000.

The Federal Work-Study Program gives eligible students an opportunity to do part-time, on-campus work to help offset the cost of tuition. Typically, half of the student’s wage will by paid by the federal government while the other half is funded by the school itself. Every college has a different set of working opportunities from which applicants can choose. Consult your colleges of choice to learn more about such opportunities.

The Teacher Education Assistance for College and Higher Education (TEACH) Grant is distinct among federal student grants because it requires you to take a specific set of classes to get your grant and it subsequently requires you to keep a certain type of job in order to prevent the grant from turning into a loan. As long as you adhere to the courses and career path specified, the TEACH Grant need not be repaid. The maximum TEACH Grant award is $4000 and you must sign a TEACH Grant Agreement to Serve which indicates your committment to teach in a high-need field, at a low-income school and for at least four academic years within eight years of completing or ceasing enrollment in the course of study for which you received your grant.

The Service Grant is specifically intended for those applicants who are not financially eligible for a Pell Grant but who lost a parent or guardian to military combat in Iraq or Afghanistan following the 9/11 terrorist attacks. You must have been under 24 years old or enrolled in college at least part-time at the time of your parent or guardian’s death to be eligible. The maximum Service Grant award typically mirrors the Pell Grant. This means that, at the time of writing, the maximum Service Grant award would be in the amount of $5,815. This number will fluctuate in direct correspondence to changes in the maximum Pell Grant amount.

The PLUS Loan is a student loan granted to the parent of the enrolled student. The PLUS Loan has some similarities to the Stafford or Federal Perkins Loan, including its repayment schedule, which usually begins roughly six months after the completion or cessation of one’s studies. (Note: This only applies to loans granted after 2008. Repayment for PLUS Loans from prior to 2008 must begin within 60 days of final disbursement). By contrast to Stafford and Perkins Loans, the PLUS Loan is granted with a fixed 7.9% interest rate. Also of note, the granting of such loans is subject to credit review, which is not the case for Stafford loans. You can apply for a PLUS Loan directly here.

  • PNC
  • Nelnet
  • Congratulations! You’ve completed the loan application process. Now all you have to do is graduate college, find a good job and pay back your loan. No pressure!

    But again, don’t sweat it. We’re here to help you every step of the way. Now that you know everything you need to about applying for your loan, learn about the risks and how you can avoid some of the most common pitfalls.

    For more about these pitfalls and about financial aid in general, visit our comprehensive Student Financial Aid One-Stop Source.


    Reader Story: How I Paid Off $18,000 in Student Loans While Still in Graduate School

    This guest post from Andrea is part of the new “reader stories” feature here at Get Rich Slowly. Some reader stories contain general “how I did X” advice, and others will be examples of how a GRS reader achieved financial success — or failure.

    I am a graduate student, working towards a PhD, and I hope to graduate in 2012. Prior to starting my PhD program I acquired a significant amount of student loan debt while working on a Master’s degree. I also had a small amount of debt left over from my undergraduate degree. In total I had accumulated around $70,000 in student loans.

    Some people might say that isn’t too bad considering that I already had completed my Master’s degree, and would not be acquiring any new loans while pursuing my PhD. But I had lived paycheck to paycheck for the two years I worked between college and graduate school, and I didn’t want to live that way anymore. I didn’t want that much debt hanging over me, potentially impacting my future career decisions, so I decided to start paying back the loans while still in school.

    While I wouldn’t say that I regret taking out so much in loans for a Master’s degree, and I’m not sure that I would do anything differently if I had the chance, it is different looking at that dollar amount from the other side. I think this is a potential trap that all students can fall into, both undergraduate and graduate, when deciding where to go to school: The financial implications of having to pay back those loans are so far outside your perspective when you sign a promissory note; it’s not until you graduate and have to figure out how you’re going to pay hundreds of dollars every month for the next decade or two that the weight of your decision finally hits you!

    It was with the realization that I’d be paying $800 a month for 20 years according to the “standard repayment plan,” and would end up paying as much in interest as the original loan amount, that I decided to embark on a much more aggressive repayment plan. I am very lucky because I have a husband who works full time and is able to help support me while I am in school. I also was lucky to obtain a training grant that is paying both my tuition and a stipend for my PhD program. Not all graduate students are so lucky.

    However, I also work very hard to find other sources of income, and for the past year or so I have budgeted my income very carefully to start paying back some of my debt. While my stipend is enough to live on, it would not provide much extra for paying off loans. So to earn extra money I work part time doing research for a professor in my department.

    At times it has been difficult balancing work and school, but in addition to providing extra money it also teaches me time management, and gives me extra experience to put on my resume, which will hopefully help me get a better job when I graduate.

    I also take advantage of opportunities to be a Teaching Assistant, which pays $1500 (pre-tax) for each 8-week course. Through the combination of my stipend, working part time, and being a teaching assistant, I was able to take home around $36,000 in 2009.

    While this isn’t a huge amount of money, it is a pretty decent income for a graduate student. However, what was more important for me wasn’t how much I was making each month, but how I was budgeting that money. I used an Excel spreadsheet to carefully budget my money each month, allocating money for utilities, groceries, car insurance, my Roth IRA (which I max out each year, since it is the only retirement account I can have as a graduate student), and discretionary spending.

    I set a goal of allotting at least $1000 every month to go towards student loans. My budget was not super strict — my husband and I are careful with our spending, but we do go out to eat and to the movies, and we buy things when we really want them. We pay off our credit cards in full each

    month, own just one car, and pack lunches.

    By following this reasonable budget I was able to pay off $18,246.45 between May 2008 and September 2009. Here’s the break down of how I did it:

    I used a combination of the debt snowball approach and paying off the highest interest loan first. I also chose to make payments in large chunks rather than a set amount on the same day each month. I knew I wanted to pay off the private loan early because it was accruing interest, but I also tackled one of my undergrad loans early on, because I could pay it off in one payment (the December 2008 payment). My final payment in September 2009 paid off the last of my undergraduate loans, just in time for my five-year reunion.

    For the last few months, I’ve taken a break from this aggressive loan paying, in part because the point I’m at in my degree program didn’t allow me to work as much recently. But I’m ready to tighten my budget again, and plan to devote at least $500 a month to my graduate student loans, comprised mostly of a Federal Direct loan now totaling just over $50,000 because about half of the amount is not subsidized and is accruing interest at 6.8% (a fixed rate — thanks a lot Uncle Sam!). In addition to putting money towards this loan I plan to save money in different “buckets” in my ING account for things like future travels and home improvements.

    I wanted to share my story because I am an avid reader of Get Rich Slowly, and I hope I can inspire other young people out there struggling with student loan debt. You don’t have to stick to the “standard repayment plan” — most student loans have no prepayment penalties. Even if you don’t make a lot of money, it is possible to find extra money in your budget to pay down student loans early.

    Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

    GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, and more.

    This is a really good tip especially to those new to the blogosphere.

    Simple but very precise information… Thanks for sharing this one.

    A must read article!

    Thank you for your inspiring story. I am not a young person but hopefully my story would resonate with young people. I graduated in 1995 with 14,000 in undergrad student loans. In 2000 I graduated with a Masters degree and altogether about 21,000 in student loans. Over the years I kept deferring and the loan kept compounding. I have been making religious payments for about three years now on a loan balance of 59,000 dollars but it is not going down since this is the minimum payment. I have a descent job and so too does my wife. She had no student debt when we married. I managed to get my daughter through college without any borrowing and she on turn does not have any student debt hanging over her. I had a solid plan for paying off my own debt but life always got In the way – marriage, kids, mortgage etc. I finally had to sit down with my wife and come up with a serious sustainable plan and goal to pay this loan off. We determined that we would apply yearly lump sum payments towards this debt with a five year plan for paying it off. Not everyone is in a position to pay their debt at the outset especially in this tight job market but as a caution – be really careful with how much money you borrow for college on terms of realistic expectations of paying it back fairly quickly. Otherwise it can severely diminish your quality of life in terms of your credit and purchasing power – how much house or car u can afford etc.

    That is so inspiring. It looks like you also living a smart lifestyle too- no credit card debt and only one car. I am trying to pay off my credit cards and then will using the debt snowball to pay off my student loans.

    Does anybody know details for educators? I’ve read that their loans will be forgiven after 10 consecutive years of working in public schools. Does this include private educational loans? I’ve read stuff on Fastweb but would like to know if any of you know more…thanks in advance!

    @#75 BB: I made sure when I first received the training grant that I would still be allowed to work part time. I was told that it was fine as long as I was not claiming work hours for time spent working on my thesis – so I wasn’t getting double paid basically. I think the rules vary at different schools or funding sources. I agree that you should absolutely be aware of the rules of your funding source regarding outside employment – I’m lucky that mine allows it.

    @44 &45: In the comments I get a feeling that people with a PhD expect higher wages or someone to bail them out!

    Now if you had done a PhD out of the love of learning or the love of the subject, I think wage should not be a consideration, but you should live will the millstone of the debt if your degree cannot fetch you a worthy wage.

    Congratulations! I did something similar–as an undergraduate who, very fortunately, qualified for financial aid, I took out only subsidized loans and grants. Throughout college, I always had a job and minimized my expenses as much as possible. I also used the “basket technique” (although I didn’t know the term for it at the time) to set aside aid money that I did not utilize. While my peers saw aid money as supplemental, I saw it as emergency money. When I graduated, I was able to pay off my student loan in full after letting it sit an collect interest for upwards of three years. It was a lot of work, but it was worth it! Congratulations again!

    Mike B, yes, I started off with $185K and my husband had the exact same, from medical school, the final year is at 6.75%. Graduated 3 years ago and I’ve got it down to about $175K for myself, but my husband has not paid anything but the interest.

    “besting” on loan debt is not very satisfying

    Wow-excellent story. My son is headed off to college in the fall. He earned a ROTC scholarship that he can use at a private university but he still will have to pay for housing. I love you perspective looking back at the debt and your aggressive nature to get out of it.

    Federal training grants DO NOT ALLOW graduate students to take outside employment. The stipend is meant to support the student in the PhD program, not pay back loans previously taken out.

    Be aware of the terms of your own training grant.

    I personally have $80k in current student loan debt from undergrad, and another $100k from grad school. My wife has $80k in student loans after grad school. Thus, $260k total between the two of us. Mixture of public and private loans. Interest rates are below 5% for all of them. We pay roughly $2k per month in loan payments.

    We live in the Bay Area and pay $2500 each month in rent. Anyone out there have more student loan debt than us?

    This is not intended as a complaint or “besting”. We’re focused on working harder and making more money, not just scrimping. We plan to accumulate an equivalent amount of $260k in investments rather than pay down the loans. Until the variable loan rates rise above our expected rates of return on our investments, we’ll take our merry time in paying them down. I’d much rather have higher-yielding assets as a security cushion..

    It is so hard to do this, but so worth it. You have to have a master’s degree to be a licensed social worker, so after escaping undergrad with no loans (between scholarships and working part and full time), I took on almost $40k in loans for grad school.

    Even though I don’t make much as a social worker (lower $30s is pretty normal to start, and it doesn’t go up much from there) I just remind myself that I’d be making a lot LESS in the same field with no MA, and so I put a lot of that “extra” toward paying my loans early.

    I also worked as a research assistant 2 days per week in addition to my 3 days of internship and 9 hours of classes. And I started my own business selling things I sewed and knitted in my “free time.” This is why I came out of school with $40k less loans than my classmates (and no private loans). I do think working outside of my internships helped me manage my time and it was good to have something else to think about occasionally. Plus it was so overwhelming and exhausting, it made me really appreciate graduating

    Jane– it depends a lot on your field. I’m in a heavily male-dominated field with a shorter graduate school time-frame (economics). I’ve got female friends in other fields doing just fine with kids from graduate school (and others who have dropped out after having kids). I agree that there is no good time to have a child in academia, but I wanted one around age 27 (give or take), and it was better career-wise to do that after graduate school than while on the job market, especially with the potential for infertility etc. I didn’t shift my child-bearing plans, but I did shift when I started school… the earlier I started the more likely I would be finished by the time I wanted to have children. I may even be ready for #2 by the time I’m up for tenure, though we’ll see.

    Econ also has a very different job market than the humanities.

    You’re not doing it wrong, you’re in a different situation.

    Andrea, you are a very lucky lady with your stipend! Grad school funding in many areas is not as “lucrative” as it once way. I did my MA at a very highly respected school – no one in our program got full funding – and a majority got no funding at all. I had a 1/3 tuition waiver and still had $33k in debt from just that year (2/3 tuition + $1k/month for living expenses). Luckily I still qualified for my parents’ health insurance. Based on discussions with my classmates, only about 50% of them (we were all social science/humanities folks) received full funding – and stipends were more like $10-$15k. Enough to pay your rent & keep you fed, but not much more than that. Then you finish up and take a first year teaching job at a university making $40k/year You don’t do it to make money – you do it because you love it. I decided not to pursue my PhD after my masters b/c I decided I justMrks didn’t love it enough to make it worth being broke the next two decades.

    @Jane that’s exactly what I’m talking about. It’s a pass the buck system we inherited, inflate and pass on to the next generation. No wonder those kids outside of berkeley are so mad right now. I seriously think were going to start seeing more protests there and another generation of people disillusioned by the system like we did in the 60s. No jobs and two wars going on right now folks…sound like a replay?

    wow I really hit a nerve with you.

    I’m happy you are a man (still making more than the average woman earns for the same work) who helped support women in school but that is not my choice. I’ve heard too many horror stories from women who supported men like this and the outcome was not good. Also, I’m almost 40 and yes I don’t want to start a relationship at this point in my life with a man or woman with a lot of debt. I’ve seen how the stress affects relationships and I’m not in a position to financially support them. If I were, I’d be happy to. In fact I think they would be better off with someone who could. So drop the gold digging b sterotype towards me. If you want to fly in like superman and save some womans day go ahead. If women earned equal work for equal pay in this country maybe I could too.

    Well, I must have really not done things right, considering I will have had two children in graduate school (one on the way this summer)! After so many years in graduate school, I basically realized that as a female academic, there’s really no good time to have a child. I figured that people might be more forgiving about taking longer to get your Ph.D. on account of children than they would be having a child on the tenure clock. In my case, it’s all a moot point, since I’ve decided not to pursue a career in academia at all – too many personal sacrifices and a terrible job market turned me off – but timing things right is a real challenge.

    I’m intrigued by those who responded to my last comment about not going into debt for grad. school even if it’s in law or the sciences. Since I was in the humanities, I didn’t want to conclude that debt wasn’t wise in other areas for which I have no experience. But I think it’s interesting how many people regret the debt and that their employment prospects don’t improve enough to justify the expense. I’m starting to think graduate education en masse the way our country does it is not a good idea….

    I have $20K in subsidized loans from Undergrad, and I have continued to defer them as I’m in undergrad.

    Unsubsidized means they don’t collect interest if they are in deferment. As inflation grows slowly each year, that $20,000 seems smaller and smaller.

    Eventually I’ll be paying my loans full time, but for now, I continue to defer while in grad school.

    Basically, if you have ‘subsidized’ loans (unpenalized for deferment), and considering grad school is a guaranteed deferment eligibility, why in the world do you pay now as opposed to later?

    #66 Why the rush: Wanting to be a tenured professor, being married, and wanting to have two kids spaced out. It’s horrible, but these days women in my career are only “allowed” (it’s implicit, not explicit) one baby before tenure while still being taken seriously as researchers. And that’s still a lot better than the previous generation. Going to graduate school right away seemed to be the best way to achieve those goals without being a trend-setter.

    Reading these comments makes me glad I did it my way – I attended grad school on the back of my employer. After a few years working at my job, I was eligible for tuition reimbursement, with a few strings attached, like a commitment to stay at the job for a few years after grad school. I was on the hook for books, parking, and other fees, but tuition was fully paid. Three years later, I graduated from my masters program, paid about $2000 out of pocket, and couldn’t be happier.

    I’ve known several people to go straight through the bachelors-masters-PhD route without any real career experience in between. Always made me wonder… why the rush? Especially when so many employers offer tuition support as a benefit of employment.

    Didn’t have time to read through all the comments, just wanted to congratulate you. Also, I wanted to thank you. I have amassed quite a lot of debt between undergrad and my master’s ($130,000!), and sadly I am a humanities student. I am taking a year off and looking at having to make payments starting next month. At my current income, I will barely be able to make standard payments ($1500 a month). Luckily I am going back to school, and hopefully I can use your tips to help cut down some of the debt before I finish up the PhD. I really wish someone had sat 18 year old me down and forced me to go to that local public school and not that expensive school out on the east coast. Mer.

    (Long-time reader, first-time post!)

    Congrats on paying down so much of that student loan debt so early!

    I am in a similar position as the author, with about $80,000 of Master’s degree debt when I graduated nearly 4 years ago. Since then, I have taken a modest paying position with the federal government, and I have been extremely lucky to receive Student Loan Repayment Benefits from my agency. That has taken about $12,000 of principal off in the past 2 years.

    Beyond that, I have struggled with the question of where to put my “disposable income” each month. I figure I have three main options: 401k-type plan, emergency/savings, and student loan debt. I have decided to basically halve my “extra money”, one half toward 401k and one-half toward savings/emergency. My student loan interest rates are around 3.5% (variable) at the moment. I figure that I can 1) get a better return than that in my 401k over the long-term and 2) can take money saved up and pay a large chunk of student loan debt should interest rates rise.

    Does anyone else have the loan debt, savings, retirement “triad” to contend with? How did you guys figure out where to put “extra money”. No complaints, though…I ENJOY being able to have such a decision to have to make!!

    Yeah, and according to today’s Chronicle of Higher Education online, over 1/3 of faculty saw a decrease in their pay last year and an additional 20% saw incomes stay the same. Part of it is the economy, of course, but since tuition is going to be the next economic “bubble,” academia is a VERY dangerous place to be working these days.

    I’m working on a Master’s right now – I work full time and go to school part time. I saved up 1/3 of the cost before I started, will earn 1/3 as I work through the program, and get reimbursed about 1/3 through my employer. I chose to continue to work full time so that when I graduate (debt free) I will have the freedom to take any opportunity I want without having to consider how to pay my loans. It’s not easy, but I would recommend it for those who can manage the demands on their time.

    Also, I really agree with Andrea’s comment that the debt doesn’t seem real to students until they graduate. To me, I think that earning the money each month and then paying it towards tuition, plus working 40 hour weeks and then spending time in class or studying, really gives me an appreciation of 1) the amount of money I’m spending on tuition, and thus, 2) a desire to get the best value out of my classes.

    @Andrea (#58) I’m also in graduate school in public health , with a somewhat similar debt load (although I am graduating next month with a master’s). I know having (currently) $77,000 in student loans is a horrible weight on my shoulders, but $18,000 was from undergrad and $40,000 alone was tuition. The other things I covered with my loans I consider worthy investments (I paid my rent and got braces, which came off last week after a year and a half!) I did save $6500 to pay off the variable rate portion of my undergrad loans, effectively consolidating a private loan from Sallie Mae.

    I like the idea of paying back some amount, $1000 in your case, every month. Following this strategy I used to pay back “atleast” $1000 every month to my car loan accound and I paid $25000 off completely in 9 months ….

    Thank you to everyone for all of your comments. I really enjoyed reading other people’s stories about student loan debt. I also realize that while my methods work for me, they may not work well for other people.

    @#6 Jane: I chose to pay off undergrad loans first for psychological reasons. It was great to visit my college for my 5 year reunion and not owe them anything! Plus I got a nice letter from them saying that because I paid off my loan, that funding became available to other students. I am not putting money in to high yield savings accounts right now because the interest rates are so low. I may switch to this method if the interest rates go back up.

    @#27 Yo: I once read somewhere that you shouldn’t take on more in student loans than you can expect to make in annual salary when you graduate. For my career field (public health) I think I am comfortably within this range.

    @#33 Erica: I decided to go to grad school because I knew that in my field of public health the best jobs go to people with MDs and PhDs. I want to be able to get higher level positions where I can be my own boss, and for that I need a graduate level degree.

    @#36 Leigh: Working part time has not slowed me down very much. It is stressful sometimes, but it actually helps me with time management, and I tend to be more productive when I am busy. Plus it adds valuable experience to my resume, which will hopefully help me get a job when I do finish. I still expect to complete my PhD in 4-5 years total, which is standard for my program.

    @#43 JLA: I am lucky to have a very supportive husband, both emotionally and financially. I realize that not everyone is in a position where someone can help support them as they focus on school and paying off loans.

    @#45 DeL: Funding is not guaranteed in my program, and many students struggle to piece together different types of funding. I consider myself lucky to have my tuition and a stipend guaranteed for 5 years.

    @#47 zud: My husband pays the entire rent on our apartment, most of the groceries, cell phones, dining out, and health insurance (although I could get basic health insurance through my funding). If I had to support myself completely without his help I don’t think I would be able to put very much money towards my loans. I am very grateful for his support, but it is a financial decision we made together. We both realize that me paying off loans aggressively now will give us more freedom in our financial decisions in the future.

    Wow, that’s quite the story.

    In the past five years, tuition and fees at public universities have risen by 40 percent, adjusted for inflation.

    Over the same time period, consumer prices in general rose less than 9 percent. Comparisons to tuition costs over the last 30 years are even more dramatic: adjusted for inflation, college tuition is roughly triple what it was in the ’70s.

    I’m not currently working in the area of my degree, my boyfriend is an attorney so I couldn’t do a nationwide job search. But I’m able to handle my debtload comfortably, actually – though I am on the extended repayment plan for sure!

    I did not have any loans as an undergrad (national merit scholar) but have about $100K in student loans from my MA and PhD…my MA is in creative writing and my PhD is in rhetoric and composition. I make $40K/year”.

    It astounds me that someone who has a PhD (and $100k in student debt!) is making only $40k a year! With zero expenses, zero taxes taken off, zero money to live on, it will take 2 1/2 years to pay off the $100k…how long when will it really take because there are costs associated to living? I’m hopeful for Honey’s sake that the PhD in “rhetoric and composition” (I’m not even sure what that is!) will earn her a much higher salary in the near future so she can begin to make a dent in her HUGE debtload. I didn’t go to university or college, make $67k (Cdn..almost the same in USD with today’s exchange rate!) doing something I love, no fear at all of layoff, excellent benefits and excellent pension plan…adding up the value of benfits/pension/etc with salary, it’s equilavent to earning almost $82k a year. I love what I do, the fact that it comes with a decent salary and great benefits is a bonus.

    #52 I wouldn’t recommend going into much debt for graduate school in the sciences either– there’s waaaay too many bio phds out there getting middling 5 figure salaries.

    Masters degrees are often worthwhile investments without full fellowships and professional degrees are also generally worthwhile, but you should really do the cost-benefit calculation on those degrees with realistic ideas of the benefits. Especially consider how much you WANT to be a doctor or lawyer or veterinarian or what have you. (I don’t think anybody becomes a vet for the money! And if you’re getting an advanced degree in social work, obviously money is not your main concern.)

    fwiw, my tuition was added to my stipend income, taxed, then paid back to the university. i was eligible to claim the lifetime learning credit, but as you might imagine it was insufficient to recover my losses.

    @ Jane (#52), I wouldn’t even recommend going into that much debt for a law degree because there are simply too many law school grads competing for too few jobs and even fewer high-paying ones. I went to a top 10 law school and some of my classmates graduated with over $100,000 of total student loan debt without a job that could support paying it back in any reasonable amount of time. Some of them will be paying for 25 years and hope to get the rest of the loan forgiven. I took a different route and went to undergrad at a place that gave me a full ride (not my first choice, or even second choice, school, but oh well). I still graduated with $63K of debt from law school but lucked out with a high-paying job. I hated the job so much that I did everything I could to pay off the student loan. I paid it off in 5 years. The people I worked with didn’t understand why I drove my old car and lived like a grad student (I even had a roommate for a while) when I was making decent money, but now, 15 years later, I’m so glad I did because those frugal habits have allowed me to plan for a career downshift before age 45 while my colleagues continue to work themselves into poor health to pay for their fancy lifestyles.

    Tuition benefits shouldn’t be taxable. I know that graduate stipends are taxable, but I’ve never heard of anyone paying tax on tuition. That’s outrageous, so much so that I don’t believe it.

    It probably depends on the type of school you go to. I am about to get a Ph.D. in history, and way back when I applied at many universities all over the country, all of them offered those they accepted full rides (free tuition, stipend, and insurance). I think in the humanities, it’s downright irresponsible of a school to not do so, considering your earning potential is questionable. This is especially the case now, since the academic job market is essentially in a state of collapse. I was told not to accept admission anywhere that didn’t give me full funding.

    I wouldn’t advise anyone to go in debt for a graduate degree, EXCEPT in law, medicine, business, or the sciences. You just don’t make enough when you get out to justify the expense. I guess if you truly don’t care about being in debt forever for a degree that doesn’t translate into higher earnings, more power to you! I just know that I’m bitter enough coming out of a 10 year program (had some personal hiccups along the way, but history takes an average of 8 yrs), that if I had extreme debt, I would be unbelievably upset. In a market in which landing a tenure track job is like winning the lottery, the only real consolation I have at the moment is that I have no debt.

    Destroy that debt.

    Sorry. I’m just passionate of destroying loan debt.

    My student loans were costing more in interest than I could have earned in almost any investment so I found that doing a monthly sweep to the curtailment of my debt was helpful.

    Keep up the good work.

    #49 If your tuition reimbursement is taxable then your school is doing it the wrong way. It hasn’t been taxable since the 1990s. Has that changed recently (if so I’m surprised I haven’t heard about it)? And student health insurance in MA is amazing– much better than what I’ve got now. ETA: Just checked my graduate school– they still say on their tax page that the tuition scholarship portion is not considered income.

    #45 Re: stipended graduate programs– this depends a LOT on your field and the institution. In my class of

    30 only one person did not have at least tuition reimbursement. I wouldn’t recommend anybody take on debt for a PhD program. If you’re not getting funded, it’ll be awfully difficult to get one of those elusive tenure track jobs once you finish. (The idea being that fields with high demand also have more funding for students, and students with funding have an advantage over those without.)

    sure, in some fields the programs offer tuition and stipend benefits. the tuition benefits are taxable (in my case, it came to about $45k/year!) health insurance is awful (i took on $11k in student debt to pay off the hospital one year.) and if you’re working as much as you *should* be toward your degree, your effective pay rate is about minimum wage.

    also, many stipend contracts come with the provision that you cannot seek additional employment. you are expected to devote full effort to completing your program so that you’re not wasting time doing other stuff, delaying your graduation, while on their funding. they hate that in a big way where i came from.

    “Now that I am debt free I have been meeting/dating guys just out of masters/phd programs at great schools (a good catch right?) but they have huge debt so I lose interest in planning a future together. How does this affect how you all date?”

    Wow. So, in essence, it doesn’t matter what kind of person they are emotionally, intellectually, if you’re both compatible, life goals, if they have a bright future, if they have student debt, drop’em like a hot potato?!

    Jeez, I hope when you do find someone that they don’t make any kind of debt (business, student loan for a better career) from trying to make a better life or out the door they go!

    In my grad days I dated some very intelligent, wonderful women who were working on their PhD’s in various fields, and even though for reasons here or there it didn’t pan out (lifestyle choices, personality incompatibility) the LAST thing I ever though about was their debt load.

    thank you for sharing your experience. can you be more specific as to how your husband is supporting you? from your 36K earnings what additional expenses would you have to cover if you were not dependent on him?

    @DeL – not in this economy. I work for a department that has 4 PHD programs and do all the admissions and financial aid…only the top 10% of our incoming class is offered tuition, stipend, and health insurance. The other 90% are on their own dime, and it’s becoming increasingly common.

    @34 Dotty dot dot- Thanks so much for the tips! I especially like the one about letting professors know that you’re available to do extra research work for $…will also help with the resume-building.

    @42 JaM – Most (I’m willing to bet 95%) PhD programs come with a full-tuition scholarship, stipend, and health insurance. I don’t plan on incurring any more debt…@44 Nicole is right – no one bails you out from your student loans.

    #42 “Is there a corelation between advanced degrees to personal financial education?”

    In the Health and Retirement Survey, there is a correlation between financial literacy and educational attainment.

    I’m very confused by the statement at the bottom, “If it is a PhD or Grad degree in some obscure field that is not going to pay for itself then Uncle Sam, President Obama or your fellow neighbours are not/should not be responsible for your debt!!”

    Nobody is paying for graduate student debt (except possibly the university with the graduate program or other sources of scholarship) except the debtor. You can’t even discharge student loan debt through bankruptcy court. Am I missing something?

    Congrats on getting such a big part of the student loan out of the way! Those types of loans are like financial cancer because if you (god forbid) go into bankruptcy they can’t be absolved. The loan interest itself could eat you alive.

    I admire that you set up a budget and really went to the mat to get that stuff done, and I hope that are extremely grateful that you have a husband that is behind you and can support you through this.

    Honestly though, I don’t think a person could erase a loan like that without outside help be it family, etc. I know TONS of people who don’t have a significant other and their loans are eating them alive even though they are dutifully setting a budget and trying to pay it off.

    Kudos to Andrea the author of the article. But I find the comments equally interesting.

    JD: It would be interesting to do an educational profile survey of your readers to know the # of PhD, Grad, Undergrad, HS diploma readers you have. Is there a corelation between advanced degrees to personal financial education?

    To the point of this article & comments – chosing to pursue what you enjoy has an associated cost to it. If it is a PhD or Grad degree in some obscure field that is not going to pay for itself then Uncle Sam, President Obama or your fellow neighbours are not/should not be responsible for your debt!!

    I know that I know what I know, and I don’t need a piece of paper to remind me

    i personally view my doctorate as a piece of paper that says i have some glimmer of an idea how much i DON’T know.

    and i get to list three extra letters after my name on my CV. woo.

    I could relate to this post as well. I did not have any loans as an undergrad (national merit scholar) but have about $100K in student loans from my MA and PhD. I went straight through (started my MA when I was 22 and my PhD when I was 24) so I really didn’t understand how tough it was going to be when I graduated. I have some credit cards, too, so I’m on the 30-year repayment plan and currently paying interest-only on the student loans (though I will switch to a different payment plan once the credit cards are paid off, which will be this year, hooray!).

    My boyfriend took out some loans for undergrad but paid them off before starting law school…he graduated from that with $100K in student loans and $50K in credit card debt (you’re not allowed to work while in law school, they will kick you out if they find out you have a job). So things are going to be a tight squeeze for awhile.

    In retrospect I would’ve done things differently as far as budgeting, but I did my grad school because I LOVED it, in answer to someone above who wondered why people go…my MA is in creative writing and my PhD is in rhetoric and composition. I make $40K/year. My boyfriend makes $92K/year, but his credit card payments are much higher.

    @33 – I went to grad school for a career-related degree after having been out of school for give or take a decade. I was able to turn that

    $25K out-of-pocket investment into a $15K/yr raise plus increased benefits including a defined benefit retirement and lifetime insurance in retirement. The extra money is helpful, but the real benefit comes after I retire.

    My spouse will have retirement benefits in one system, I’ll have them in another, so hopefully we’re spreading our risk.

    Anyway, that’s why I went to grad school.

    This is exactly why I didn’t even consider going to school after I got a good enough diploma. Completely bypassing the whole debt to your eyeballs and eating noodles.

    Went straight to work, saved up (and stayed completely out of bad debt), invested and hopefully retire around 30… Without paying out the nose for a shiny piece of paper that says I know stuff. I know that I know what I know, and I don’t need a piece of paper to remind me (if that makes any sense).

    Good luck to all of you who are going the school route. I have a buddy who got a tech BA, and was very poor after graduating for a few years with 60k in debt, until he landed a job overseas that started paying very generously (Afghanistan tech contractor). But then again, who wants to be in BFE just to make ends meet.

    Leigh– I think if you do work for extra money it’s important to do something that furthers your career. Research assisting or TAing (in moderation) for example, can help you get a job later, teach you skills, or could lead into coauthorships and less stress as a first year assistant prof.

    I also know some people that did relaxing jobs that they could earn money at when their brains were otherwise dead (student advising, for example). I felt that the volunteering I did outside of graduate school helped me stay centered (though I didn’t start until late in my graduate career), which helped dealing with getting the dissertation done. Definitely a good point about not working so much you can’t actually get the degree finished in time. But work isn’t all bad.

    how much more quickly would you finish graduate school if you spent your time working on your degree rather than working for extra money?

    you may be extending your time living on a crappy stipend by trying to tackle your loans that aggressively. US PhDs take long enough already, and stipends are lean. not that a postdoc salary is worlds better, but you have a lot more doors open to you.

    just something to consider. my PhD took 5 years of 150% time-effort (60+ hour work weeks, and during the last few months i exceeded 100 hours per week.) had i directed a lot of my focus elsewhere, i could see that having extended to 6-7 years.

    Maturity=Realizing the simplicity that comes with the easy loan, requires steadfastness, discipline and hard work in paying back.

    Here are a few tips I’ve picked up along the way to save money in grad school. I do many things, but these ones are grad-school specific:

    1. Don’t drink. There will be social events, there will be booze. Drink water. It’s free and you won’t wake up with a headache or a dent in your wallet.

    2. If public transportation is included in your tuition fees, make the most of it. Alternatively, walk or bike anywhere that you can.

    3. Ditch cable. And if you have a cell phone, ditch home phone. Sign up with Skype for long distance calls – free and fabulous.

    4. Participate in any research studies available on campus (these are usually in psychology departments)to earn some extra cash. At my school, tests run about 50 minutes and pay $10. Alternatively, if you can sign up to be a Simulated Patient (I’m sure your husband could tell you more about that). For those that don’t know, essentially you act out real symptoms for med students who then “diagnose” you. These can pay very handsomely. And for anyone that watches Seinfeld: “That’s it! They gave me ghonorrhea!”

    5. Apply to every single bursary/grant that even remotely applies to your work. These are time consuming, yes, but worth it. Example: I applied for a grant from a European company (I’m in Canada) who has only ever given money to European students. I was not expecting to win, but I figured, what the heck — and I won!

    6. For entertainment, create a special interest group. About eight of us (all couples) created a “wine club”, and each month we pick a grape variety, and every couple brings one bottle of wine of that grape variety. We take turns hosting (whoever hosts also takes care of snacks for that evening), and we end up getting to try four different kinds of wine for the price of one.

    7. Also for entertainment, check out local community offerings. My town has great festivals in the summer that cost nothing to attend.

    7.(b) There are also school-sponsored talks going on around campus all the time, so find out what you’re interested in and attend. They’re free, they’re informative, and they can also be great networking opportunities.

    8. Ask professors for money, especially your supervisor. Let them know that you’d be interested in doing any work for them; if something comes up (and they like you), they’ll let you know.

    9. Let people know that you’re willing to teach. Create a network for yourself among contract faculty (I say this because my friendship with one invariably led me to a job that he turned down and recommended me… from there, I’ve taught two other classes, plus designed one of my own). Alternatively, apply for every teaching position that you would be eligible for. You won’t get them all — you may get none — but teaching any course will give you much-needed experience and extra money.

    10. Save the best for last: finish on time (or sooner). The longer you take to finish your degree, the more out-of-pocket expenses you will have, most notably tuition.

    Hope that helps! If you’ve thought of any, please share

    I’m always curious about the reasons people attend grad school. I’m 28 and have watched many of my high school classmates go to school…some of them are still in school at age 28/29!

    Granted, there are some jobs that require grad school, but overall, I see a lot of people just “default” to grad school.

    I always wonder why, when there are so many opportunities to start your own business and/or work in a small business, people continue to get degrees instead–and fall farther into debt to do so.

    I realize this is a bit offtopic, but it’s long been of interest to me.

    I have $60K in student debt without even the benefit of a masters, just my own stupidity in undergrad (Go to the school offering me a free ride? Of course not. I’ll go to the ONE school not offering me a scholarship).

    You live, you learn, etc. I’m finally seeing a light at the end of the tunnel for one set of loans. The other set? *sigh*

    It’s important not to discount private schools entirely– some of them give much better financial aid than private schools, especially for middle class families. Our (underfunded) flagship state school would have ended up costing both my DH and me more than our respective (highly endowed) private schools did; even with 3x the stated tuition, the scholarships we got more than made up for the difference. Our private graduate schools also offered larger stipends than the public ones (Berkeley made a big mistake sending its financial aid offer in the same envelope as the estimated cost of rent in student housing).

    Thanks so much for sharing your story. I too am in grad school for a PhD. I’ve been on track for a few years to get my finances in better shape. I arrived at grad school having paid off all of my credit card debt. And last year I started working on paying off my unsubsidized Stafford loan. Did you know with Sallie Mae you can request that your payments be credited to a certain portion of your loans? While I only send them $90-100 each month, I make sure to request that it get credited to my unsubsidized loan so that I pay less in interest over time. I wouldn’t mind finishing my PhD with less debt than I started with!

    #27 has a point. I read an article recently (maybe the Washington Post? Argg…my memory is going!) that ran results of a study that was done on people that had college degrees. The income people with college degrees were not based on the type of college they went to! People that went to state schools were making as much or more as people that graduated from an ivy league school. The study went on to find the important factor was how much drive the person had.

    Congratulations on hitting your financial goals so quickly. You showed tremendous discipline! Your story should provide both a warning and a hopeful note to current and future grad students about managing the cost of education.

    Student debt is one of the biggest scams in this country between financial institutions and government. Do you realize that if we were citizens of Dubai we’d have our entire educations paid for? I went to a state school I could afford but was one of the first generations in college to be heavily marketed to with credit cards. (a practice I’m now told just got banned) I graduated with credit card debt but felt worse for my friends who went to big name schools and owed tons of money they could not just stop paying on.

    Sometimes I feel the whole looking down the nose at people who go to state schools is really jealousy over these loans. I have to ask, with all of the money you guys know it costs to go to a masters or phD program how do you justify it? It barely made economic sense before and now with such poor job prospects, globalization and so many people in my area (SF) having these degrees it doesn’t really set you apart.

    Now that I am debt free I have been meeting/dating guys just out of masters/phd programs at great schools (a good catch right?) but they have huge debt so I lose interest in planning a future together. How does this affect how you all date?

    Also in CA our entire education code is being messed with by occupational skills schools (acupuncture, cooking, etc) scamming poor and working class students into loans they may never be able to repay. Our government should be ashamed but they make good money off this! And the “nonprofit” schools do too. Greedy greedy greedy…

    This is such a timely post…I’m going to be starting a PhD program in the fall and my husband has two years to go in med school. I was freaking out about being able to afford everything, but seeing this post and the above comments made me realize that it IS possible.

    Would other readers be willing to share how they cut back on expenses to make ends meet during grad school? I’ve been reading some great tips above and want all the info I can get!

    I love the combination approach.

    I disagree with using the straight debt snowball approach, because although it might be better psychologically, it costs more in the end.

    Andrea, your story really resonated with me. I found myself in a similar situation a year and a half ago, but chose to do the opposite of what you have done. I’m also a PhD student and will finish in 2012. I took out 28K in student loans in my undergrad so that I could focus on school and not have to get a part-time job. Hard work paid off and when I started my master’s I got scholarships, and a RA and TAship to cover my tuition and living expenses. I wish I had the foresight to save some of it but I didn’t.

    When I started my PhD I got a significantly larger scholarship that lasts for 3 years, plus a half-TAship guaranteed every year. My fourth year will be funded by the university. Instead of paying off my student loans I decided to start saving aggressively, mostly for long-term/retirement savings. Since September 2008 I have saved about 39K (some of this is in an emergency fund).

    There were a few reasons why I decided to hold off on the student loans: they don’t accrue interest while I’m in school, when I do start paying them off the interest I do pay is tax deductible (I live in Canada so things are a bit different), starting my retirement account early means I don’t have to save as much later on, and lastly, it just feels better to have a bit of a nest egg. Sometimes I wonder though if I made the right decision and perhaps I should have paid off the loan instead. But I feel comfortable with my decision and I think that’s what counts.

    I can’t say AMEN enough to this story. Both my husband and I are graduate school educated and took on significantly more debt than is mentioned in this story. Between the ages of 18 and 25, we were just trying to get by, living on part time jobs, ramen noodles, and spaghetti, but still ended up with significant debt due to the school we atteneded (small private college). When we both got our degrees and we sat down to plan our life out with “normal” jobs, it scared the crap out of us! We are essentially paying for a non-existent house! LOL. But we have a repayment arrangement for our budget, and if things happen as planned, we will still get a planned vacation a year, work towards savings, and have everything gone in 5 years. It will require sacrifices in other areas, but those are areas we are willing to give up to get debt free and still enjoy our life with rewards for being prudent.

    Congrats to you in your PhD endeavors! I will be starting mine in August!

    You are definitely right about not understanding what all these loans will mean once you graduate– 20 years of paying hundreds of dollars a month! I was the first one in my family to go to college and of course believed that the jobs I would get with my college degree would pay waaaaay more than my parent’s jobs. Well it does, but once I factor in those loan payments, it’s really not that much more. It took a few years for me to be making enough to cover all my bills and then actually be able to afford other stuff (like a car–which I paid for in full but the insurance in NJ is pretty high). Being single and having no one to help support me means very little is going to my loans. I pay about $100 a month more than I have to, but it seems like it doesn’t add up to much. I am a couple months away of paying off the 3K of credit card debt I had, and so hopefully I’ll soon be able to pay more on the loans. However I’m also facing layoffs, and worry that my emergency fund is not big enough, because right now I only have enough saved for a couple of months. So I may have to put the money in there instead.

    Way to go on your debt payment so far! 70K is a lot, but you can do it!

    DH and I paid off 10K of his (unsubsidized at 8.5% interest!) loans back the first year of graduate school. My stipend was 18K, his was something like 20K though he got a signing bonus of 2K or so. We lived in Boston so rent ate half of that (we broke a lease on a 100 sq foot apartment when we got into a 300 sq foot subsidized university apartment late in the semester– the penalty was worth it.) I had about 3K saved up from working during undergrad, and we had about 2K from wedding gifts. DH had nothing.

    We participated in university experiments. DH did some extra research assistant work which paid the rent the two months before school and his stipend started. For Christmas we asked for money to pay off loans instead of gifts from our family (my father was very generous and gave us 1K that year! He liked our goal, I guess.).

    We had one subsidized subway pass since we were at different universities. I walked everywhere. We never ate out. We did not eat red meat (when I eventually tried a steak later I threw up… had to ease back on starting with processed roast beef). We mainly lived on groceries from the Haymarket, where you could get a bag of fruit or veggies for a dollar. We made that trek every 2 weeks and cooked in bulk. I’d take leftover pizzas home from business school events (MBA students didn’t want them!). We packed our lunches, even though that usually meant me eating a bagged lunch at ABP while my friends ate ABP sandwiches. I got very good at timing the Star/Shaws sales– I knew when chicken leg-thigh combinations would be 69 cents a lb and bought a bunch. Same with flour, sugar etc. at 10 cents a bag (yay for holiday sales), or macaraoni and cheese at 25 cents. We also ate a lot of soups (split pea, black bean) and potatoes. I would stew chicken meat and freeze it to add to meals in small amounts. (Something I hope never to have to clean up from again.)

    For furniture we had a futon (new, $119) and got the rest (desk, kitchen supplies) for $20 from a couple that was moving out of the building. At some point my father drove up a bunch of my stuff from college, and we used some of DH’s signing bonus to buy a real bed ($2K– embarrassingly expensive– we didn’t know what we were doing, but it is still a nice bed!) after we got into the new apartment.

    It was a crazy sacrificial year. But– year two we were on track and able to start earning interest on our money rather than losing it. By the time 5-6 years of graduate school were up, we had 50K saved up (the stock market had gone crazy and we had a job that gave us free rent for 2 years) and ready to be converted into a down payment and closing costs for a house. (And we maxed out our ROTH IRAs, though only because the contribution limits were much lower then.)

    I am very glad I had not read Suze Orman’s Young Broke and Fabulous at that point. It never even crossed our minds to keep the debt or put on credit card debt to get to a normal standard of living. (My heuristic at the time was that debt with interest under 6% was ok, under 5% should be kept as long as possible, and debt over 6% interest needed to be paid whatever the cost.) We have friends now, 10 years later who HAD read Suze and are still saving up for that down-payment while paying down their 18% credit cards racked up in graduate school. Maybe the harsh vegetarianism wasn’t worth it, but 10 years later, I’m glad we did what we did. Would not do it again, but it is nice to pay the price while you’re young so you don’t have to worry about money and can take chances later.

    p.s. Of course, DH’s school started offering 30K+ stipends AFTER we graduated. *shakes tiny fist*

    Great job Andrea! It took a lot of hard work and discipline to accomplish what you did. I’d like to say how proud of myself I was when I went back for my Master’s degree while going through a divorce, I was able to get an Assitantship which paid my tuition plus a stipend, allowing me to graduate owing only $2,000! This was in addition to working a part-time job, and in my last year, completing an internship. What people need to understand is that the “dream job” is not always out there when you graduate, and your ability to pay back what you owe could be hampered by the inability to find work in your “high paying field” for months or even years. By the way, my husband and I are just finishing up paying our share of $40,000 a year tuition for his daughter from a previous marriage. After sending our share of the payments to the ex for the past four years, we’ve come to find out that she took out a loan for $24,000 dollars which we will also be responsible for. Her mother doesn’t think she should start off her excellent career as a nurse with student loans. Is there anything wrong with a child taking some responsibility for the choices they make?

    Nice job, but it convinced me even more that parents should help a child through their undergrad. You might be able to make huge money after a Phd (and you must be shooting for that since you think $36,000 is a pittance), but most undergrads do not make near that amount. I have no interest in having my grandchild crushed by debt when he graduates from college in 20 years.

    I only have another month or so before I have to make a decision on where to attend undergrad. Part of me just wants to say screw it and go to the expensive out of state university. But then my logical side tells me that it’s a mistake and to go to the cheaper in state school.

    You are 100% correct that it’s almost impossible to understand what paying back hundreds of dollars every month will feel like.

    Right now, it’s so easy for me to say that I don’t care about paying back 60-80k(price of the out of state school). But I also still live at home and have no bills to worry about.


    Looking for Student Loans Without Cosigners? Read This.

    Which loan type requires you to make loan payments while you’re attending school

    to Find Your Best Fit

    Getting an education these days is not easy, it costs about as much as buying a Bentley. If you’re not Beyonce-rich (a category all in it’s own), then you will probably need student loans. You might even need more loans than the federal student loans the government will give to you. That just about guarantees you’ll have to turn to private student loans.

    While the government is comfortable giving money to teenagers without a co-signer, banks are businesses, and they will not guarantee you a loan. Most college students don’t have a credit history so they have no clue how responsible you are. About 9 of 10 students who use private student loans will do so with the help of a cosigner.

    Compare Student Loans That Don't Require a Cosigner

    • See which lenders you are eligible for
    • Compare options to find your best fit
    • Choose from fixed and variable rates
    • Borrow up to 100% of cost-of-attendance
    • Easy application process
    • Different repayment terms available
    • Absolutely no fees
    • Choose terms that fit your situation
    • No cosigner required

    will not take you off this page

    While you might have the budget skills of a financial genius and the earnestness of Jimmy Fallon, there’s no way for a bank to know that. To limit their risk, banks require a co-signer. Even if they don’t require a co-signer, they will often give you a lower interest rate if you have one.

    A cosigner is any creditworthy adult who is willing to accept responsibility for the loan should the primary borrower ( the student ) fail to pay. ​Most often, parents act as the cosigner. However, cosigning comes with many risks for parents. Studies has shown that cosigning can negatively impact a parents credit and make it harder to save for retirement. So. before you use a cosigned loan, you should look for alternatives!

    You, my friend, should be looking for student loans without cosigners. While some might say they’re as real as unicorns, I’m happy to tell you that they do actually exist. They are just rare and not easy to come by.

    Federal Student Loans (Guaranteed They’re all Without a Cosigner!)

    Federal Loans are the best student loans without cosigners. The problem is that you’re limited to how much money you get from them. The good thing is that the interest rates are fixed and you’re pretty much guaranteed to qualify for some federal student loans. You’re almost guaranteed better off by keeping your debt manageable, so try to stay within the amount you get from federal student loans.

    Stafford loans are offered through a federal government program designed to help students finance their higher education. The loans are made directly from the U.S. Department of Education to students through the Federal Direct Student Loan Program (FDSLP).

    Stafford loans typically offer lower interest rates than private loans, but there are limits on how much can be borrowed under these loans. These limits are based on whether a student is independent or dependent, and where they are in school.

    The maximum Stafford loans that can be taken out by a dependent freshman is $5,500, for example, while the maximum amount that can be borrowed by an independent freshman is $10,500. The loan amount increases each year to a maximum of $7,500 for dependent students and $12,500 for independent students.

    For graduate students, Stafford loans are limited to $20,500 for graduate or professional school and $40,500 for medical school. These loans also have maximum lifetime limits, ranging from $31,000 for a dependent undergraduate student to $224,000 for a medical school student.

    To be eligible for a Stafford loan, a student must complete a Free Application for Federal Student Aid (FASFA). The Department of Education will then determine eligibility for loans based on a student’s financial need. Once the loan is signed, a student is not required to make payments while enrolled at least half-time in an accredited institution. The loans are deferred for six months after graduation, withdrawal or otherwise leaving school.

    There are two types of Stafford loans: subsidized and unsubsidized.

    Subsidized loans are granted based on financial need and based on a student’s expected family contribution. Interest is paid by the federal government while the student is in school or in the six month deferral period.

    For unsubsidized loans, the student is guaranteed responsible for all interest that accrues while enrolled; the interest that can be deferred while the student is in school, but then it will be added to the loan capital after graduation.

    Subsidized loans are only available for undergraduate students, while unsubsidized Stafford loans are available to both undergrad and graduate students.

    Stafford loans do not have a set interest rate; instead they vary based on the date that the loan was disbursed and the type of loan it is (for an undergraduate or graduate student). All students receive the same interest rate regardless of their credit score or potential for repayment. Under a 2013 bill, the interest rate for Stafford Loans will change each year depending on the current market, but will be fixed for the life of the loan.

    Like subsidized Stafford loans, Perkins loans are available based on need. They have a ten year repayment period with a fixed 5 percent interest rate. These loans are also subsidized so that students are not required to pay interest on the loans until after the graduate, go below half-time status, or withdraw from school. The deferment period for Perkins loans is longer than for Stafford loans, with students not required to pay back their loans for 9 months after they leave school.

    Students must apply for these low-interest loans through FASFA. They are available to undergraduate, graduate and professional school students with demonstrated financial need. The loans are issued directly through the college or university, which means that only students who attend schools that participate in the Perkins loan program are eligible for these loans.

    Perkins loans have limits on the amount that can be borrowed per year and in a lifetime. These limits are based on a number of factors, such as financial need, the amount of other aid that you receive and the availability of scholarships and grants at your institute of higher education.

    For undergraduate students, the maximum amount that can be borrowed through Perkins loan is $5,500 a year, or a total of $27,500. For graduate students, the maximum amount that can be borrowed is $8,000 per year. Between undergraduate and graduate school, students can borrow a maximum of $60,000.

    As with some other federal student loans, Perkins loans may be eligible for loan cancellation policies for graduates who work in public service fields. This may include teaching, law enforcement, government attorneys, active duty military and librarians. However, eligibility for these programs often depends on the setting in which a graduate works; a teacher may participate in the program only by working at certain schools designated by the government.

    PLUS loans are offered to graduate and professional students and parents of undergraduate students through the Department of Education. They are not dependent on your financial need, but you must have a good credit score to be eligible for these loans.

    There are two types of PLUS loans: Direct PLUS loans for students and PLUS loans for parents. Direct PLUS loans are only offered to graduate and professional students who are enrolled at least half-time at an eligible graduate or professional school program.

    PLUS loans for parents are available to parents of dependent undergraduate students who are enrolled at least half-time in an eligible program. The name PLUS loans comes from the acronym Parent Loan for Undergraduate Students; this no longer applies as the loans are available for students as well.

    There are no limits on PLUS loans, with students and parents able to borrow the entire cost of attending school (tuition plus living expenses) minus other financial aid. The interest rate is higher for PLUS loans than for other federal loans, and the unpaid interest is added to the principal of the loan while the loan repayment is deferred. These loans have an origination fee. PLUS loans are not eligible for student loan forgiveness or cancellation programs.

    Unlike Perkins and Stafford loans, a PLUS loan requires a credit check. If you have an “adverse credit history,” you may not be approved for a PLUS loan without a co-signer or unless you can document extenuating circumstances that led to the poor credit history. Students and parents can apply for PLUS loans through FASFA.

    Federal student loans have many advantages over private loans for school. They make paying for school easier and cheaper than private loans, and in some case, may even result in your debt being forgiven or cancelled.

    For students, one of the most important guaranteed advantages of federal student loans is that you can get one without a credit history or a co-signer. Most students apply for student loans and aid while they are still in high school — and in many cases, before they even turn 18. This means that they are unlikely to have a credit history, which makes obtaining private loans very difficult.

    Federal student loans can be obtained easily without a credit history just by filling out the FASFA — and you don’t need a co-signer for a federal student loan. That is because these loans are not based on your credit (other than PLUS loans for graduate students), so co-signers are not necessary.

    After being approved for a federal student loan, repaying loans is often less expensive and easier with federal loans than with private. Interest rates tend to be far lower — and are often half as much as private loans. This is particularly true if you have a limited or bad credit score, which can nearly guarantee private loan interest rates being incredibly high.

    Loan rates are also fixed, so that the interest rate will stay the same throughout your loan; in contrast, many private loans have variable interest rates, which can mean that you end up paying a lot more over the life of a loan than with a low fixed interest rate.

    If your loan is subsidized, then you won’t have to pay interest on your loans while you’re still in school and for a grace period after you are out of school; this prevents interest from accumulating and increasing your total debt burden while you’re still working on your degree.

    Federal student loans also offer better repayment options, with seven different payment plans. This includes income-based repayment plans that allow you to put a maximum of 10 percent of your monthly income towards loan repayment; after a set period of time (20 to 25 years, depending on if the loan is for graduate or undergraduate schooling), your loan will be forgiven. In addition, your loans could be cancelled or forgiven through the Public Service Loan Forgiveness Program if you work in the public sector (for a nonprofit or the government).

    Private loans do not offer the option of loan forgiveness. You also have the option of putting off your federal student loans for up to three years if you cannot afford to repay them. This can be achieved through deferment for up to three years due to economic hardship, or forbearance for up to one year. Private student loan lenders may offer some options for reducing student loan payments, such as a slightly lower interest rate or permitting you to only pay back interest, but this depends on the individual lender.

    If you are having trouble paying off your federal student loans despite generous repayment options, the government gives you a longer period of time before deeming the loans to be in default. After 3 months of non-payment, federal student loans are considered delinquent; they are not considered in default until you have missed nine months of payments. In contrast, private lenders may consider you to be in default the day after you miss a payment.

    Another guarantee of federal student loans is that if you die or become permanently disabled, your loans will be discharged — but this is not true of private student loans. Lenders may require your co-signer (if any) to repay your student loans if you die, and if your co-signer dies, the company may demand that you repay the entire amount of the loan. Federal student loans will be cancelled if you die, and any PLUS loans taken out for you by your parents will be discharged if your parent dies, guaranteed.

    These are the primary reasons why federal student loans are often better for student borrowers than any other loan option. While the best course of action is to avoid borrowing money at all, taking on federal student loans is usually better than private loans.

    While federal student loans are generally preferable to private student loans, they do have some disadvantages. Each of these cons should be considered before agreeing to sign a Stafford, Perkins or PLUS loan.

    There are limits on federal student loans — which means that even if you qualify for subsidized loans, they will not likely come close to covering the whole cost of your education. You also must meet eligibility requirements and apply through the FASFA program. If you have a criminal record or commit a crime while receiving federal student loans, this may impact or limit your ability to obtain these loans.

    If you are unable to pay back a federal student loan, the government has wide-reaching authority to get its money through garnishing your wages or even your taxes. Private student loan companies cannot do the same thing. In addition, federal student loans cannot be discharged in bankruptcy, so unless you die or become permanently disabled, you will not be able to discharge them if you cannot repay your loans.

    Overall, federal student loans are a better deal for students — but these factors should be reviewed before signing a loan.

    But what happens if your parents have bad credit and don’t qualify as co-signers, or if you don’t want them to jeopardize their credit or put their house up as collateral? Private student loans without cosigners are not going to be nearly as good as what you would qualify for with a cosigner who has good credit.

    First, you will nearly be guaranteed a high originator fee. Second, the interest rate you’ll pay will be much higher. Finally, you might not be able to get one depending on what you’re studying.

    So, where can you find these student loan almost-unicorns? Here are some places to check out:

    • Funding University: No co-signer required. Funding University offers ultra competitive interest rates, easy-to-understand terms, budgeting tools and job-networking resources – AND, they don't require a co-signer.
    • Citizens Bank: While they do technically provide student loans without cosigners, they strongly suggest that you apply with a cosigner.
    • Sallie Mae: Under special circumstances Sallie Mae provides student loans without cosigners. They also have a cosigner release program that you can apply for after 12 consecutive payments but they have far more rigid conditions to qualify such as making the student pass a credit review.

    Private student loans are any loan that are not backed by the federal government. They can be issued by banks, credit unions or other lenders. As a general rule, these loans require a credit check and may be based on a number of factors, including your choice of school, what you plan to study and whether or not you have a co-signer.

    Because private student loans are not offered by the government, they do not have the same advantages as federal student loans. The repayment terms are less flexible, and interest rates are often higher and variable.

    What Are the Best Private Student Loan Lenders Who Don't Require a Cosigner?

    The best private student loan lenders will depend on your specific situation. To get the best deal, you should start by shopping around. Some sites will permit you to compare rates and deals from a number of different lenders, giving you an idea of what rates you’ll be eligible for based on your credit history.

    However, you should look beyond rates to determine the true cost of a loan. The terms of the loan should be carefully considered. This includes any fees, grace periods, rate reductions for on-time payments, and repayment plans. Origination fees can add up to a significant amount of money, which is why it is so critical to carefully look at this item before agreeing to a loan.

    Currently, some of the better student loans options from private lenders have been found through Common Bond, iHelp, College Ave, Citizens Bank, and RISLA.

    Who is Eligible for a Private Student Loan Without a Cosigner?

    Eligibility for private student loans depends on a wide range of factors. Typically, you must be a United States citizen or permanent resident, and be enrolled at least half-time at an institute of higher education. You must also be at least 18 years old.

    Beyond these basic requirements, most student loans are determined by a combination of your credit history, the school you plan to go to, and your chosen field of study. The lender wants to know if you are a good risk: will you be able to repay the loan?

    A demonstrated history of making payments on bills or loans helps to show that you’re a good credit risk. If you are going to an accredited school and majoring in a subject that will likely lead to gainful employment, those are further signs that you will be able to repay your loans.

    However, if you do not meet these requirements, you may need to have a co-signer in order to be eligible for a private student loan.

    A cosigner is somebody who is willing to guarantee that they will pay back your student loans if you are unwilling or unable to do so. Typically, a cosigner is a family member or a close friend with a good credit history who trusts you to repay the loan and wants to help you attend college.

    Cosigners are usually necessary if a lender deems you too much of a credit risk to offer you a student loan without one. This happens whenever you have no established credit or bad credit, when you have too little income to or much debt, or if you do not meet the eligibility requirements for a student loan. For example, if you are under the age of 18 or are not a U.S. citizen, a co-signer can help you obtain a loan.

    A cosigner helps students by allowing them to qualify for a loan that they wouldn’t otherwise be able to obtain. In short, a co-signer will let you borrow money so that you can get a degree that you wouldn’t otherwise be able to get.

    A cosigner may be able to help you achieve a lower interest rate as well. If your credit history is non-existent or if you had bad credit, you will likely have a high interest rate for student loans. However, with the help of a co-signer, you will be able to not only qualify for a loan, but get a much more favorable interest rate (provider that your co-signer has a good credit history).

    Over time, a cosigned loan can also benefit you by helping you to build credit. If you make regular, on-time payments, you can establish a good credit score — or repair one that has been damaged by financial mistakes in the past.

    The biggest advantage of a private student loan is that you will be able to pay for your education — almost without limits. If you qualify for a student loan, you will be on your way to earning a degree — and to a whole new life.

    There are no caps on private student loans, unlike the limits on federal student loans. You can take out as much as a lender will give you — which can be dangerous if you end up borrowing too much and if you are not putting these loans towards educational expenses. Just be sure that you only take out as much as you need, and use them appropriately.

    Unlike federal student loans, private loans may give you the ability to put the money towards different educational needs. The flexibility of private student loans is a major advantage, because it can help you afford anything from a computer for classes to travel to and from school.

    In some cases, private student loans may also be cheaper than federal student loans, depending on the interest rate. Some private loans offer lower interest rates than federal loans — but be careful, because these rates are often variable, and can end up costing you more money over the long term if they shoot up unexpectedly.

    You may also be able to release your cosigner in the future through student loan refinancing.​

    While private student loans can be incredibly helpful, they also come with many disadvantages. These cons can make it harder to pay off your student loans — particularly if you’ve amassed a large amount of debt.

    The first negative aspect of private student loans is the lack of limits. When you can borrow almost as much as you want for school, there is no incentive to budget or to keep your spending in check. Instead of a basic, utilitarian computer, you may find yourself shopping for top-of-the-line laptops that are better for gaming than writing papers. You may find yourself living a fairly lavish lifestyle despite having no income — which can spell trouble down the road when you graduate with mountains of debt.

    Next, while the interest rates may initially be lower than federal student loans, these interest rates are often variable, which means that the low interest rate that convinced you to sign for the loan in year one shot up to an unsustainable amount in year two. Suddenly, your affordable student loan becomes unmanageable, with the interest adding to principal to make your total debt even greater. The interest rate will also be dependent on your credit score, which means that for young borrowers or those with a bad credit history, the rate could be much higher than with federal loans.

    There are also fewer and less generous repayment options for private student loans, with no possibility of having your loan forgiven. Depending on the terms of your loan, you may not have the ability to have your loan deferred or put in forbearance — even if you are unemployed or otherwise unable to work. If you miss a payment, you may be deemed to be in default immediately — which can have a very negative impact on your credit score and affect your ability to get a house, insurance, or even a job.

    Finally, because private student loans are not subsidized by the government in any way, you may need to start repaying them while you’re still in school — and when you have little to no income. This can be particularly challenging for students, who often cannot afford to pay even a small amount towards interest or principal each month. And if you cannot make these payments, the interest gets added to the principal so that you graduate with even more debt than you thought you were taking out when you signed the loans.

    The bottom line is that while private student loans can help you go to school, they should be avoided in favor of grants, scholarships and federal student loans. They tend to be more expensive and more challenging for students to pay off — and can be a heavy burden for both the student and the co-signer if something happens.

    If you need to obtain a private student loan and do not have a co-signer, the best way to do so is to start early and build your credit over time. This requires advance planning and dedication. Research your credit score, and understand what it means. Then start small, taking on certain debt and paying it off regularly and on-time. This can help to build you credit and make you eligible for a student loan without a co-signer.

    If you do not have a cosigner, the primary disadvantage is that you will have a much higher interest rate — and your loan will be significantly more expensive over time.

    On top of this, you are exclusively responsible for your loan, so there is much more of a financial risk as the borrower.

    What Happens if You Don't Find Student Loans Without Cosigners or a Cosigner?

    If you can’t find a cosigner or a student loan without a cosigner, you should talk to your school’s financial aid office. They might be able to help you with bursaries. If not, you should start building a credit rating and find another way to pay for school. Look for a work study position or for a part-time job. Cut back on your expenses or take fewer courses.

    Find a way to make it work. It’s not the ideal situation, but sometimes life happens and we need to adapt. Someday when you graduate and make it big, you can look back on all the ramen noodles you ate and laugh. While drinking champagne and eating caviar on your yacht. Hopefully, with Beyonce.


    Reader Story: How I Paid Off $18,000 in Student Loans While Still in Graduate School

    This guest post from Andrea is part of the new “reader stories” feature here at Get Rich Slowly. Some reader stories contain general “how I did X” advice, and others will be examples of how a GRS reader achieved financial success — or failure.

    I am a graduate student, working towards a PhD, and I hope to graduate in 2012. Prior to starting my PhD program I acquired a significant amount of student loan debt while working on a Master’s degree. I also had a small amount of debt left over from my undergraduate degree. In total I had accumulated around $70,000 in student loans.

    Some people might say that isn’t too bad considering that I already had completed my Master’s degree, and would not be acquiring any new loans while pursuing my PhD. But I had lived paycheck to paycheck for the two years I worked between college and graduate school, and I didn’t want to live that way anymore. I didn’t want that much debt hanging over me, potentially impacting my future career decisions, so I decided to start paying back the loans while still in school.

    While I wouldn’t say that I regret taking out so much in loans for a Master’s degree, and I’m not sure that I would do anything differently if I had the chance, it is different looking at that dollar amount from the other side. I think this is a potential trap that all students can fall into, both undergraduate and graduate, when deciding where to go to school: The financial implications of having to pay back those loans are so far outside your perspective when you sign a promissory note; it’s not until you graduate and have to figure out how you’re going to pay hundreds of dollars every month for the next decade or two that the weight of your decision finally hits you!

    It was with the realization that I’d be paying $800 a month for 20 years according to the “standard repayment plan,” and would end up paying as much in interest as the original loan amount, that I decided to embark on a much more aggressive repayment plan. I am very lucky because I have a husband who works full time and is able to help support me while I am in school. I also was lucky to obtain a training grant that is paying both my tuition and a stipend for my PhD program. Not all graduate students are so lucky.

    However, I also work very hard to find other sources of income, and for the past year or so I have budgeted my income very carefully to start paying back some of my debt. While my stipend is enough to live on, it would not provide much extra for paying off loans. So to earn extra money I work part time doing research for a professor in my department.

    At times it has been difficult balancing work and school, but in addition to providing extra money it also teaches me time management, and gives me extra experience to put on my resume, which will hopefully help me get a better job when I graduate.

    I also take advantage of opportunities to be a Teaching Assistant, which pays $1500 (pre-tax) for each 8-week course. Through the combination of my stipend, working part time, and being a teaching assistant, I was able to take home around $36,000 in 2009.

    While this isn’t a huge amount of money, it is a pretty decent income for a graduate student. However, what was more important for me wasn’t how much I was making each month, but how I was budgeting that money. I used an Excel spreadsheet to carefully budget my money each month, allocating money for utilities, groceries, car insurance, my Roth IRA (which I max out each year, since it is the only retirement account I can have as a graduate student), and discretionary spending.

    I set a goal of allotting at least $1000 every month to go towards student loans. My budget was not super strict — my husband and I are careful with our spending, but we do go out to eat and to the movies, and we buy things when we really want them. We pay off our credit cards in full each

    month, own just one car, and pack lunches.

    By following this reasonable budget I was able to pay off $18,246.45 between May 2008 and September 2009. Here’s the break down of how I did it:

    I used a combination of the debt snowball approach and paying off the highest interest loan first. I also chose to make payments in large chunks rather than a set amount on the same day each month. I knew I wanted to pay off the private loan early because it was accruing interest, but I also tackled one of my undergrad loans early on, because I could pay it off in one payment (the December 2008 payment). My final payment in September 2009 paid off the last of my undergraduate loans, just in time for my five-year reunion.

    For the last few months, I’ve taken a break from this aggressive loan paying, in part because the point I’m at in my degree program didn’t allow me to work as much recently. But I’m ready to tighten my budget again, and plan to devote at least $500 a month to my graduate student loans, comprised mostly of a Federal Direct loan now totaling just over $50,000 because about half of the amount is not subsidized and is accruing interest at 6.8% (a fixed rate — thanks a lot Uncle Sam!). In addition to putting money towards this loan I plan to save money in different “buckets” in my ING account for things like future travels and home improvements.

    I wanted to share my story because I am an avid reader of Get Rich Slowly, and I hope I can inspire other young people out there struggling with student loan debt. You don’t have to stick to the “standard repayment plan” — most student loans have no prepayment penalties. Even if you don’t make a lot of money, it is possible to find extra money in your budget to pay down student loans early.

    Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

    GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, and more.

    This is a really good tip especially to those new to the blogosphere.

    Simple but very precise information… Thanks for sharing this one.

    A must read article!

    Thank you for your inspiring story. I am not a young person but hopefully my story would resonate with young people. I graduated in 1995 with 14,000 in undergrad student loans. In 2000 I graduated with a Masters degree and altogether about 21,000 in student loans. Over the years I kept deferring and the loan kept compounding. I have been making religious payments for about three years now on a loan balance of 59,000 dollars but it is not going down since this is the minimum payment. I have a descent job and so too does my wife. She had no student debt when we married. I managed to get my daughter through college without any borrowing and she on turn does not have any student debt hanging over her. I had a solid plan for paying off my own debt but life always got In the way – marriage, kids, mortgage etc. I finally had to sit down with my wife and come up with a serious sustainable plan and goal to pay this loan off. We determined that we would apply yearly lump sum payments towards this debt with a five year plan for paying it off. Not everyone is in a position to pay their debt at the outset especially in this tight job market but as a caution – be really careful with how much money you borrow for college on terms of realistic expectations of paying it back fairly quickly. Otherwise it can severely diminish your quality of life in terms of your credit and purchasing power – how much house or car u can afford etc.

    That is so inspiring. It looks like you also living a smart lifestyle too- no credit card debt and only one car. I am trying to pay off my credit cards and then will using the debt snowball to pay off my student loans.

    Does anybody know details for educators? I’ve read that their loans will be forgiven after 10 consecutive years of working in public schools. Does this include private educational loans? I’ve read stuff on Fastweb but would like to know if any of you know more…thanks in advance!

    @#75 BB: I made sure when I first received the training grant that I would still be allowed to work part time. I was told that it was fine as long as I was not claiming work hours for time spent working on my thesis – so I wasn’t getting double paid basically. I think the rules vary at different schools or funding sources. I agree that you should absolutely be aware of the rules of your funding source regarding outside employment – I’m lucky that mine allows it.

    @44 &45: In the comments I get a feeling that people with a PhD expect higher wages or someone to bail them out!

    Now if you had done a PhD out of the love of learning or the love of the subject, I think wage should not be a consideration, but you should live will the millstone of the debt if your degree cannot fetch you a worthy wage.

    Congratulations! I did something similar–as an undergraduate who, very fortunately, qualified for financial aid, I took out only subsidized loans and grants. Throughout college, I always had a job and minimized my expenses as much as possible. I also used the “basket technique” (although I didn’t know the term for it at the time) to set aside aid money that I did not utilize. While my peers saw aid money as supplemental, I saw it as emergency money. When I graduated, I was able to pay off my student loan in full after letting it sit an collect interest for upwards of three years. It was a lot of work, but it was worth it! Congratulations again!

    Mike B, yes, I started off with $185K and my husband had the exact same, from medical school, the final year is at 6.75%. Graduated 3 years ago and I’ve got it down to about $175K for myself, but my husband has not paid anything but the interest.

    “besting” on loan debt is not very satisfying

    Wow-excellent story. My son is headed off to college in the fall. He earned a ROTC scholarship that he can use at a private university but he still will have to pay for housing. I love you perspective looking back at the debt and your aggressive nature to get out of it.

    Federal training grants DO NOT ALLOW graduate students to take outside employment. The stipend is meant to support the student in the PhD program, not pay back loans previously taken out.

    Be aware of the terms of your own training grant.

    I personally have $80k in current student loan debt from undergrad, and another $100k from grad school. My wife has $80k in student loans after grad school. Thus, $260k total between the two of us. Mixture of public and private loans. Interest rates are below 5% for all of them. We pay roughly $2k per month in loan payments.

    We live in the Bay Area and pay $2500 each month in rent. Anyone out there have more student loan debt than us?

    This is not intended as a complaint or “besting”. We’re focused on working harder and making more money, not just scrimping. We plan to accumulate an equivalent amount of $260k in investments rather than pay down the loans. Until the variable loan rates rise above our expected rates of return on our investments, we’ll take our merry time in paying them down. I’d much rather have higher-yielding assets as a security cushion..

    It is so hard to do this, but so worth it. You have to have a master’s degree to be a licensed social worker, so after escaping undergrad with no loans (between scholarships and working part and full time), I took on almost $40k in loans for grad school.

    Even though I don’t make much as a social worker (lower $30s is pretty normal to start, and it doesn’t go up much from there) I just remind myself that I’d be making a lot LESS in the same field with no MA, and so I put a lot of that “extra” toward paying my loans early.

    I also worked as a research assistant 2 days per week in addition to my 3 days of internship and 9 hours of classes. And I started my own business selling things I sewed and knitted in my “free time.” This is why I came out of school with $40k less loans than my classmates (and no private loans). I do think working outside of my internships helped me manage my time and it was good to have something else to think about occasionally. Plus it was so overwhelming and exhausting, it made me really appreciate graduating

    Jane– it depends a lot on your field. I’m in a heavily male-dominated field with a shorter graduate school time-frame (economics). I’ve got female friends in other fields doing just fine with kids from graduate school (and others who have dropped out after having kids). I agree that there is no good time to have a child in academia, but I wanted one around age 27 (give or take), and it was better career-wise to do that after graduate school than while on the job market, especially with the potential for infertility etc. I didn’t shift my child-bearing plans, but I did shift when I started school… the earlier I started the more likely I would be finished by the time I wanted to have children. I may even be ready for #2 by the time I’m up for tenure, though we’ll see.

    Econ also has a very different job market than the humanities.

    You’re not doing it wrong, you’re in a different situation.

    Andrea, you are a very lucky lady with your stipend! Grad school funding in many areas is not as “lucrative” as it once way. I did my MA at a very highly respected school – no one in our program got full funding – and a majority got no funding at all. I had a 1/3 tuition waiver and still had $33k in debt from just that year (2/3 tuition + $1k/month for living expenses). Luckily I still qualified for my parents’ health insurance. Based on discussions with my classmates, only about 50% of them (we were all social science/humanities folks) received full funding – and stipends were more like $10-$15k. Enough to pay your rent & keep you fed, but not much more than that. Then you finish up and take a first year teaching job at a university making $40k/year You don’t do it to make money – you do it because you love it. I decided not to pursue my PhD after my masters b/c I decided I justMrks didn’t love it enough to make it worth being broke the next two decades.

    @Jane that’s exactly what I’m talking about. It’s a pass the buck system we inherited, inflate and pass on to the next generation. No wonder those kids outside of berkeley are so mad right now. I seriously think were going to start seeing more protests there and another generation of people disillusioned by the system like we did in the 60s. No jobs and two wars going on right now folks…sound like a replay?

    wow I really hit a nerve with you.

    I’m happy you are a man (still making more than the average woman earns for the same work) who helped support women in school but that is not my choice. I’ve heard too many horror stories from women who supported men like this and the outcome was not good. Also, I’m almost 40 and yes I don’t want to start a relationship at this point in my life with a man or woman with a lot of debt. I’ve seen how the stress affects relationships and I’m not in a position to financially support them. If I were, I’d be happy to. In fact I think they would be better off with someone who could. So drop the gold digging b sterotype towards me. If you want to fly in like superman and save some womans day go ahead. If women earned equal work for equal pay in this country maybe I could too.

    Well, I must have really not done things right, considering I will have had two children in graduate school (one on the way this summer)! After so many years in graduate school, I basically realized that as a female academic, there’s really no good time to have a child. I figured that people might be more forgiving about taking longer to get your Ph.D. on account of children than they would be having a child on the tenure clock. In my case, it’s all a moot point, since I’ve decided not to pursue a career in academia at all – too many personal sacrifices and a terrible job market turned me off – but timing things right is a real challenge.

    I’m intrigued by those who responded to my last comment about not going into debt for grad. school even if it’s in law or the sciences. Since I was in the humanities, I didn’t want to conclude that debt wasn’t wise in other areas for which I have no experience. But I think it’s interesting how many people regret the debt and that their employment prospects don’t improve enough to justify the expense. I’m starting to think graduate education en masse the way our country does it is not a good idea….

    I have $20K in subsidized loans from Undergrad, and I have continued to defer them as I’m in undergrad.

    Unsubsidized means they don’t collect interest if they are in deferment. As inflation grows slowly each year, that $20,000 seems smaller and smaller.

    Eventually I’ll be paying my loans full time, but for now, I continue to defer while in grad school.

    Basically, if you have ‘subsidized’ loans (unpenalized for deferment), and considering grad school is a guaranteed deferment eligibility, why in the world do you pay now as opposed to later?

    #66 Why the rush: Wanting to be a tenured professor, being married, and wanting to have two kids spaced out. It’s horrible, but these days women in my career are only “allowed” (it’s implicit, not explicit) one baby before tenure while still being taken seriously as researchers. And that’s still a lot better than the previous generation. Going to graduate school right away seemed to be the best way to achieve those goals without being a trend-setter.

    Reading these comments makes me glad I did it my way – I attended grad school on the back of my employer. After a few years working at my job, I was eligible for tuition reimbursement, with a few strings attached, like a commitment to stay at the job for a few years after grad school. I was on the hook for books, parking, and other fees, but tuition was fully paid. Three years later, I graduated from my masters program, paid about $2000 out of pocket, and couldn’t be happier.

    I’ve known several people to go straight through the bachelors-masters-PhD route without any real career experience in between. Always made me wonder… why the rush? Especially when so many employers offer tuition support as a benefit of employment.

    Didn’t have time to read through all the comments, just wanted to congratulate you. Also, I wanted to thank you. I have amassed quite a lot of debt between undergrad and my master’s ($130,000!), and sadly I am a humanities student. I am taking a year off and looking at having to make payments starting next month. At my current income, I will barely be able to make standard payments ($1500 a month). Luckily I am going back to school, and hopefully I can use your tips to help cut down some of the debt before I finish up the PhD. I really wish someone had sat 18 year old me down and forced me to go to that local public school and not that expensive school out on the east coast. Mer.

    (Long-time reader, first-time post!)

    Congrats on paying down so much of that student loan debt so early!

    I am in a similar position as the author, with about $80,000 of Master’s degree debt when I graduated nearly 4 years ago. Since then, I have taken a modest paying position with the federal government, and I have been extremely lucky to receive Student Loan Repayment Benefits from my agency. That has taken about $12,000 of principal off in the past 2 years.

    Beyond that, I have struggled with the question of where to put my “disposable income” each month. I figure I have three main options: 401k-type plan, emergency/savings, and student loan debt. I have decided to basically halve my “extra money”, one half toward 401k and one-half toward savings/emergency. My student loan interest rates are around 3.5% (variable) at the moment. I figure that I can 1) get a better return than that in my 401k over the long-term and 2) can take money saved up and pay a large chunk of student loan debt should interest rates rise.

    Does anyone else have the loan debt, savings, retirement “triad” to contend with? How did you guys figure out where to put “extra money”. No complaints, though…I ENJOY being able to have such a decision to have to make!!

    Yeah, and according to today’s Chronicle of Higher Education online, over 1/3 of faculty saw a decrease in their pay last year and an additional 20% saw incomes stay the same. Part of it is the economy, of course, but since tuition is going to be the next economic “bubble,” academia is a VERY dangerous place to be working these days.

    I’m working on a Master’s right now – I work full time and go to school part time. I saved up 1/3 of the cost before I started, will earn 1/3 as I work through the program, and get reimbursed about 1/3 through my employer. I chose to continue to work full time so that when I graduate (debt free) I will have the freedom to take any opportunity I want without having to consider how to pay my loans. It’s not easy, but I would recommend it for those who can manage the demands on their time.

    Also, I really agree with Andrea’s comment that the debt doesn’t seem real to students until they graduate. To me, I think that earning the money each month and then paying it towards tuition, plus working 40 hour weeks and then spending time in class or studying, really gives me an appreciation of 1) the amount of money I’m spending on tuition, and thus, 2) a desire to get the best value out of my classes.

    @Andrea (#58) I’m also in graduate school in public health , with a somewhat similar debt load (although I am graduating next month with a master’s). I know having (currently) $77,000 in student loans is a horrible weight on my shoulders, but $18,000 was from undergrad and $40,000 alone was tuition. The other things I covered with my loans I consider worthy investments (I paid my rent and got braces, which came off last week after a year and a half!) I did save $6500 to pay off the variable rate portion of my undergrad loans, effectively consolidating a private loan from Sallie Mae.

    I like the idea of paying back some amount, $1000 in your case, every month. Following this strategy I used to pay back “atleast” $1000 every month to my car loan accound and I paid $25000 off completely in 9 months ….

    Thank you to everyone for all of your comments. I really enjoyed reading other people’s stories about student loan debt. I also realize that while my methods work for me, they may not work well for other people.

    @#6 Jane: I chose to pay off undergrad loans first for psychological reasons. It was great to visit my college for my 5 year reunion and not owe them anything! Plus I got a nice letter from them saying that because I paid off my loan, that funding became available to other students. I am not putting money in to high yield savings accounts right now because the interest rates are so low. I may switch to this method if the interest rates go back up.

    @#27 Yo: I once read somewhere that you shouldn’t take on more in student loans than you can expect to make in annual salary when you graduate. For my career field (public health) I think I am comfortably within this range.

    @#33 Erica: I decided to go to grad school because I knew that in my field of public health the best jobs go to people with MDs and PhDs. I want to be able to get higher level positions where I can be my own boss, and for that I need a graduate level degree.

    @#36 Leigh: Working part time has not slowed me down very much. It is stressful sometimes, but it actually helps me with time management, and I tend to be more productive when I am busy. Plus it adds valuable experience to my resume, which will hopefully help me get a job when I do finish. I still expect to complete my PhD in 4-5 years total, which is standard for my program.

    @#43 JLA: I am lucky to have a very supportive husband, both emotionally and financially. I realize that not everyone is in a position where someone can help support them as they focus on school and paying off loans.

    @#45 DeL: Funding is not guaranteed in my program, and many students struggle to piece together different types of funding. I consider myself lucky to have my tuition and a stipend guaranteed for 5 years.

    @#47 zud: My husband pays the entire rent on our apartment, most of the groceries, cell phones, dining out, and health insurance (although I could get basic health insurance through my funding). If I had to support myself completely without his help I don’t think I would be able to put very much money towards my loans. I am very grateful for his support, but it is a financial decision we made together. We both realize that me paying off loans aggressively now will give us more freedom in our financial decisions in the future.

    Wow, that’s quite the story.

    In the past five years, tuition and fees at public universities have risen by 40 percent, adjusted for inflation.

    Over the same time period, consumer prices in general rose less than 9 percent. Comparisons to tuition costs over the last 30 years are even more dramatic: adjusted for inflation, college tuition is roughly triple what it was in the ’70s.

    I’m not currently working in the area of my degree, my boyfriend is an attorney so I couldn’t do a nationwide job search. But I’m able to handle my debtload comfortably, actually – though I am on the extended repayment plan for sure!

    I did not have any loans as an undergrad (national merit scholar) but have about $100K in student loans from my MA and PhD…my MA is in creative writing and my PhD is in rhetoric and composition. I make $40K/year”.

    It astounds me that someone who has a PhD (and $100k in student debt!) is making only $40k a year! With zero expenses, zero taxes taken off, zero money to live on, it will take 2 1/2 years to pay off the $100k…how long when will it really take because there are costs associated to living? I’m hopeful for Honey’s sake that the PhD in “rhetoric and composition” (I’m not even sure what that is!) will earn her a much higher salary in the near future so she can begin to make a dent in her HUGE debtload. I didn’t go to university or college, make $67k (Cdn..almost the same in USD with today’s exchange rate!) doing something I love, no fear at all of layoff, excellent benefits and excellent pension plan…adding up the value of benfits/pension/etc with salary, it’s equilavent to earning almost $82k a year. I love what I do, the fact that it comes with a decent salary and great benefits is a bonus.

    #52 I wouldn’t recommend going into much debt for graduate school in the sciences either– there’s waaaay too many bio phds out there getting middling 5 figure salaries.

    Masters degrees are often worthwhile investments without full fellowships and professional degrees are also generally worthwhile, but you should really do the cost-benefit calculation on those degrees with realistic ideas of the benefits. Especially consider how much you WANT to be a doctor or lawyer or veterinarian or what have you. (I don’t think anybody becomes a vet for the money! And if you’re getting an advanced degree in social work, obviously money is not your main concern.)

    fwiw, my tuition was added to my stipend income, taxed, then paid back to the university. i was eligible to claim the lifetime learning credit, but as you might imagine it was insufficient to recover my losses.

    @ Jane (#52), I wouldn’t even recommend going into that much debt for a law degree because there are simply too many law school grads competing for too few jobs and even fewer high-paying ones. I went to a top 10 law school and some of my classmates graduated with over $100,000 of total student loan debt without a job that could support paying it back in any reasonable amount of time. Some of them will be paying for 25 years and hope to get the rest of the loan forgiven. I took a different route and went to undergrad at a place that gave me a full ride (not my first choice, or even second choice, school, but oh well). I still graduated with $63K of debt from law school but lucked out with a high-paying job. I hated the job so much that I did everything I could to pay off the student loan. I paid it off in 5 years. The people I worked with didn’t understand why I drove my old car and lived like a grad student (I even had a roommate for a while) when I was making decent money, but now, 15 years later, I’m so glad I did because those frugal habits have allowed me to plan for a career downshift before age 45 while my colleagues continue to work themselves into poor health to pay for their fancy lifestyles.

    Tuition benefits shouldn’t be taxable. I know that graduate stipends are taxable, but I’ve never heard of anyone paying tax on tuition. That’s outrageous, so much so that I don’t believe it.

    It probably depends on the type of school you go to. I am about to get a Ph.D. in history, and way back when I applied at many universities all over the country, all of them offered those they accepted full rides (free tuition, stipend, and insurance). I think in the humanities, it’s downright irresponsible of a school to not do so, considering your earning potential is questionable. This is especially the case now, since the academic job market is essentially in a state of collapse. I was told not to accept admission anywhere that didn’t give me full funding.

    I wouldn’t advise anyone to go in debt for a graduate degree, EXCEPT in law, medicine, business, or the sciences. You just don’t make enough when you get out to justify the expense. I guess if you truly don’t care about being in debt forever for a degree that doesn’t translate into higher earnings, more power to you! I just know that I’m bitter enough coming out of a 10 year program (had some personal hiccups along the way, but history takes an average of 8 yrs), that if I had extreme debt, I would be unbelievably upset. In a market in which landing a tenure track job is like winning the lottery, the only real consolation I have at the moment is that I have no debt.

    Destroy that debt.

    Sorry. I’m just passionate of destroying loan debt.

    My student loans were costing more in interest than I could have earned in almost any investment so I found that doing a monthly sweep to the curtailment of my debt was helpful.

    Keep up the good work.

    #49 If your tuition reimbursement is taxable then your school is doing it the wrong way. It hasn’t been taxable since the 1990s. Has that changed recently (if so I’m surprised I haven’t heard about it)? And student health insurance in MA is amazing– much better than what I’ve got now. ETA: Just checked my graduate school– they still say on their tax page that the tuition scholarship portion is not considered income.

    #45 Re: stipended graduate programs– this depends a LOT on your field and the institution. In my class of

    30 only one person did not have at least tuition reimbursement. I wouldn’t recommend anybody take on debt for a PhD program. If you’re not getting funded, it’ll be awfully difficult to get one of those elusive tenure track jobs once you finish. (The idea being that fields with high demand also have more funding for students, and students with funding have an advantage over those without.)

    sure, in some fields the programs offer tuition and stipend benefits. the tuition benefits are taxable (in my case, it came to about $45k/year!) health insurance is awful (i took on $11k in student debt to pay off the hospital one year.) and if you’re working as much as you *should* be toward your degree, your effective pay rate is about minimum wage.

    also, many stipend contracts come with the provision that you cannot seek additional employment. you are expected to devote full effort to completing your program so that you’re not wasting time doing other stuff, delaying your graduation, while on their funding. they hate that in a big way where i came from.

    “Now that I am debt free I have been meeting/dating guys just out of masters/phd programs at great schools (a good catch right?) but they have huge debt so I lose interest in planning a future together. How does this affect how you all date?”

    Wow. So, in essence, it doesn’t matter what kind of person they are emotionally, intellectually, if you’re both compatible, life goals, if they have a bright future, if they have student debt, drop’em like a hot potato?!

    Jeez, I hope when you do find someone that they don’t make any kind of debt (business, student loan for a better career) from trying to make a better life or out the door they go!

    In my grad days I dated some very intelligent, wonderful women who were working on their PhD’s in various fields, and even though for reasons here or there it didn’t pan out (lifestyle choices, personality incompatibility) the LAST thing I ever though about was their debt load.

    thank you for sharing your experience. can you be more specific as to how your husband is supporting you? from your 36K earnings what additional expenses would you have to cover if you were not dependent on him?

    @DeL – not in this economy. I work for a department that has 4 PHD programs and do all the admissions and financial aid…only the top 10% of our incoming class is offered tuition, stipend, and health insurance. The other 90% are on their own dime, and it’s becoming increasingly common.

    @34 Dotty dot dot- Thanks so much for the tips! I especially like the one about letting professors know that you’re available to do extra research work for $…will also help with the resume-building.

    @42 JaM – Most (I’m willing to bet 95%) PhD programs come with a full-tuition scholarship, stipend, and health insurance. I don’t plan on incurring any more debt…@44 Nicole is right – no one bails you out from your student loans.

    #42 “Is there a corelation between advanced degrees to personal financial education?”

    In the Health and Retirement Survey, there is a correlation between financial literacy and educational attainment.

    I’m very confused by the statement at the bottom, “If it is a PhD or Grad degree in some obscure field that is not going to pay for itself then Uncle Sam, President Obama or your fellow neighbours are not/should not be responsible for your debt!!”

    Nobody is paying for graduate student debt (except possibly the university with the graduate program or other sources of scholarship) except the debtor. You can’t even discharge student loan debt through bankruptcy court. Am I missing something?

    Congrats on getting such a big part of the student loan out of the way! Those types of loans are like financial cancer because if you (god forbid) go into bankruptcy they can’t be absolved. The loan interest itself could eat you alive.

    I admire that you set up a budget and really went to the mat to get that stuff done, and I hope that are extremely grateful that you have a husband that is behind you and can support you through this.

    Honestly though, I don’t think a person could erase a loan like that without outside help be it family, etc. I know TONS of people who don’t have a significant other and their loans are eating them alive even though they are dutifully setting a budget and trying to pay it off.

    Kudos to Andrea the author of the article. But I find the comments equally interesting.

    JD: It would be interesting to do an educational profile survey of your readers to know the # of PhD, Grad, Undergrad, HS diploma readers you have. Is there a corelation between advanced degrees to personal financial education?

    To the point of this article & comments – chosing to pursue what you enjoy has an associated cost to it. If it is a PhD or Grad degree in some obscure field that is not going to pay for itself then Uncle Sam, President Obama or your fellow neighbours are not/should not be responsible for your debt!!

    I know that I know what I know, and I don’t need a piece of paper to remind me

    i personally view my doctorate as a piece of paper that says i have some glimmer of an idea how much i DON’T know.

    and i get to list three extra letters after my name on my CV. woo.

    I could relate to this post as well. I did not have any loans as an undergrad (national merit scholar) but have about $100K in student loans from my MA and PhD. I went straight through (started my MA when I was 22 and my PhD when I was 24) so I really didn’t understand how tough it was going to be when I graduated. I have some credit cards, too, so I’m on the 30-year repayment plan and currently paying interest-only on the student loans (though I will switch to a different payment plan once the credit cards are paid off, which will be this year, hooray!).

    My boyfriend took out some loans for undergrad but paid them off before starting law school…he graduated from that with $100K in student loans and $50K in credit card debt (you’re not allowed to work while in law school, they will kick you out if they find out you have a job). So things are going to be a tight squeeze for awhile.

    In retrospect I would’ve done things differently as far as budgeting, but I did my grad school because I LOVED it, in answer to someone above who wondered why people go…my MA is in creative writing and my PhD is in rhetoric and composition. I make $40K/year. My boyfriend makes $92K/year, but his credit card payments are much higher.

    @33 – I went to grad school for a career-related degree after having been out of school for give or take a decade. I was able to turn that

    $25K out-of-pocket investment into a $15K/yr raise plus increased benefits including a defined benefit retirement and lifetime insurance in retirement. The extra money is helpful, but the real benefit comes after I retire.

    My spouse will have retirement benefits in one system, I’ll have them in another, so hopefully we’re spreading our risk.

    Anyway, that’s why I went to grad school.

    This is exactly why I didn’t even consider going to school after I got a good enough diploma. Completely bypassing the whole debt to your eyeballs and eating noodles.

    Went straight to work, saved up (and stayed completely out of bad debt), invested and hopefully retire around 30… Without paying out the nose for a shiny piece of paper that says I know stuff. I know that I know what I know, and I don’t need a piece of paper to remind me (if that makes any sense).

    Good luck to all of you who are going the school route. I have a buddy who got a tech BA, and was very poor after graduating for a few years with 60k in debt, until he landed a job overseas that started paying very generously (Afghanistan tech contractor). But then again, who wants to be in BFE just to make ends meet.

    Leigh– I think if you do work for extra money it’s important to do something that furthers your career. Research assisting or TAing (in moderation) for example, can help you get a job later, teach you skills, or could lead into coauthorships and less stress as a first year assistant prof.

    I also know some people that did relaxing jobs that they could earn money at when their brains were otherwise dead (student advising, for example). I felt that the volunteering I did outside of graduate school helped me stay centered (though I didn’t start until late in my graduate career), which helped dealing with getting the dissertation done. Definitely a good point about not working so much you can’t actually get the degree finished in time. But work isn’t all bad.

    how much more quickly would you finish graduate school if you spent your time working on your degree rather than working for extra money?

    you may be extending your time living on a crappy stipend by trying to tackle your loans that aggressively. US PhDs take long enough already, and stipends are lean. not that a postdoc salary is worlds better, but you have a lot more doors open to you.

    just something to consider. my PhD took 5 years of 150% time-effort (60+ hour work weeks, and during the last few months i exceeded 100 hours per week.) had i directed a lot of my focus elsewhere, i could see that having extended to 6-7 years.

    Maturity=Realizing the simplicity that comes with the easy loan, requires steadfastness, discipline and hard work in paying back.

    Here are a few tips I’ve picked up along the way to save money in grad school. I do many things, but these ones are grad-school specific:

    1. Don’t drink. There will be social events, there will be booze. Drink water. It’s free and you won’t wake up with a headache or a dent in your wallet.

    2. If public transportation is included in your tuition fees, make the most of it. Alternatively, walk or bike anywhere that you can.

    3. Ditch cable. And if you have a cell phone, ditch home phone. Sign up with Skype for long distance calls – free and fabulous.

    4. Participate in any research studies available on campus (these are usually in psychology departments)to earn some extra cash. At my school, tests run about 50 minutes and pay $10. Alternatively, if you can sign up to be a Simulated Patient (I’m sure your husband could tell you more about that). For those that don’t know, essentially you act out real symptoms for med students who then “diagnose” you. These can pay very handsomely. And for anyone that watches Seinfeld: “That’s it! They gave me ghonorrhea!”

    5. Apply to every single bursary/grant that even remotely applies to your work. These are time consuming, yes, but worth it. Example: I applied for a grant from a European company (I’m in Canada) who has only ever given money to European students. I was not expecting to win, but I figured, what the heck — and I won!

    6. For entertainment, create a special interest group. About eight of us (all couples) created a “wine club”, and each month we pick a grape variety, and every couple brings one bottle of wine of that grape variety. We take turns hosting (whoever hosts also takes care of snacks for that evening), and we end up getting to try four different kinds of wine for the price of one.

    7. Also for entertainment, check out local community offerings. My town has great festivals in the summer that cost nothing to attend.

    7.(b) There are also school-sponsored talks going on around campus all the time, so find out what you’re interested in and attend. They’re free, they’re informative, and they can also be great networking opportunities.

    8. Ask professors for money, especially your supervisor. Let them know that you’d be interested in doing any work for them; if something comes up (and they like you), they’ll let you know.

    9. Let people know that you’re willing to teach. Create a network for yourself among contract faculty (I say this because my friendship with one invariably led me to a job that he turned down and recommended me… from there, I’ve taught two other classes, plus designed one of my own). Alternatively, apply for every teaching position that you would be eligible for. You won’t get them all — you may get none — but teaching any course will give you much-needed experience and extra money.

    10. Save the best for last: finish on time (or sooner). The longer you take to finish your degree, the more out-of-pocket expenses you will have, most notably tuition.

    Hope that helps! If you’ve thought of any, please share

    I’m always curious about the reasons people attend grad school. I’m 28 and have watched many of my high school classmates go to school…some of them are still in school at age 28/29!

    Granted, there are some jobs that require grad school, but overall, I see a lot of people just “default” to grad school.

    I always wonder why, when there are so many opportunities to start your own business and/or work in a small business, people continue to get degrees instead–and fall farther into debt to do so.

    I realize this is a bit offtopic, but it’s long been of interest to me.

    I have $60K in student debt without even the benefit of a masters, just my own stupidity in undergrad (Go to the school offering me a free ride? Of course not. I’ll go to the ONE school not offering me a scholarship).

    You live, you learn, etc. I’m finally seeing a light at the end of the tunnel for one set of loans. The other set? *sigh*

    It’s important not to discount private schools entirely– some of them give much better financial aid than private schools, especially for middle class families. Our (underfunded) flagship state school would have ended up costing both my DH and me more than our respective (highly endowed) private schools did; even with 3x the stated tuition, the scholarships we got more than made up for the difference. Our private graduate schools also offered larger stipends than the public ones (Berkeley made a big mistake sending its financial aid offer in the same envelope as the estimated cost of rent in student housing).

    Thanks so much for sharing your story. I too am in grad school for a PhD. I’ve been on track for a few years to get my finances in better shape. I arrived at grad school having paid off all of my credit card debt. And last year I started working on paying off my unsubsidized Stafford loan. Did you know with Sallie Mae you can request that your payments be credited to a certain portion of your loans? While I only send them $90-100 each month, I make sure to request that it get credited to my unsubsidized loan so that I pay less in interest over time. I wouldn’t mind finishing my PhD with less debt than I started with!

    #27 has a point. I read an article recently (maybe the Washington Post? Argg…my memory is going!) that ran results of a study that was done on people that had college degrees. The income people with college degrees were not based on the type of college they went to! People that went to state schools were making as much or more as people that graduated from an ivy league school. The study went on to find the important factor was how much drive the person had.

    Congratulations on hitting your financial goals so quickly. You showed tremendous discipline! Your story should provide both a warning and a hopeful note to current and future grad students about managing the cost of education.

    Student debt is one of the biggest scams in this country between financial institutions and government. Do you realize that if we were citizens of Dubai we’d have our entire educations paid for? I went to a state school I could afford but was one of the first generations in college to be heavily marketed to with credit cards. (a practice I’m now told just got banned) I graduated with credit card debt but felt worse for my friends who went to big name schools and owed tons of money they could not just stop paying on.

    Sometimes I feel the whole looking down the nose at people who go to state schools is really jealousy over these loans. I have to ask, with all of the money you guys know it costs to go to a masters or phD program how do you justify it? It barely made economic sense before and now with such poor job prospects, globalization and so many people in my area (SF) having these degrees it doesn’t really set you apart.

    Now that I am debt free I have been meeting/dating guys just out of masters/phd programs at great schools (a good catch right?) but they have huge debt so I lose interest in planning a future together. How does this affect how you all date?

    Also in CA our entire education code is being messed with by occupational skills schools (acupuncture, cooking, etc) scamming poor and working class students into loans they may never be able to repay. Our government should be ashamed but they make good money off this! And the “nonprofit” schools do too. Greedy greedy greedy…

    This is such a timely post…I’m going to be starting a PhD program in the fall and my husband has two years to go in med school. I was freaking out about being able to afford everything, but seeing this post and the above comments made me realize that it IS possible.

    Would other readers be willing to share how they cut back on expenses to make ends meet during grad school? I’ve been reading some great tips above and want all the info I can get!

    I love the combination approach.

    I disagree with using the straight debt snowball approach, because although it might be better psychologically, it costs more in the end.

    Andrea, your story really resonated with me. I found myself in a similar situation a year and a half ago, but chose to do the opposite of what you have done. I’m also a PhD student and will finish in 2012. I took out 28K in student loans in my undergrad so that I could focus on school and not have to get a part-time job. Hard work paid off and when I started my master’s I got scholarships, and a RA and TAship to cover my tuition and living expenses. I wish I had the foresight to save some of it but I didn’t.

    When I started my PhD I got a significantly larger scholarship that lasts for 3 years, plus a half-TAship guaranteed every year. My fourth year will be funded by the university. Instead of paying off my student loans I decided to start saving aggressively, mostly for long-term/retirement savings. Since September 2008 I have saved about 39K (some of this is in an emergency fund).

    There were a few reasons why I decided to hold off on the student loans: they don’t accrue interest while I’m in school, when I do start paying them off the interest I do pay is tax deductible (I live in Canada so things are a bit different), starting my retirement account early means I don’t have to save as much later on, and lastly, it just feels better to have a bit of a nest egg. Sometimes I wonder though if I made the right decision and perhaps I should have paid off the loan instead. But I feel comfortable with my decision and I think that’s what counts.

    I can’t say AMEN enough to this story. Both my husband and I are graduate school educated and took on significantly more debt than is mentioned in this story. Between the ages of 18 and 25, we were just trying to get by, living on part time jobs, ramen noodles, and spaghetti, but still ended up with significant debt due to the school we atteneded (small private college). When we both got our degrees and we sat down to plan our life out with “normal” jobs, it scared the crap out of us! We are essentially paying for a non-existent house! LOL. But we have a repayment arrangement for our budget, and if things happen as planned, we will still get a planned vacation a year, work towards savings, and have everything gone in 5 years. It will require sacrifices in other areas, but those are areas we are willing to give up to get debt free and still enjoy our life with rewards for being prudent.

    Congrats to you in your PhD endeavors! I will be starting mine in August!

    You are definitely right about not understanding what all these loans will mean once you graduate– 20 years of paying hundreds of dollars a month! I was the first one in my family to go to college and of course believed that the jobs I would get with my college degree would pay waaaaay more than my parent’s jobs. Well it does, but once I factor in those loan payments, it’s really not that much more. It took a few years for me to be making enough to cover all my bills and then actually be able to afford other stuff (like a car–which I paid for in full but the insurance in NJ is pretty high). Being single and having no one to help support me means very little is going to my loans. I pay about $100 a month more than I have to, but it seems like it doesn’t add up to much. I am a couple months away of paying off the 3K of credit card debt I had, and so hopefully I’ll soon be able to pay more on the loans. However I’m also facing layoffs, and worry that my emergency fund is not big enough, because right now I only have enough saved for a couple of months. So I may have to put the money in there instead.

    Way to go on your debt payment so far! 70K is a lot, but you can do it!

    DH and I paid off 10K of his (unsubsidized at 8.5% interest!) loans back the first year of graduate school. My stipend was 18K, his was something like 20K though he got a signing bonus of 2K or so. We lived in Boston so rent ate half of that (we broke a lease on a 100 sq foot apartment when we got into a 300 sq foot subsidized university apartment late in the semester– the penalty was worth it.) I had about 3K saved up from working during undergrad, and we had about 2K from wedding gifts. DH had nothing.

    We participated in university experiments. DH did some extra research assistant work which paid the rent the two months before school and his stipend started. For Christmas we asked for money to pay off loans instead of gifts from our family (my father was very generous and gave us 1K that year! He liked our goal, I guess.).

    We had one subsidized subway pass since we were at different universities. I walked everywhere. We never ate out. We did not eat red meat (when I eventually tried a steak later I threw up… had to ease back on starting with processed roast beef). We mainly lived on groceries from the Haymarket, where you could get a bag of fruit or veggies for a dollar. We made that trek every 2 weeks and cooked in bulk. I’d take leftover pizzas home from business school events (MBA students didn’t want them!). We packed our lunches, even though that usually meant me eating a bagged lunch at ABP while my friends ate ABP sandwiches. I got very good at timing the Star/Shaws sales– I knew when chicken leg-thigh combinations would be 69 cents a lb and bought a bunch. Same with flour, sugar etc. at 10 cents a bag (yay for holiday sales), or macaraoni and cheese at 25 cents. We also ate a lot of soups (split pea, black bean) and potatoes. I would stew chicken meat and freeze it to add to meals in small amounts. (Something I hope never to have to clean up from again.)

    For furniture we had a futon (new, $119) and got the rest (desk, kitchen supplies) for $20 from a couple that was moving out of the building. At some point my father drove up a bunch of my stuff from college, and we used some of DH’s signing bonus to buy a real bed ($2K– embarrassingly expensive– we didn’t know what we were doing, but it is still a nice bed!) after we got into the new apartment.

    It was a crazy sacrificial year. But– year two we were on track and able to start earning interest on our money rather than losing it. By the time 5-6 years of graduate school were up, we had 50K saved up (the stock market had gone crazy and we had a job that gave us free rent for 2 years) and ready to be converted into a down payment and closing costs for a house. (And we maxed out our ROTH IRAs, though only because the contribution limits were much lower then.)

    I am very glad I had not read Suze Orman’s Young Broke and Fabulous at that point. It never even crossed our minds to keep the debt or put on credit card debt to get to a normal standard of living. (My heuristic at the time was that debt with interest under 6% was ok, under 5% should be kept as long as possible, and debt over 6% interest needed to be paid whatever the cost.) We have friends now, 10 years later who HAD read Suze and are still saving up for that down-payment while paying down their 18% credit cards racked up in graduate school. Maybe the harsh vegetarianism wasn’t worth it, but 10 years later, I’m glad we did what we did. Would not do it again, but it is nice to pay the price while you’re young so you don’t have to worry about money and can take chances later.

    p.s. Of course, DH’s school started offering 30K+ stipends AFTER we graduated. *shakes tiny fist*

    Great job Andrea! It took a lot of hard work and discipline to accomplish what you did. I’d like to say how proud of myself I was when I went back for my Master’s degree while going through a divorce, I was able to get an Assitantship which paid my tuition plus a stipend, allowing me to graduate owing only $2,000! This was in addition to working a part-time job, and in my last year, completing an internship. What people need to understand is that the “dream job” is not always out there when you graduate, and your ability to pay back what you owe could be hampered by the inability to find work in your “high paying field” for months or even years. By the way, my husband and I are just finishing up paying our share of $40,000 a year tuition for his daughter from a previous marriage. After sending our share of the payments to the ex for the past four years, we’ve come to find out that she took out a loan for $24,000 dollars which we will also be responsible for. Her mother doesn’t think she should start off her excellent career as a nurse with student loans. Is there anything wrong with a child taking some responsibility for the choices they make?

    Nice job, but it convinced me even more that parents should help a child through their undergrad. You might be able to make huge money after a Phd (and you must be shooting for that since you think $36,000 is a pittance), but most undergrads do not make near that amount. I have no interest in having my grandchild crushed by debt when he graduates from college in 20 years.

    I only have another month or so before I have to make a decision on where to attend undergrad. Part of me just wants to say screw it and go to the expensive out of state university. But then my logical side tells me that it’s a mistake and to go to the cheaper in state school.

    You are 100% correct that it’s almost impossible to understand what paying back hundreds of dollars every month will feel like.

    Right now, it’s so easy for me to say that I don’t care about paying back 60-80k(price of the out of state school). But I also still live at home and have no bills to worry about.