Author Topic: 401k versus paying my way through Grad School  (Read 1195 times)

rlnine

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401k versus paying my way through Grad School
« on: February 06, 2019, 05:22:25 AM »
Hello all!

Some time ago, in the financial wasteland of my twenties, I made the decision to become an advanced practice nurse, something I had been interested in since I was quite young, though nursing itself didn't have a lot of appeal, as I didn't think I really had the (practical, methodical) temperament for floor nursing.

I graduated nursing school in December 2017, a newly divorced single mom with over $90,000 in debt. The divorce is relevant to the debt, though I'm fine taking responsibility for both. Stupid decisions all around. I got a job as a nurse in February 2018 and have been making good money and paying things down, though until recently I've also been spending way too much. This year will be much better financially, with the spending side under control.

Unfortunately, while I'm not as terrible of a nurse as I had feared, the constant rule-following (of more rules that can actually be followed, but you're on the hook if you don't follow them), charting, high-conflict coworker environment, etc. *is* proving very difficult, as is the night shift. I'm a bit of a wreck emotionally and have basically stopped sleeping. I imagine this will get a little bit better with the return of light to the PNW in the coming months, but I don't have too much more of this in me.

My original original plan had been to go straight from undergraduate nursing school to graduate nursing school. I'm so glad I did not! I'm learning things working that I couldn't in school, I'll be more hireable (many jobs state they'll only take experienced APRNs, but can count 2 years of floor nursing in this specialty towards experience), and I'm paying off some of my ridiculous student debt. I have also reconsidered attending my local brick and mortar graduate school, where it would be almost impossible to work and attend simultaneously and tuition would be at least $100,000.

Then came my new plan - work the required two years at my current job, then get a job without a commute and work an additional 3 years. Of my student loan debt, I started with $30,000+ in federal loans with 3-4% interest rates (I'm paying these as slowly as possible, and if there're any left at the end of ten years of work in nursing, including advanced practice nursing depending on where I do it, they'll be forgiven - but they'll likely be paid off sooner), $50,000 in private loans with 5.5-6.5% interest rates (over half is in a variable interest rate loan - I'm paying these as fast as possible), and a little less than $10,000 in a federal loan that is forgiven in percentages each year I work fulltime as a nurse - it's paid in full at the end of 5 years.

I thought I'd work full time for the five years, putting money in my 401k at least up until the employer match (and partially funding my HSA as well), paying down my private loans, letting the $10,000 of federal loans be forgiven and in the 4th and 5th year I would start an online graduate school (well-respected - several of the providers  work with attended it) part time, continuing to work full time and paying as I go. The total cost of the program is $40,000 including everything except living expenses). The 6th year I would hopefully be out of my private debt and $10,000 federal debt and have enough extra money saved to work very little during my clinical portion of the program. Then back to work as a nurse until I got a job as a nurse practitioner. (Luckily nursing allows you to go "U-status" or "resource" where you pick up extra shifts of your choosing only, so I could drop to that status during my clinical time).

The problem is - I don't think I can go 5 years. As a nurse practitioner, and with a master's degree at all, I can teach, I can run my own business, I can work for other people, and I won't be on the hook for charting every single thing I do over 12.5 hour night shifts. I also won't be treating patients in ways I find morally questionable, as I'll be making the decisions. If I took the most conventional route of working in a clinic/hospital practice, I would work 3 clinic days and one 24 hour call shift each week, which I have good reason to believe my body could handle. Almost any other route I took would be even more sleep. Also I would make more money. Not enough to necessarily justify it on a purely monetary basis, but a higher hourly rate than now, for sure.

If I do continue in floor nursing for 5 years, I definitely will need to take a day shift position (in fact, I'm going to apply for the next one coming up
 - this will likely be in November), which is a 20% pay cut plus because of custody agreements will necessitate me hiring a babysitter a few mornings a month, for a total hit of about $700/month. Though luckily, starting in June my little one is out of private kindergarten for $520/month and into public school, so that makes up for some of it. Also, maybe it will lower my tax burden and help somehow in that way? I am new to taxes, having been a professional poor person up to this point in my life.

If you're with me this far, here are my questions:

1.) Is it reasonable to try to go back to graduate school sooner than years 4-5 (which is to say, before I have my private loans paid off and giving up portions of the loan forgiveness on the $10,000)?

2.) Last year I made about $65000, and spent about $40,000. Depending on when or if I go to dayshift and any raises, I expect to make about $75,000 this year, and could probably cut $5000 off my spending (yes, I know, this is still bloated - that's another post). So taking this extra $40,000 - what do I do with it? I am currently funding 5% of my income into my 401k to capture the 4.5% employer match, and $100 a month into my HSA just because. I have $50/month going into a 529 (I live in a state with an income tax, so there is a tax benefit to this, but I am not fully funding it), and ALL the extra is going to my variable interest rate private student loans. At this rate, I would expect to have them paid off in late 2021, possibly sooner with bonuses, etc. But in this case I'm not taking advantage of the potential tax or compounding benefit of the retirement accounts, nor am I saving for graduate school. - Should I be putting more into my 401k, HSA and the 529? (Possibly relevant - I have no previous retirement savings, so I'm starting from scratch at age 31).

2.)a.) - Fully fund 401k and HSA, pay minimums on loans. Cut back on all of this when I go to graduate school in order to pay as I go? All loans could be deferred for full time school status. Not sure about part time. Some would still accrue interest.
b.) Knock out the loans ASAP, keep 401k and HSA low, go back to school paying as I go. Don't worry about taxes; they weren't that big this year with all the child breaks.
c.) Some combination of funding my 401k and HSA for tax breaks, saving in the 529 or otherwise for graduate school so I can use savings as well as paying as I go and continue partially funding my 401k and HSA during my grad school years. Minimums on loans.

Ideas? Suggestions? Things I need to clarify because I'm not making sense?

Obviously I am also trying to lower costs wherever I can. I am stuck in a work contract and custody agreement, as well as limited slightly in my flexibility by needing to provide a stable home for my kiddo. So I can't just rent a tiny room in someone's house for $400/month. But as I said, I am also lowering costs a lot, and as soon as I'm out of this work contract I will get a job in the same town I live in and no longer use my car except in emergencies, which will be wonderful and also lower costs some.

chasesfish

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Re: 401k versus paying my way through Grad School
« Reply #1 on: February 06, 2019, 06:34:32 AM »
There's a lot here!  First off congratulations to where you've gotten to.  I know there's a lot stressful about the nursing profession, but you do have a job where you can work by the hour/day and that is helpful in getting to FI.   You have to decide how long you can "death march" in the current job before making the changes that are a better fit for your lifestyle and personality.  I've "death marched" for years in a job I don't love, I don't recommend it.

I can't answer the "if/when graduate school" question and how to pay for it.  Those are personal decisions.   

I'm going to answer the rest of the question, which is really "what should my investment order" be?   The answers below are my opinion only:

- Fund the 401k up to the match.
- Have $10k or more saved outside of your retirement accounts.  Its fine to invest this in a regular vanguard account and/or keep it in a savings account.  You have to decide how large your "go to hell" fund is.

After that, I think your options are all toss-ups and have equal advantages and disadvantages: 
- Fund a Roth IRA has advantages
- Fund an HSA has advantages
- Paying off the Private Student Loans

I would not touch the federal loans until you have 100k saved outside of retirement accounts and are maximizing all three of your tax deferred accounts.

Best of luck