Help me decide whether to take on more loans or not!

[goodygoody]

Hi there.  I have a rather weird question.  I am currently a homemaker, but have a master's in counseling.  Between my BA and M.Ed., I racked up around $70,000 in student loan debt (I was a single mom at the time and was essentially supporting my daughter off loan refunds).  I had the loans put into income contingent repayment, which reduced my repayment requirement to zero for the last 8 years or so.  Which would be swell except the government keeps adding interest to the loans.  So my full repayment amount right now is over $90,000.  My family is currently living off my husband's income, which is still low enough that my payments are zero.  Eventually I hope to return back to work, and I'd expect to have to start paying something at that point.  I believe the max amount you can be required to pay is 20% of your disposable income, so either way my payments will never be astronomical. 

My question is this.   I would really like to switch careers when I return to the workforce, so I'm considering returning to school - which would mean MORE loan debt.  But my reasoning is that my loans are so high at this point, no matter what I do, my future payment would very likely be exactly the same with more debt.  So does it really matter if I, on paper, have "more debt?"  Because while I might be paying longer, I won't have to pay a larger monthly payment.  And I'd rather have a career I enjoy and a larger debt than one I dislike (I was pushed into counseling my my mother who thought it was a good idea) and smaller debt on paper.  And as far as I can tell, even if I wanted to be on a mortgage later, I think I could (right now we're considering a mortgage in a couple years only in my husband's name), so long as I can present evidence of what my loan payment is, the high debt won't hurt much with that).  My plan would be to pay as much tuition as I can with cash, but I know it won't be enough.  So I'll undoubtably need loans.

Is there something I'm missing here?  I really wish I hadn't gotten in all this loan debt to begin with for a career I don't even want.  But with things as they are, is there really any big reason I shouldn't just go ahead and get a different degree?

[llecs]

IMO, I'm not a fan of college (other than the fun and meeting DW), and adding degrees does not make you any more successful financially. And a degree does not equal an automatic job. So, my advice is slanted. But if I had that (and DW is a domestic engineer to 4 kiddos), I would skip school for now and wait 2-3-4 years. In the meanwhile, I'd paydown the debt even if I wasn't required to. This will save you thousands of dollars and relieve some of that payment shock if you ever were to go back to school and not pay for it up front.

[kkyoung27]

If it were me I would try to find some work in the field that I am degreed in or a job that makes you happy and pay down some of the loan that you already have.  Then I would consider going back to school.  What field are you trying to seek another degree in?

[poet]

Oh, my God--don't do it. I have one terminal advanced degree and am finishing up a second. In between I blew $20K easily at a small private college. I have loans dating back to 1982 that will take $650-700/month for me to pay back. For the price of all these English degrees, I could have done one really good Ivy League B.A. and been set for life. (Unfortunately, neither my family nor I were too hip to the college-financing thing back then.) No one loves literature and writing more than I do. If only I had world enough and time, I would get a master's in something more closely related to the career I left 15 years ago. I will be lucky if I can get back into something resembling my old job, which would be my best bet for paying off the student loans. I won't even contemplate the huge amount of lost wages, benefits, investments, promotions, etc. this move has cost me. It's sickening.

I definitely would NOT have taken any loans this time around, but the monthly teaching stipend is not enough to pay the bills. Three times a year, I catch up on the bills (read: CCs) and make whatever necessary purchases need to be made over the next few months (e.g., serious stuff--a car or computer dies; home repair). Besides, depending on the line of work you want to pursue, a Ph.D. can work against you--some people are intimidated by it; others think you've spent too much time in the ivory tower and can't possibly know how the so-called "real" world works. 

If you have a burning desire to do something different, I strongly advise you to work full-time in your current job, save money for a couple of years, and only then work on another degree, part-time, cash only. Trust me. I have made EVERY mistake there is to make when it comes to paying for higher education. If your significant other/spouse is making good money, bully for you. If something were to happen to that income, would you be able to support yourself, your family, and the bursar?

Do a master's degree; get in and get out. You do not need a Ph.D. unless you plan to join the ranks of desperate adjunct faculty living on $2400/semeter per class. The market is saturated. Google "why not to go to grad school" and see what others say. 

Whatever you decide, investigate alternate ways to get the skills you need to make a change: graduate certificate programs, industry-recognized training programs, picking up small jobs on the side. Remember to read as many industry books as you can, too.

I wish you the very best of luck, whatever you decide. 

[mazinaige]

If you intend to be employed in the public service (federal government, state government, local government, or tribal government entity including the military, public schools and colleges, public child and family services agencies, and special governmental districts, or a 501C3 non-profit organization) then I would encourage you to visit http://www.ibrinfo.org/ and educate yourself about the Income Based Repayment plan (IBR) and the Public Service Loan Forgiveness (PSLF) program. Only in the case of public employment would I advise taking on more loans and only if they were federal loans that are eligible for the IBR and PSLF programs.

[Booner72]

Another option: Depending on where you live, if you are licensed in counseling (LCSW) you can get your loans totally forgiven after 2 years of working in a rural area doing counseling. 

[mazinaige]

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@goodygoody wrote:

"So does it really matter if I, on paper, have "more debt?"  Because while I might be paying longer, I won't have to pay a larger monthly payment.... as far as I can tell, even if I wanted to be on a mortgage later, I think I could (right now we're considering a mortgage in a couple years only in my husband's name), so long as I can present evidence of what my loan payment is, the high debt won't hurt much with that)."

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Hi Goodygoody,

I am not as familar with the ICR plan as I am with the IBR plan. What I have read on the Facebook group, The Project on Student Debt, is that people who have signed up for the IBR plan are having difficulty getting approved for mortgages because of their debt to income ratio. At this time, banks are not factoring the adjusted IBR payment, even if the payment is $0.00. I hope this gets straightened out soon or I'll be renting for the next decade. People have found work-arounds for this problem, such as opting out of the program for a short time, then trying to quailfy for mortgage, then signing back up for IBR again, or timing one's mortgage application day/closing day to the exact day of  IBR renewal (yeah, right!).  

If your husband applies for a mortgage in his name only, does the bank factor your debts into the equation since he is supporting you and your family?

[poet]

Oh--one more thing about the mortgage. You may be better off paying a mortgage than paying rent. We were in a similar state a few years ago, and we bought a REO (in my name) with maybe about $2K down on a 30-year fixed FHA. The interest rate is pretty high (6.75%), but the idea was to buy a sound fixer-upper and be able to pay the mortgage and utilities on a single minimum-wage salary in case of complete financial disaster. It was the smartest thing we ever did. As the realtor pointed out to us, "Your mortgage is less than most people's car payments." If we were trying to pay the grossly-inflated rents in this market, we'd need to cough up 3-4x more a month. It's a great relief to know that we at least have a roof over our heads if disaster strikes. Also, because we bought at a cut rate, the house essentially comes with built-in equity, even after recent events in the housing market cut that in half. If you and your husband make a habit of cruising likely neighborhoods where sales are slow, you can make it happen, too. We did this every time we went out--individually or together--for a couple of years while saving the down payment and closing costs. I hear from Suze Orman that 20% down is the new dealmaker, but if you're talking about a modest house at half of what you'd normally have paid, you're still quite possibly looking at four figures. (And GET A FIXED RATE! You can always pay ahead on the principal if you feel flush--it's the only investment I know that pays an immediate 300-400% dividend by cutting the amount of interest you'd pay otherwise.)

If the market tanks, you have shelter. If you take a job out of state, you can either sell and put the money down on a new place, or rent and put that income aside in savings. (For me, it'd be worth paying a management company to keep the grass cut, collect the rent, and make sure the place didn't get trashed.)