Author Topic: How to plan for grad school - spouse  (Read 641 times)

midwestmoney

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How to plan for grad school - spouse
« on: April 04, 2019, 07:31:53 AM »
Good morning everyone,

I was hoping I could get some thoughts/opinions from a group of people I respect regarding preparation for my DW's going back to school. 

To give a little background we are 27 (me) and 25 (DW) and are currently making around $75k +~$10K annual bonus and $30-35k respectively pre-tax and investments.  This results in us maxing a 401k ($19k), our IRA's ($12k) and an HSA ($7k).  These currently total to around $125k in total investments in VTSAX or similar vehicles.  We also have a 3-6 months EF ($15k), two paid-off cars and are renting in a L-MCOL area.  I give these details not because I am looking for a full case study, but just because I want to set the stage for our situation.  The DW is looking to go back to school and would be over doubling her salary.  My initial estimate, just based on what I have read, is that it would increase her salary from between $30-35k/year up to $70k+/year.  The schools we are looking at are around $90k for two years.  For what it is worth, she is looking to become a Physician's Assistant so I am also curious about any particular scholarships or aid that is available.  This leads me to the primary area where I am looking for thoughts:

We will become a single income household when she goes back to school so our savings will definitely have to take a dip.  I do plan on us continuing to max the HSA and contribute up to 7% in the 401k (match) however, should we be prioritizing saving and attempting to pay for as much of school out of pocket as possible?  Alternatively, should we continue to aim for maxing our tax-advantage investments to the extent possible?  Federal loans seem to hover between 6.5 and 7% which would lead me to believe we are better off trying to take some of the bite off and paying as much as we can up front.  That being said, I was lucky enough to have a full academic scholarship for undergrad and really have NO idea how this whole student loan thing works. 

TLDR: Currently saving and investing at a reasonable pace (maxed 401k, IRAs, HSA), should we plan to redirect funds to pay for DW's graduate school out of pocket (to the extent possible)?

Thanks so much for your thoughts!!
MWM

mtbmafia

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Re: How to plan for grad school - spouse
« Reply #1 on: April 05, 2019, 05:00:30 PM »
Hi MWM,

Your post finally prompted me to register for the forum after being a lurker for the last year or more!  Long story short, we (me and DW) are looking at almost the exact same scenario as you in the near future.  DW has recently been back to school for a post-bac pre-med program in order to prep for PA school (she had a BA in journalism so a complete career switch) and now we're prepping for the inevitability of a PA program and everything it will entail (single income, increased expenses) 

Like you, we were both fortunate to have great scholarships for undergrad and didn't have to dive into the world of student loans.  Your TLDR "Currently saving and investing at a reasonable pace (maxed 401k, IRAs, HSA), should we plan to redirect funds to pay for DW's graduate school out of pocket (to the extent possible)?"  is essentially the exact question I'm asking myself. 

Seems like an easy question in theory but I'm having a hard time putting together an unbiased analytical method to determine the best path forward.  We've got some time (earliest possible school start is Spring 2020) but it's never too early to start planning in my opinion. 

Additionally, anyone have thoughts about starting a 529 plan for DW that we could pull from throughout PA school?  Obviously it's not the traditional use of a 529 but are there any benefits to be had as a short term savings vehicle? 



cincystache

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Re: How to plan for grad school - spouse
« Reply #2 on: April 06, 2019, 07:17:02 PM »
You are crushing it, keep up the good work. Great job picking a grad program with a solid return on investment.

There could be aid available if she's willing to work in an under served area like somewhere rural etc.

I'd keep it simple, get the employer match, as you mention and potentially the HSA if you are using the MadFientist approach, then put everything else towards grad school starting right now until you have enough saved to cash flow it. This doesn't mean you need to save 90k before she starts but if you can contribute X per year towards her school from your single income then shoot for having 90k minus 2X, saved. You could probably get that saved between now and when she starts school assuming she starts in the fall, then you have grad school covered and can pay as you go.

I wouldn't bother with a 529 plan as the other poster mentioned unless you live in a super high state tax area. Even then it probably isn't worth the hassle of having an extra account because your tax savings will be pitiful.

Don't forget you can deduct up to 4k per year in tuition expenses on your taxes.

Good luck with school!



nereo

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Re: How to plan for grad school - spouse
« Reply #3 on: April 07, 2019, 08:29:19 AM »
First off, let's step back a second.  Is this career change something DW wants to pursue, or is the reason its being considered almost entirely based on the increase in salary?  If she's genuinely interested in going to grad school in order to become a PA then by all means go for it.  But in my experience if she's doing it just for a salary boost and not because she wants the ultimate title its going to be a long, miserable road for both of you.

Strictly speaking you do not need this.  You are already killing it in terms of savings, and at your age you could easily become FI before 40 with no change.

Assuming you go forward with grad school, here's a couple of thoughts in response to your questions
  • Definitely take advantage of the HSA and 401(k) up to match (free money!) but beyond this the tax benefits will dwindle based on your (reduced) income levels and in comparison to student loan rates.  I'd pay for grad school as much out-of-pocket as possible.
  • Would any of her student loans be subsidized?  This makes a big difference in the payback equation.  In brief, if you qualify for subsidized loans the government pays the interest until ~6 months after graduation. To find out you will need to fill out a FAFSA, which is free, easy and online.
  • realize that grad school is its own world, and its own (more than) full time job. Your schedules will need to adjust accordingly. Networking is very important at this stage and shouldn't be ignored - it can be the difference between getting the rotation/practice she wants down the road.