What student loan debt makes sense?

[DandeCobb]

Is there a formula to tell you when student loan debt makes sense and is worth is? Like, I think its not worth it go to get $100K in student loan debt to be an elementary teacher. But that debt prob would be worth it for a doctor, YKWIM?

So, my question is, is there a rule of thumb? Like SL debt should not be more than ____ X your projected annual salary?

[Crazybean]

I don't think there is a rule per say especially because you and I could have the same degree but you could be making 15K more per year because of the route you took. I've seen this with 2 friends. Both have their MS in social work. 1 works at a church making hardly a dime (but big thing here is she's happy). I have another friend who has her MS in social work and works with abused children and adoption agencies (not as happy because she is very sensitive) ect.. she makes much more but they are both in debt for the same amount.

I think if the new degree will increase your pay more than the cost of repayments per year, then it is worth it. For example, my SL payment is $225/mo for 10 years but after I'm done school (in Jan I hope) then I'll be making an extra $700-800 per month so it's worth it for me. If I was only going to make an extra $50, I probably wouldn't have done it.

[cristeen]

Personally I think it depends... but as a general rule of thumb, a SL that's more than about 3x starting annual salary is a bad idea.

I see people all the time talking about going to culinary school. Easy $60-80K in SL. Most of those people will make minimum wage when they graduate. Bad idea, in part because there is very little room for advancement. You might someday make $10 or $12/hr. It's only very rare, very ambitious chefs who can open their own successful restaurant and make more.

But, if you're talking about a field where you have to "pay your dues" for the first year or two with a low paying job, and then your pay rate jumps, then it might be worth it to spend a little more in tuition.

There are not many fields IMO that pay enough to make the degree required worth it. Heck, anymore most secretarial positions around here want a BA, but pay under $15/hr. Who can afford that??

[Vancouver Mommy]

DP recently finished a graduate program and is now earning about $30,000 more than he was before he went back to school. He used to teach high school english and is now a policy advisor for a major labour union. He was off work for about 2 years, but during that time earned about $15,000 a year on contracts and as a teaching assistant. We ended up with about $38,000 in debt, which we are completely comfortable with.

[Sailor]

My rule is this - if you have a passion that you need to pursue in order to be fulfilled and happy, then do it. Have a plan in place for paying off the debt, for finding scholarships, for pursuing this passion after graduation, etc., ... but do it.

I'm ALL about the passion, and following one's purpose. I know I would not be happy if I didn't follow mine (which, coincidentally, did not need a degree).

So, if your passion needs a degree and you need this to be fulfilled ... go for it (as long as you have a repayment plan in place).

However, if it's not your passion and you're ambivalent about it - stick to a cheap community college. Unless you get a scholarship, of course.

That's just my thinking.

[annethcz]

When I was thinking about this, I didn't find any hard and fast rules. But I did think about how long it would take me to pay back the loans.

I played with loan calculators, using different interest rates and different monthly payments, to see what the payments would look like. I then looked at starting salaries for people who work in the field I plan to study. I didn't use average salaries, I assumed the low end of the scale. I made some quick calculations about how much money I'd be taking home after taxes, and then compared that income to the projected loan amounts.

[Belleweather]

It was really important for me to think about what the education would do for my income.

For instance, law school was right about $55k in loans. I knew that after law school I wanted to be working in government or corporate law, where the starting salaries ranged from $45-$65ish. I was making $11/hour. So, doing some math, I was investing $55k to increase my income $23k-$42k per year. Which didn't seem like a bad investment.

Of course, it would have been a better investment if I'd been able to keep living like I was making $11/hour and pay the loans back in 2 years... but I acquired two babies, a car and a husband in the intervening years, so ramen noodles and studio apartments weren't going to work so well... but I still feel like it was a good investment in my future earning power.

I LOVE the idea of following your bliss, but I think if you're getting education for love you probably ought to pay cash.