Author Topic: Reader Case Study: Go back to school to pay off student loans?  (Read 3527 times)

TeresaB

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Hi, I'm excited to have you guys punch me in the face! I have been reading MMM for a while but only just found the forum. Here's our situation: My husband and I just graduated from college, got married, and moved to Chicago. When I say just, I mean we got married six weeks ago and got here five weeks ago. For this reason there is a guess-factor in each of these numbers because we haven't had a full normal month. (The first paycheck was for three weeks of work, and our first month's expenses included non-recurring expenses to set up the apartment like a shower curtain rod.) We are not interested in ER per se—he likes his job. But I want to work for a little bit and then be a stay at home mother. Our biggest priority is to kill the debt. We are both 22.

Income:
I don't have a job. I'm looking for one. (See below.)
My husband makes 5000/month pre-tax. I think this is going to work out to about 4000/month post-tax/deductions/etc (conservative guess). Husband will be eligible for a simple IRA with 3% match after he has been with his company for 3 months. His health insurance and life insurance are deducted automatically. I have health insurance from my parents. (Yay Obamacare.) I don't have life insurance. I don't think I need any right now. I don't contribute much value!

Current expenses:
Rent: 1400/month (Kind of high—but a great deal for the area and we can walk or bike nearly everywhere. It also includes water.)
Renter's insurance: 12.75/month (I think this is a stupid expense, but the lease says we need it.)
Electricity: 25/month (This might go up if it gets hot enough to need a/c. I'm sure it will go up in the winter when we need heat.)
Internet: 30/month
Phones: 30/month (two phones)
Food: 250/month (I'm trying to keep this down but it's hard to escape the convenience creep and go to Subway sometimes. My goal is to get this under 200, maybe under 150 for everything.)
Transportation: ….100/month? This is a huge unknown category. My husband is shifting his commute from bus-based to bike-based. Since he's just starting he is making this a gradual shift. The plan is to get this down to almost nothing.
Student loans: 1000/month. This is more than the minimum. I'm not sure what the minimum will be because they haven't entered repayment yet. I think it will be between 800-1000 a month.
Vacation: 200/month. I know this is a total facepunch. It will go down. This was 4th of July last month and our best friends' wedding this month. We don't anticipate more vacations for a while.
Miscellaneous: 500/month. This includes things like laundry, someone needs a new pair of shoes, we run out of a medication, we need stamps, someone buys a book. I realize that not having this broken down means it's hard to critique but I just don't have enough data yet to break this down in a way that makes any sense.
Total: ~3550/month.
Grand total: 450/ leftover per month. This will go towards debt.

Assets:
Emergency fund: $10,000. I realize that the general wisdom on here is that we should throw this at the debt, but I don't want to. First of all, $7,704 of this is a savings bond earning 4% interest, which is guaranteed for the next ten years or so. Second of all, our credit limit on the credit card is only $1,500, so it's not a very good emergency fund. No HELOC or anything like that. We have nothing valuable. I do not want to rely on our parents as an emergency fund. But tell me if I'm missing something. Maybe we should put the non-savings-bond cash to debt.
Cash assets: About $3,500 spread across checking and savings accounts (and some literal cash). The goal is to reduce this, but we have only just started our month. At the end of the month, most of what's left will go towards the loans, keeping about $1k just in case.
Total ~13,500.

Liabilities:
Student loans. Major facepunch any way you slice it. But what's done is done. These totals include interest, which hasn't capitalized yet.
2,226.36 at 6.8%
6,068.15 at 6.8%
7,672.68 at 6.8%
57,148.80 at 5%
639.00 at 4.5%
5,528.00 at 3.86%
5,525.10 at 3.4%
Total: 84,808.90 (ugh it makes me sick just to type it)

Specific questions:
Obviously the first priority is to get the interest before the loans enter repayment. We can do this easily. Next priority is to pay the debt down as soon as possible.
1) Small question: With our level of debt, should we be maxing out the IRA or just meeting the match and putting the rest to loans?
2) Big question: I have a potential job opportunity starting next summer to get a master's degree in special ed with training that funnels into a 95%+ guaranteed job. (The program is AUSL Chicago if anyone wants to look it up.) Applications aren't open yet, but I think I'm a strong candidate because I have a lot of experience with kids with special needs and last year they were still recruiting for special ed people right up to the late deadline.
Pros:
-I think I would love the job and be good at it.
-It's a more or less guaranteed salary for five years, or presumably as long as I want it ($20k the first year, something like $50k the years after that). That's a non-trivial amount of money that we could put towards the debt.
-If we move, which is not unlikely some years down the road, it will probably be pretty easy to move the teaching certification. It's also a nice credential for other related jobs that would be easier to do on a part-time basis.
Cons:
-It is a five-year commitment to a full-time job (albeit one I could break if I repay the first year stipend of $10k). We want to have a child (I know some of you will think this is a facepunch until we're out of debt—we've thought about it and we think we can do this with very little extra expense) and I would like to be a stay at home mother. I'm not sure how I feel about such a long commitment.
-The master's degree is not entirely funded. The program costs something like $15-25k (totals for next year haven't been announced), and while there are scholarships, I'd very likely have to take out some loans. These can be deferred while I'm teaching and up to $17.5k can be forgiven if I stay at my school for five years (ie one extra year after the commitment). My instinct is that this is a good investment but there's another part of me that can't handle the thought of more debt.
-Some of my family have expressed concern about me (white woman, 5'4”, 110lbs) teaching in an urban school. I'm not super concerned about this. My biggest concern is an unsafe commute. But I doubt this program would place me into a school that was literally dangerous.
So should I take this job if I'm offered it?

Wow, this is incredibly long. Congratulations to anyone who made it through! I'd be grateful for any input anyone has, even on questions I didn't ask.

TrulyStashin

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #1 on: July 22, 2014, 08:13:28 AM »
What's your BA in?  Education?

Can you teach in Chicago with only the BA?  If so, skip the master's program and get a teaching job now.

Teaching is a great job to have as a mom.   

TeresaB

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #2 on: July 22, 2014, 08:17:53 AM »
No, it's in philosophy/theology. It was a great degree and I don't regret it, but it doesn't qualify me for any teaching positions. (FTR, the loans are my husband's. I know better than to take out significant loans for a liberal arts degree.)

Cyanne

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #3 on: July 22, 2014, 08:38:42 AM »
I was hired as a teaching fellow to work in an urban district. When I was hired I was told that the tuition would be discounted and they thought it would be about $11,000 to obtain my masters degree in education. After I had quit my other job, they came back and said it is $24,000! I can't get my loans forgiven because I had a student loan earlier that disqualifies me from that program. I did take out grants that would be forgiven if I continued to teach in an qualifying urban district for a number if years. Unfortunately, I was cut from the qualifying district before I could fullfill that requirement so my "grants" converted to loans at 6.8 % interest retroactive to the date of disbursement.

I still teach and I am happier at my new district but I want you to be aware that it doesn't always go as planned. There are no guarantees that the district that hires you will keep you and if there aren't other low-income districts that qualify you might not get your loans forgiven.

TeresaB

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #4 on: July 22, 2014, 08:53:46 AM »
Wow, Angie, that's scary. My impression is that Chicago is not lacking in disaster school districts...! But I will definitely take all that into consideration.

MBot

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #5 on: July 22, 2014, 05:57:27 PM »
I had a theology degree and took more school to have a paying job. It was an excellent decision for me even with the extra loans because now I earn so much more in my 2nd field (medical heart testing).

Cpa Cat

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #6 on: July 22, 2014, 06:50:31 PM »
Is there any job at all that you can get with your Theology degree? Teaching at a private Catholic school? Anything?

Because if you want to be a stay at home mother, it's hard to justify going back to school and locking yourself down for 5 years. Unless 27-30 is your ideal time for having children AND you think you could parlay it into private education/childcare once your own kids are in school.

I guess I would say this: If applications aren't even open yet, then there's no harm in looking for something decent. If you find gainful employment, then skip the grad school program. If you're still looking by the time offers go out, and you want to do it, then do it - if you're willing to stick it out for the 5-6 years it takes to get the loan forgiveness.


TeresaB

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #7 on: July 22, 2014, 08:12:42 PM »
Cpa Cat, you're basically saying what I'm thinking, I guess. I do think I can probably get a different job. I haven't so far, but that doesn't mean much. I didn't really start my job search until about a month ago. (Maybe I'm cocky--but I graduated from a good, well-known school with a good GPA. :p) I really want to get pregnant ASAP, actually, but I don't know if that's biologically possible right now, and I'm feeling pressured by the debt.

Cpa Cat

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #8 on: July 23, 2014, 08:29:33 AM »
Cpa Cat, you're basically saying what I'm thinking, I guess. I do think I can probably get a different job. I haven't so far, but that doesn't mean much. I didn't really start my job search until about a month ago. (Maybe I'm cocky--but I graduated from a good, well-known school with a good GPA. :p) I really want to get pregnant ASAP, actually, but I don't know if that's biologically possible right now, and I'm feeling pressured by the debt.

Well, since you are afflicted with the Baby Fever, I strongly suggest NOT going back to school. Find something that utilizes your degree or something that just requires a generic Bachelor's degree. The chances that you will end up pressing pause on this whole school/employment thing are very high.

It's ok for you to want to make having children and being a SAHM your priority. Accept that it is your priority and don't invest heavily in a future that is not in line with that priority. Instead, find any job to help pay down debt in the short term and work on reducing your expenses - because a dollar saved is a dollar earned.

It would be different if you pictured your ideal future one year from now was being "Working with disadvantaged children." But if your ideal future one year from now is "Having a baby and being a SAHM" then that's the future you should pursue.

TeresaB

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Re: Reader Case Study: Go back to school to pay off student loans?
« Reply #9 on: July 23, 2014, 10:03:43 AM »
It's ok for you to want to make having children and being a SAHM your priority. Accept that it is your priority and don't invest heavily in a future that is not in line with that priority.

:) Thanks. This was a really helpful way of putting things.