Author Topic: Need a strategy for graduate school (HELP!)  (Read 6764 times)

TheGadfly

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Need a strategy for graduate school (HELP!)
« on: March 13, 2014, 09:53:00 AM »

My fiancé is attending graduate school in the fall for a Master's in Social Work.  She is still waiting to hear back about funding (potential full- or half-ride!) but it's entirely possible that she won't receive any scholarships at all.  In the event that we get stuck with the full bill, I would like to have a concrete plan for payment.  Given the high cost of tuition, she might decide to defer enrollment until the school can give her a better offer.  Still, I am curious to see how we could pay the full tuition and accrue a minimum of interest.  This is what our situation will probably look like on September 1, 2014 (given our current lifestyle):

Monthly Income:  $3185 - This is just my income since she will be in school full-time.

Monthly Expenses:

Rent........................$1200 - Her's and mine combined (we will be living apart while she's in school)
SL minimums.............$450 - Both of us normally pay 3 or 4 times the minimum but we will have to cut back on that once she stops working.
Food.........................$400
Phones.......................$80
Utilities.......................$60
Internet.....................$60
Misc.........................$250

Total: $2500

Monthly net: $685

Assets:

Money Market Savings............. $10,000
Taxable investments................ $12,000
401k........................................... $9,750
HSA.............................................$1,100

Total: $32,850

Liabilities:

Private Loan (6.55%)...............$22,000
Fed Direct 1 (6.55%)...................$3400
Fed Direct 2 (5.75%)...................$4150
Fed Direct 3 (5.35%)...................$4125

Total: $33,675


Grad School Info/Cost:

The program is 4 semesters long with a summer in between each academic year.  She will presumably be working but her wages probably won't amount to much so leave that out of the equation.  Since I can easily pay for her living expenses while she's in school, I'm only concerned with paying for tuition (disregard room & board, books, etc.).

Tuition and fees........................$20,038

Total: $20,038 x 4 = $80,152

Financial Aid (per semester):

Federal Work Study..................$1,500
Unsub. Fed Loan (5.41%).......$10,250 - interest accrues 60 days after disbursement
Perkins Loan (5%)......................$250 - interest accrues 6-months after graduation

She is also eligible for a Grad PLUS loan which totals the cost of tuition minus the Aid listed above (i.e. I have to use everything listed above before I can take out a Grad PLUS).  In this case, if we didn't use our savings, we would take out a.....

Grad PLUS loan (6.41%)...............$8,038 - interest accrues 6-months after graduation

My question boils down to this: Given our total cash on-hand (~$22,000) by September, what is the smartest way to utilize the financial aid shown above?  Should we pay for the first semester in full and take out loans for the rest?  Should we use all of the Financial Aid on offer and pay off the Unsub. Fed Loan immediately?  Should we pay off our current debts and use new loans to pay for all 4 semesters?

I realize taking out loans is very anti-mustachian (especially since scholarships are possible) but there must be an optimal way to go about this situation, right?

Thanks in advance!

p.s. don't forget that we will qualify for the continuing education tax credit each year (2014, 2015, 2016): 20% credit up to $10,000 in qualified education expenses (includes loans).

MrCash

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Re: Need a strategy for graduate school (HELP!)
« Reply #1 on: March 13, 2014, 11:26:49 AM »
It may be difficult to avoid taking out loans, but you should do everything you can including scholarships like you mentioned.  You should also see if she qualifies for Pell Grants, which could help a lot.

The subsidized loans (Perkins and Grad PLUS) could be useful to buy you time while she's in school, but make sure you realize that they will hit you in force 6 months after graduation. 

The unsubsidized loan can help you fill in the gaps (but hopefully you can fill these in with other sources of income instead).  However, I would use your saved $22,000 to get rid of your highest interest loans first (the Private loan and the Fed Direct 1), since these are the ones costing you the most and limiting your cash flow.

There are also several areas in which you could cut back on expenses in order to free up cash flow and cut down on debt. 

Quark

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Re: Need a strategy for graduate school (HELP!)
« Reply #2 on: March 13, 2014, 12:49:49 PM »
When I was in grad school for a phD, I was paid a stipend in return for which I was required to attend classes 3/4 time (9 credit hours, 3 classes) and teach 20 hours per week, as well as spend 10-20 more hours per week in my own research lab. I'm sure your fiancée could find time between only 4 classes to work a part time job. That, in addition to her summer job, would pay for at least one semester each year.

snuggler

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Re: Need a strategy for graduate school (HELP!)
« Reply #3 on: March 13, 2014, 02:05:34 PM »
A couple of thoughts:

Has your fiance considered alternative schools? This article suggests that $80k is the high end of the costs of a MSW: http://www.nytimes.com/2011/07/24/education/edlife/edl-24roi-t.html?pagewanted=all&_r=0. Particularly given that you already expect to live apart, a cheaper but still great school could be a great option.

How long does your fiance expect to work until retirement? I'm only asking because, while a MSW may make a huge difference in a normal person's working career, it may not make as much of a difference for a mustachian who expects to work a much shorter number of years than the average person. This article suggests that getting an MSW adds $15,000/year: http://socialworklicensemap.com/social-worker-salary/. If you consider the total cost of the loans (including total interest that will be paid) she will pay and the actual amount you'll get extra from that $15k after taxes, it will probably take at least 7-10 years for her to break even.

Do you have any equity in any assets? I used the equity in my car to pay off higher interest student loans more quickly. 1.99% felt so much better than 8.5%. Might be something to consider.

I also took advantage of every opportunity to reduce the amount of the minimum payment on each student loan I had by extending my repayment plan, signing up for the graduated repayment plan, etc. That helped me pay the bare minimum on the lower interest student loans, which enabled me to direct more money (that would normally go to the lower interest minimum payments on the 10 year plan) at the higher interest loans.

If I were you, I would probably use the $22k to repay the 6.55% interest private loan. That just makes sense financially. Also, private loans have less protection for borrowers than federal loans, so when the interest rate is the same, it's generally better to keep/take out the federal loan.

You may also want to look into private loans for her if you plan to pay them back very quickly, and into refinancing your student loans. I know Sofi offers some great refinancing rates, but they are variable rate. Also consider the protections (deferment, etc.) that you would give up by taking these private loans.

In fact, if you are EXTREMELY careful about money and expect to be able to pay a lot back quickly, you may want to even consider a 0% bank transfer credit card to finance whatever you know you can pay back within the 0% period.

One website that helped me consider different scenarios is http://www.whatsthecost.com/default.aspx. It lets you input loans (or potential loans) and how much you can pay each month, and will tell you the total interest, time until payoff, etc.

Keep in mind that there may be origination fees with student loans that affect the math as well. I think 1%-3% of the total loan amount was immediately added to the balance of the loan when I took them out for grad school.

Finally, will you be married before she begins her degree? If not, make sure you would be ok if you pay her living expenses but never see the benefits of the extra income from the degree in the event that you break up. I know that is tough to think about and may be unlikely, but you should at least be aware of and ok with that risk.

Gin1984

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Re: Need a strategy for graduate school (HELP!)
« Reply #4 on: March 13, 2014, 02:32:51 PM »
Graduate students don't get work study.

QuacktasticStache

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Re: Need a strategy for graduate school (HELP!)
« Reply #5 on: March 14, 2014, 06:57:22 AM »
My biggest piece of advice would be to plan on paying the interest on the new unsubsidized loans while she's in school.

I'm also in school with unsubsidized federal loans, and all the unpaid interest will capitalize, or turn into principal, upon graduation - so you'll be paying interest on top of interest. (Also, I'm not sure about your note below that the interest doesn't start accruing until 60 days from disbursement. You have 180 days from disbursement to send back a reimbursement, which goes right to principal and the loan origination fee, but I just checked the interest on my September disbursement, and four days from the disbursement I already owed $6.07 in interest. I would double check on when her interest would accrue.)

On a personal note, I received a merit scholarship my first year. In my program, I could not find anybody that received a merit scholarship in the second. I would anticipate receiving less scholarship money (or no scholarship) in the second year, as colleges don't really have an incentive to give you a break when they know you're half way through.

I also want to repeat Gin1984 and say that she won't be elligible for federal work study as a grad student. Perhaps she can get a research fellowship or TA?


ragesinggoddess

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Re: Need a strategy for graduate school (HELP!)
« Reply #6 on: March 14, 2014, 08:49:38 AM »
Yeah, the state school near where I live has an MSW which costs $20,000 TOTAL. Why on earth would you go into that much debt for a degree that has an average salary of around 30-50K?

TheGadfly

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Re: Need a strategy for graduate school (HELP!)
« Reply #7 on: March 14, 2014, 09:51:50 AM »
Hi,

Thank you to everyone for your input! I'll just add a couple things in response:

Graduate students don't get work study.

Actually, for whatever reason, she does.  Her 2014-2015 Award notice includes Work Study.  We also have a friend who is getting her MSW elsewhere and she claims that all MSW students get work study.  Go figure?

Snuggler - That's all very sound advice, Thanks! We are both aware of the financial implications of paying full-tuition (especially given her expected salary afterwards).  If we are forced to pay in-full, she will most likely choose not to attend this year.  Still, I want to be fully informed of our options and their potential outcomes. 
No, we don't have any equity like that but that's an interesting idea.
And, yes, we are getting married in June, just a couple months before she starts classes.


Gin1984

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Re: Need a strategy for graduate school (HELP!)
« Reply #8 on: March 14, 2014, 05:16:58 PM »
Hi,

Thank you to everyone for your input! I'll just add a couple things in response:

Graduate students don't get work study.

Actually, for whatever reason, she does.  Her 2014-2015 Award notice includes Work Study.  We also have a friend who is getting her MSW elsewhere and she claims that all MSW students get work study.  Go figure?

Snuggler - That's all very sound advice, Thanks! We are both aware of the financial implications of paying full-tuition (especially given her expected salary afterwards).  If we are forced to pay in-full, she will most likely choose not to attend this year.  Still, I want to be fully informed of our options and their potential outcomes. 
No, we don't have any equity like that but that's an interesting idea.
And, yes, we are getting married in June, just a couple months before she starts classes.
That is extremely odd.  I wonder if this is not federal work study but funded by the department. 

Thegoblinchief

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Re: Need a strategy for graduate school (HELP!)
« Reply #9 on: March 14, 2014, 06:15:50 PM »
Don't pay full cost, especially not at that price. $80K is really expensive for a Masters Degree.

I'd want a degree to pay for itself in 5 years tops, but your break even would be much longer based on comments in the thread.

Is she SURE, absolutely positively SURE she wants to do this for 10 years or more? My DW got a Masters that netted her a raise but within 6 months she made a lateral move and has barely used the education at all.

TheGadfly

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Re: Need a strategy for graduate school (HELP!)
« Reply #10 on: March 31, 2014, 12:46:39 PM »
This question is now MOOT because my fiancé got a fellowship that pays for everything PLUS a $1600/month stipend!!!!!!!

I just had a 'stash-gasm!

Daleth

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Re: Need a strategy for graduate school (HELP!)
« Reply #11 on: March 31, 2014, 02:43:09 PM »
This question is now MOOT because my fiancé got a fellowship that pays for everything PLUS a $1600/month stipend!!!!!!!

I just had a 'stash-gasm!

Hot damn! Congrats!

Gin1984

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Re: Need a strategy for graduate school (HELP!)
« Reply #12 on: March 31, 2014, 02:49:03 PM »
This question is now MOOT because my fiancé got a fellowship that pays for everything PLUS a $1600/month stipend!!!!!!!

I just had a 'stash-gasm!
Congrats!!!

Fletch

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Re: Need a strategy for graduate school (HELP!)
« Reply #13 on: March 31, 2014, 03:06:03 PM »
AH congratulations!
I'm in a similar situation looking at options for graduate school in 2015- not quite enough to pay cash and really hoping for scholarships and stipends. Nice to know that such things still exist!

Cassie

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Re: Need a strategy for graduate school (HELP!)
« Reply #14 on: March 31, 2014, 05:31:42 PM »
If you have really good grades for your BA you should be able to get free tuition plus a stipend or free tuition and work as a graduate assistant. I was able to do this for all 3 of my graduate degrees so please check into it.

libertarian4321

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Re: Need a strategy for graduate school (HELP!)
« Reply #15 on: April 01, 2014, 04:06:07 PM »
This question is now MOOT because my fiancé got a fellowship that pays for everything PLUS a $1600/month stipend!!!!!!!

I just had a 'stash-gasm!

Getting school for free is nice.  Free plus a stipend rocks.

rescuedog

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Re: Need a strategy for graduate school (HELP!)
« Reply #16 on: April 01, 2014, 04:16:21 PM »
Well that worked out nicely!  Congratulations to you guys!

Zamboni

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Re: Need a strategy for graduate school (HELP!)
« Reply #17 on: April 01, 2014, 05:29:02 PM »
Wonderful!  Congrats!

Gin1984

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Re: Need a strategy for graduate school (HELP!)
« Reply #18 on: April 01, 2014, 06:12:47 PM »
If you have really good grades for your BA you should be able to get free tuition plus a stipend or free tuition and work as a graduate assistant. I was able to do this for all 3 of my graduate degrees so please check into it.
That is not true in a fields.  Many schools/programs only wave tuition or give a stipend to PhDs, not Masters. 

Fletch

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Re: Need a strategy for graduate school (HELP!)
« Reply #19 on: April 02, 2014, 04:32:17 PM »
If you have really good grades for your BA you should be able to get free tuition plus a stipend or free tuition and work as a graduate assistant. I was able to do this for all 3 of my graduate degrees so please check into it.
That is not true in a fields.  Many schools/programs only wave tuition or give a stipend to PhDs, not Masters.

This what I am finding for stipends- PhD students get first dibs and master's students get leftovers where possible, and in some cases are not "guaranteed" for 2 years, but must be found every semester. Tuition varies, but I am confident I will find a way to get that covered (BS instead of BA makes that part fairly easy).

SwordGuy

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Re: Need a strategy for graduate school (HELP!)
« Reply #20 on: April 02, 2014, 04:43:53 PM »
Is that an expensive private school tuition rate?  Because it's a damn sight more expensive than the state grad school tuition I've seen.

Why not get a masters at a state school for 1/2 the cost?  After all, it's a masters in SOCIAL WORK, which isn't a degree program that needs (or rewards) the best of the best.

And, is there a tuition reimbursement from your partner's employer?  Could they go locally part time?  Or transfer to an office where they could go part time?

What's the economic benefit of getting this masters degree?  I presume a higher wage?  How long will it take to break even on the cost?   You have to not only include the $80,000 !!!!!! tuition, but the interest on the $80,000 !!!!! tuition and the interest on the existing student loans that you aren't paying down early.
Don't forget to include the opportunity cost of the lost wages for 2 years and the double rent cost.

Does it even make economic sense to do this?

Cassie

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Re: Need a strategy for graduate school (HELP!)
« Reply #21 on: April 02, 2014, 04:57:27 PM »
I obtained free tuition and a stipend to help with living expenses for one master's degree and free tuition and had to be a graduate assistant for the 2nd master's degree. Also obtained same for Ph.D.   However, that was in 1988 & 1992 so maybe things have changed.  Although, my son got the same deal in 2003 for his master's degree.

Gin1984

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Re: Need a strategy for graduate school (HELP!)
« Reply #22 on: April 02, 2014, 05:27:00 PM »
I obtained free tuition and a stipend to help with living expenses for one master's degree and free tuition and had to be a graduate assistant for the 2nd master's degree. Also obtained same for Ph.D.   However, that was in 1988 & 1992 so maybe things have changed.  Although, my son got the same deal in 2003 for his master's degree.
I am not saying you did not, all I am saying is that does not work in every department, in every school.

Cassie

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Re: Need a strategy for graduate school (HELP!)
« Reply #23 on: April 02, 2014, 05:56:53 PM »
I also wonder if some people don't know to look for deals.  It never hurts to ask what is available. Also my GPA was really high for my BA which may be one reason help was easy to get. I did not get anything for my BA. 

Rebecca Stapler

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Re: Need a strategy for graduate school (HELP!)
« Reply #24 on: April 02, 2014, 06:04:23 PM »
This question is now MOOT because my fiancé got a fellowship that pays for everything PLUS a $1600/month stipend!!!!!!!

I just had a 'stash-gasm!

NICE! That is going to open up a lot of job possibilities for her, since she won't graduate with debt.

Gin1984

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Re: Need a strategy for graduate school (HELP!)
« Reply #25 on: April 02, 2014, 06:50:12 PM »
I also wonder if some people don't know to look for deals.  It never hurts to ask what is available. Also my GPA was really high for my BA which may be one reason help was easy to get. I did not get anything for my BA.
My husband works in the chair's lab.  I've asked, unless you are a minority race and apply for a grant (which grades were not the only criteria), in biomedical sciences, at my school, master's do not get tuition waved or a stipend.  Maybe it was your program, maybe the time, I don't know, but it is not common IME.