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student loan & credit card debt anxiety

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jpg_mke
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student loan & credit card debt anxiety  Reply with quote  

Hi All,

New to money-talk and seeking some advice and opinions concerning my debt, the vast majority of which is student loans. I started at a private college at age 17 and failed out after two years leaving me about 37K in debt. I took a six year hiatus from higher education (working in banking & home equity coincidentally) and then decided to return to state college to complete my Bachelors. Perhaps foolishly in hindsight, I decided that I would return to school full-time and quit my decent paying bank job, which has caused me to become heavily dependent on said loans. I completed my Bachelors last year and now am about to begin my second year of Graduate studies at the same university. Right now I am sitting with about 136K in student loans, 85K of which is federal and the balance are private. I also have about 18K in credit card debt. Both my Bachelors and in-progress Graduate degree are in art/design and I'm weary of job prospects post-graduation. I'll be qualified to teach post-secondary, but the jobs are few and far between, not to mention extremely competitive. I've been doing some research on loan forgiveness and income-based repayment for my federal loans and it sounds like this could be of great help to me. I could even take out some federal grad-plus loans to "convert" some of my private to federal (about 20K worth). One concern is that these programs could somehow change or go away entirely, leaving me buried under this massive debt. Part of me is also uncertain whether completing this degree and going further in debt is the best option at this point. I have two years left of the program and by my calculations I'll be 200K or more in the red (inc. credit cards) by the time it's said and done. I'm passionate about what I study and would love to see it through, but financially I'm feeling a bit overwhelmed. Do I just put the student loan gremlins out of my mind until after graduation and take comfort in income-based repayment/loan forgiveness, or say enough is enough? I feel like I'm so close but (especially financially) so far away! I also realize my 18K in credit card debt is nothing to scoff at, so this is also causing me some anxiety, but to a lesser extent. Any thoughts/advice would be greatly appreciated.

Thanks,

jpg_mke
Post Sun Jun 24, 2012 4:21 am
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coaster
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I'll tell you what, this developing student loan problem has been creeping on us for years, getting ready to explode, and all Congress has done has been to make it worse. You and your fellow students need to be hollering and screaming at your legislators about doing something for those who are our country's future, and I'll tell you that loan defaults and loan forgiveness are NOT the answers because they undermine the financial system, but favorable loan rates are; after all the Fed is doing all it can to get the housing market revived, why can't they do the same for students? (who are future homeowners, anyway, but not if they're in hock for their student loans the rest of their lives) The interest rates private lenders get away with on student loans should be a crime.

~Tim~
Post Sun Jun 24, 2012 6:34 am
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fast
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Re: student loan & credit card debt anxiety  Reply with quote  

If I were only six months away from graduating, I'd personally stick it out, even if it wasn't financially worth it. I'd even go so far as a year if my heart was in it (as it seems yours is), but with only a year under your belt and two more exhausting debt accumulating years to go and not working, it sounds like you're going to be in a mighty big financial uphill battle when you get out, not so much because you'll nearly be in a whopping quarter of a million dollars in debt but because your income prospects look so grim.

Your solution to this mess is ultimately going to be your higher than expected income. Taking solace in having your minimum payments based on the possibility that they'll be income based may suffice and bring you some relief over the short-term, but that will in no way even begin to solve your long term financial issues. You'll have that debt hanging over you for a very long time. Federal student loan debt isn't even bankruptable.

If your future degree would play an enormous role in ensuring that your income would be significant, then it would still be inadvisable, but at least with that, there would be some light at the end of the tunnel, as they say, but if you're telling us that you don't believe that even with the degree that your earning potential will change (and in a major way), then it's my belief that you need to cut your losses now.

Who knows, by sticking it out, you may go places you couldn't even guess now, but the odds are not on your side. If I were you, I'd focus on what's going to make a positive financial difference, and if your graduate degree isn't going to take you where you want to go in that area, then maybe you should take a closer look at your emotions and reflect on the grip it has over you. Wanting something is one thing. Wanting something badly is, well, okay—we’ve all been there. But, just how healthy is it to want something so badly that isn’t even going to pay off in an area where you desperately need it to?

As it stands, you have your undergraduate degree, and the debt you have now is miles better than the debt you’ll have later if you continue on this path. Why not take what you have and produce an income?

Despite it all, there’s a side of me that would like to see you get what you want—or live your dream, as they say, but as it stands right now, if you don’t do some serious networking and secure some hope for a career in your field where that degree will pay off, then I’m afraid it might be time to put your schooling on hold.

How about do some more digging first. If you’re an above average kind of person, and if you find that you can secure an above average pay grade with your graduate degree, then think it over again.
Post Sun Jun 24, 2012 2:35 pm
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oldguy
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Truly - I would quit that program and get back into the work force. If you don't, you will find yourself with two very negative issues. (1) a $200k debt and (2) a unmarketable education.

A problem with the income-based repayment/loan forgiveness plans is that the main require is to to earn a low income. A better answer is to choose a marketable field where a degree pays $80k or $100k and then live like a student for 3 or 4 yrs while you knock out the $200k loan. But that won't happen with an art/design education.

Perhaps you could fall-back onto your banking/home equity experience and make a career of it. Take the Real Estate class and sit for the WI state real estae test. (It was about a 3 week night course and $400 when I got my license). Or maybe you could apply your creativeness to IT, writing code, etc.? Or design molds, precision tooling, for the many fabrication shops in Mpls - that pays very well - requires ProE / Yi4.5 certifcatiosn. Like the RE license, these are things that you can get in a few weeks and a few hundred dollars - way more return on your time/dollar than spending another $50 & 2 years for Art/Design credentials.

Aside: Years ago, I drove 18-wheeler (some in WI) - that was a way to earn solid money, $60k or $70k if you're willing to put in the hours - that paid for my engineering degree. And drivers are in high demand right now, lots of unfilled openings.
Post Sun Jun 24, 2012 4:42 pm
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jpg_mke
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Coaster - I agree, it's quite a predicament, not just for me personally but for many grads (granted my situation is worse than average). Fortunately my private loans actually have decent rates, not too far off from my federal. It will be interesting (to say the least) to see how this develops.

Fast, Oldguy - I hear where you're coming from, two years and 40-50K in additional loans is a huge (and questionably wise) commitment at this point. It's definitely not a decision that I'm taking lightly and I continue to hear both sides of the argument from people that I discuss this with. My practical side tells me "enough is enough" but my artistic side tells me to throw karma to the wind, hope for the best and things will work out one way or another. There are good paying jobs in academia, they're just highly competitive and hard to get with a fresh MFA. Also I'm fairly entrepreneurial and have started writing a business plan with a friend of mine, but this is no doubt also complicated by my financial situation. I could always pursue certifications, etc. (per Oldguy's recommendation)with a completed MFA if things aren't panning out, but I'm not getting any younger (currently 30). I also have retirement to think about, though this is another (anxiety-causing) issue entirely. I realize that there's no "right" answer here per se, but your replies have been helpful so I hope to see more.
Post Mon Jun 25, 2012 12:16 am
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littleroc02us
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My biggest concern for you is that your going heavily into debt not knowing what job you will get and at what salary. 136k for an Art/Design degree IMO is suicide. I know the artistic type of person, I went to a liberal arts private school where a lot of kids came from well off parents and paid 20k a year or more in 1992 to make 25k a year making pottery or starting up a photography studio. I too went to this liberal arts school dreaming of being the next Ansel Adams, but was that realistic for the price. No it wasn't in the end, because I ended up 40k in debt and a job taking pictures for Auto Trader making $9 dollars an hour living in California. In 1996 I went broke and moved in with my parents back here in Minnesota until I got back on my feet. I began to looking for a photographic job in landscape photography. Ya it was like good look finding something like that. So in order to be more realistic I started doing weddings and portrait photography, but I disliked it greatly.

At this point I knew this was a dead end career for me, so I went back to a technical school and got my AAS degree in Computer Science and my tuition was only 3k a year. I had a 35k paying job before I even got out of school and have never looked back.

So in the end, yes the experience I had going to the liberal arts school was quite interesting and fulfilling, but realistically I paid a lot of money for a career I'm not involved in anymore. My belief is that students with parents guidance need to start helping their kids to make wise decisions and to plan in advance what exactly the cost benifit of a college and the expected outcome will be instead of just jumping in at 136k of schooling and hoping a career will come out of it with similar pay.

So what I would suggest you do is to quit school and find another good paying bank job and start working on those school loans. If you choose to finish your graduate degree right now you'll be 200k in debt and will have what type of paying job? Your going to be paying school loans until your 40 or even 50 at that point. I would strongly advise you to get your house finances in order before taking on more debt. Your best investing years are going by the wayside if you continue to add more debt.

Good luck!

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Jun 25, 2012 1:58 pm
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oldguy
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littleroc gave you excellent advice. And shared his story with you.

quote:
If you choose to finish your graduate degree right now you'll be 200k in debt and will have what type of paying job? Your going to be paying school loans until your 40 or even 50 at that point.


Compounding is a surprisingly powerful force, it is often over-looked by non-math types.
Consider these 3 scenarios -
(1) $10,000/yr invested at 11%/yr equals $2 million in 30 years. At the 30-year point you must switch from wealth building to wealth preservation, ie, into bonds/CDs to protect yourself in retirement.
(2) save only a little each year thruout you working life, you end up with a paid-for house and a small pension.
(3) borrow $10,000/yr @ 11%/yr. (thsi is item 1 in reverse) So afterf 30 yrs you owe $2M - or you essentially owe your entire salary for life to someone else.

Most young couples that have educations can do #1 w/o much strain - direct $5000/yr each into their 401k's, keep their hands off of it, and watch it grow to $2M, it's not nearly as hard as people try to make it. Yet the majority seems to follow plan #2 - even the high earners overspend - you see lots of Boomers with lots of toys but very little retirement investments.

IMO, you need to apply your STEM skills, get a career path underway where you can earn a steady $60k or $75k. And then you can enjoy art as a hobby.

BTW, as an old retired guy, I've seen many people quit a "work for the man" job and start a shop to "be their own boss". They love the hobby so they buy the finest equipment whether or not it makes business sense. And they are willing to work for almost nothing to pay off the pretty machines. That ends in the equipment getting re-possessed plus a huge cc bill for groceries - and then bk. And by then they HATE that hobby.
Post Mon Jun 25, 2012 5:26 pm
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benzmen
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loan  Reply with quote  

i took student loan and till didn't payback them. One day i got a letter and said i don't have to pay them the loan because the government has paid them because i wrote a letter to the eduction authority that i can't pay the loan. i don't know if this thing works in your country,
Post Wed Jun 27, 2012 6:11 am
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littleroc02us
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Can you imagine how high our taxes would be in the US if our Gov't started doing that?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Jun 27, 2012 1:17 pm
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coaster
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Thoughts on forgiving debt as policy  Reply with quote  

Debt forgiveness is a very, very tricky method of solving a debt problem. People whose loans are forgiven don't suffer enough pain to learn the lesson of staying out of debt if at all possible. Sounds harsh, but life is harsh. Suffering, pain and loss are what teach the best lessons. If a lesson isn't learned, the mistake is likely to be repeated. I think debt forgiveness should be an absolute last resort, when everything else has been tried, when the debtor is in extremis, and then only once. Once in a lifetime, not once in a loan. The money to pay the creditor of the forgiven loan has to come from somewhere: higher lending costs to everyone else, higher taxes on everyone else, more difficult to get loans, increased loan loss reserves, lower profits. It's all very bad for both the individual AND the financial system.

~Tim~
Post Thu Jun 28, 2012 6:37 am
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littleroc02us
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When did not fulfilling a promise to pay a debt back become a socially acceptable norm? Can I get paid back from the tax payers please because I busted my butt and worked to pay off my school loans. Please! It seems only fair if others can do it. Very Happy

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Thu Jun 28, 2012 1:24 pm
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MargueriteSmithas
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thanx for shareing the valuable info man i was searching this on the google like for ages thanx any way Smile
Post Sat Jun 30, 2012 9:05 pm
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jpg_mke
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Most of the comments have been helpful in one way or another, especially fast, oldguy & littleroc02us. At present I am seriously considering leaving the program, finding a reasonable paying job and seeking out some additional technical training in IT/Development to better leverage my existing web/graphic design experience. I'm feeling more and more that transitioning into a decent paying career versus taking on the additional 40-50K (and the uncertainty that comes with it) is the best move for me right now. As far as the loan forgiveness programs are concerned, it's comforting to know they're in-place should I ever need them. I'm not saying they're the answer to the student loan "crisis", nor do I claim to have said answer, only my opinions which would likely comprise a rant beyond the scope of this post. Thanks everyone and I'll be sure to let you know how things develop.
Post Fri Jul 06, 2012 9:44 pm
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coaster
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You're welcome to open a new thread and post your rant. Smile

~Tim~
Post Sat Jul 07, 2012 6:58 am
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