Can I Afford It?

[Anonymous]

Here is my story. I am starting classes at Milwaukee school of engineering this fall. The tuition is $34890 a year and after aid and federal loans I will need $18139 in private loans per year to attend. After obtaining 80+ credits toward my bachelors in Architectural Engineering at a community college I was told I have to attend MSOE for 3 years. This puts me at roughly $54,000 in private loans and $19,500 for federal loans. I have applied to Wells Fargo with a credit worthy family member and am waiting to see the interest rate I am quoted before accepting.

Graduates from my program usually receive a starting salary of $55,000-$60,000 fresh out of school. I plan on paying the interest on my private loans to avoid compounding interest. My real question is, will this be a situation that I can resolve somewhat quickly? I plan on putting everything I possibly can toward these loans as soon as I graduate. I'm just wondering is it going to be a very uphill battle to pay over $70,000 in loans on a $55,000-$60,000 salary? 

I have done everything in my power to reduce the cost of attendance and am only taking loans for tuition. I will be paying for rent, food, books and all other expenses out of pocket. Just want more opinions on if I am making an smart decision in putting myself this far into debt.

Thank you all for your time, I look forward to the responses!

[WLRK11]

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@Anonymous wrote:

Here is my story. I am starting classes at Milwaukee school of engineering this fall. The tuition is $34890 a year and after aid and federal loans I will need $18139 in private loans per year to attend. After obtaining 80+ credits toward my bachelors in Architectural Engineering at a community college I was told I have to attend MSOE for 3 years. This puts me at roughly $54,000 in private loans and $19,500 for federal loans. I have applied to Wells Fargo with a credit worthy family member and am waiting to see the interest rate I am quoted before accepting.

Graduates from my program usually receive a starting salary of $55,000-$60,000 fresh out of school. I plan on paying the interest on my private loans to avoid compounding interest. My real question is, will this be a situation that I can resolve somewhat quickly? I plan on putting everything I possibly can toward these loans as soon as I graduate. I'm just wondering is it going to be a very uphill battle to pay over $70,000 in loans on a $55,000-$60,000 salary? 

I have done everything in my power to reduce the cost of attendance and am only taking loans for tuition. I will be paying for rent, food, books and all other expenses out of pocket. Just want more opinions on if I am making an smart decision in putting myself this far into debt.

Thank you all for your time, I look forward to the responses!

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Hi! Congrats on furthering your education! You're asking a great question and I think the best way to find the answer is to calculate your net income on $55,000. Use a paycheck calculator (Google those two words) and then set up a rough budget: estimated rent, utilities, food, minimum student loan payments, entertainment, etc. 

Feel free to take a screenshot of those two items and reply. Try to maximize federal student loans as much as possible. Good luck! 

[Luscher]

Its possible. Im in the same situation. But with even more in loans.

Just don't blow your money on anything stupid.

[Anonymous]

Congrats! I guess the real question is: can you afford not to? I agree with the person who said make a budget. That's  smart advice. Here's the reality. I'm 38 and finished school a bit late (in 2006). I had to take out student loans for all of my education because I recieved no other aid. I have a Master's degree so that what a bit more expensive than I really needed to be, but my student loans just came out of forebearance/deferrment recently and I just started paying them back. I have $66K in SL debt. Here's the real scenario: SL debt is a very very long term committment. Paying them back or making arrangements when you can't is extrememly important for your future credit (as I'm sure you already know from this forum). It's almost more important to your credit than any one other thing you can do. Getting those loans will not only help you get through school and future higher employment, but also helps you to establish your credit history. As long as you are always current, it's a great benefit.

However, when you graduate and get that job, you have to think about where you will be in your life. Do you plan on getting married, having kids, wanting a better car, etc in the next 10 years? If not, you have a good chance with that salary of paying back your loans within the 10 years time frame or sooner if you can afford extra payments. However, if any of those things happen, your cost of living goes up and those things become priority for you. You may need to defer at certain times in your life, which means you will still accrue interest to owe at the end. Things happen beyond your control (like a medical situation or getting fired, etc) and you can't make your payments so you defer them.

I am 38 years old. I didn't have my first child until I was 37. I have a $207/month car payment and I make $100k per year. I don't own a home yet (we are buying now) and I have paid off all other debt from my past. My last debt is student loans, which I had deferred for the last 9 years and just now paying on them. Between my husband and myself we make $147k per year without much debt and my payment is about $450 per month for the next 300 months...yep, that's almost 30 years. I won't be done paying my student loans until I'm retired if I don't make more than the monthly payment. SOOOOOOO....

Stick to your plan and you will be fine . I can tell you right now though that I wouldn't be making 6 figures in a career that I love if I didn't have my degree so to me, it's worth it.

[Anonymous]

I appreciate everyone's responses. I do agree that without my degree I wouldn't get too far in life. It's my passion and something I will thoroughly enjoy doing day in and day out. I'm just terrified of taking the loans out. I realize it's necessary and I will be taking them out. I just wanted to triple check I'm not making a big mistake by taking more debt out than my expected starting salary will be. I will do budgeting and looking more into it. I plan on trying to pay these loans off before a house, however I will need a vehicle after I graduate. I can always fit it into my budget.

[SCF]

The general rule of thumb is that your student loans shouldn't exceed your expected annual income when you graduate.  You've already identified that your debt burden is likely to exceed your starting salary.  So, are there any compensating factors?  Are you going into a very high demand field where you will have little concern about quickly finding work and being able to find another job if your lose your current one?  Are you likely to see a substantial increase in your salary over the first few years of working?

Keep in mind that the majority of your debt will be private loans.  That means you will have limited options for postponing or reducing your payments compared to your federal loans, and you should carefully read over the terms of your loan so you understand exactly what your options are if you are having trouble paying.  Not all private lenders are created equal, and there are things outside of your interest rate to consider.

Personally, I would look for a less expensive school in your situation.  Is there a specific reason why you want to attend a private school over a public university?  Will that reasoning translate to improved income?  You're investing in yourself here, so make a smart choice and get the best return for your money.  If you can get similar job opportunities for a substantially reduced cost, why burden your future self with debt you don't need?

[ddemari]

My experience with student loans is i took out way too mich money, i wish I would of considered cheaper schools or going to community college for 2 years.

Im paying back around 92,000 in private/ government loans. my minimum payments are big, but they are very willing to work with you if you start out on a good foot with them. if you can consider a less costly option, you might really appreciate that decesion down the road. 

[Anonymous]

Unfortunately this school has been a long time coming. It is one of the very few with an accredited program in Architectural Engineering. I certainly plan on having a job secured through internships before even graduating. The school constantly boasts the 96% job placement rate for my program. And I have a few family friends who have gone down the same path as me successfully and found great jobs quickly. The only part I didn't ask them about is the loan situation because that is more of a private matter in my belief. I do know they all used private and federal loans and had them paid off within 5-7 years after graduation.

[Anonymous]

I have already taken many courses to contribute to my degree at this school through a community college. So at this point there is no looking back on my university choice.

[WLRK11]

There you go! 5-7 years is a car loan for most people. Try to draft a rough budget (see my first post) and be honest with yourself as to wether you're willing to be frugal enough to pay off your loans in less than a decade.