Please tell me about student loans

amother

Thu, Jul 25 2013, 8:36 pm

I don't even know what to ask, I'm so overwhelmed! After a lot of back and forth we have just about decided that DH is headed to college to pursue his dream career. We will not be able to do it without loans. I have never had a penny of debt, and with a growing family I am terrified to start now, but it seems to be the only way to get to a brighter future.

1. Can you tell me generally how they work and what we should know about them beforehand?

2. What should I expect the interest to look like? Does it start as soon as you graduate? Before? After?

3. It seems you can get them from the government or from banks. What are the relative advantages/disadvantages of each?

4. Can you use them to cover living expenses or just as much as college costs? The living expenses worry me much, much more. They would also BE more. DH will have to quit his current (measly, insufficient) job to enter an intense college program. College won't only cost us tuition, it will cost tuition PLUS several years of life expenses not covered by work.

5. If we take out a loan to cover living expenses, the result would be that we would have more money to spend, but it wouldn't actually be money that we have - it would be money that we owe later. But we'd be living like people with more money than we have. Will this affect our eligibility for government programs like medicaid and food stamps? If we could get on those programs it would save us about $1500 a month that we would not have to owe later with interest... Right now we don't qualify but if DH quits his job to go to college our actual income would drop by about half, putting us squarely below the poverty line for our family size. Does having money that you will owe back later count as having money? (I feel like it shouldn't but I want to make sure. There's QUITE a difference between borrowing to cover rent and tuition, and borrowing to cover rent and tuition and health insurance and food)

6. Where I come from, "debt" is a four-letter word. Please help me understand how this could be not so scary! Logically it seems to make a lot of sense as a gateway to a much better career, but on the other hand I have been living frugally in an effort to avoid ever spending money that isn't mine, have read horror stories of people digging their way out of debt, or being stuck with loans and interest for a long time, I am just really anxious about this.

Thanks in advance for helping us out!

amother

Thu, Jul 25 2013, 9:01 pm

I don't know the answers to your questions but I just want to throw out an idea. my DH and I refinanced our mortgage around the time when my DH's BIL was dealing with student loans. We made an agreement with them that we would take out extra money and they would pay us back each month their percentage. We know and trust them and have it in writing. Not saying I would do this for someone who a. wasn't family b. wasn't someone I know would insist on paying it back but they are both The reason being that mortgage interest is significantly lower then student loan interest. So they are taking out the same amount of money at a lower interest. They don't have a mortgage so they couldn't do that for themselves but we could do that for them without losing out a penny.

I believe that if someone goes bankrupt mortgage gets forgiven but student loans do not. We were later told that we weren't supposed to do that since refinancing is supposed to be for EVERYTHING BUT student loans for that reason but no one told us that before we did it and the bank went ahead with it.

Do you have any family members that would be willing to loan you the money either like this or a straight out loan- someone in my graduate school mentioned that they borrowed the money from a relative I believe interest free.

morah

Thu, Jul 25 2013, 9:01 pm

There are 2 main types of loans- private and federal. Stay away from private loans, they're a bad deal. Within federal, you have subsidized and unsubsidized. Subsidized means that you don't have to pay the interest that accumulates while you are in school, only when you graduate. Unsubsidized means you do have to pay that interest. I think interest rates very recently went up, so check up on that. You can use student loans to cover living expenses, but if you can manage to get by without doing that, so much the better. There's more to it than that, you should check out FAFSA for more information.

Just in terms of the concept of debt, you don't need to treat it like a 4 letter word. The 2 big items in American life are almost impossible to achieve these days without taking on SOME debt for SOME amount of time. Want to buy a house? You're almost certainly going to need to take on some debt. Most people don't have $500K laying around to drop on a house; more likely, you scrimp and save to put $100K down and finance the rest. Yes, it's a debt. But there's nothing wrong with that as long as you can afford to pay that mortgage. Same thing with education. Most people need to finance their education. The important thing is to be smart about it. Don't take out $100K in loans to study Art History. $30K to study engineering, on the other hand, is almost certainly going to be worth it. Education is usually a good investment, but you have to be careful- what is he planning on studying? What is the average salary in his field in your area? And as others have noted, student loans CANNOT be discharged in bankruptcy, so think long and hard about every dollar you borrow. I don't remember the exact numbers, but there's a rule of thumb about not taking on loans exceeding X percentage of your expected yearly salary.

Dolly Welsh

Thu, Jul 25 2013, 9:12 pm

The only sensible student loan is one which will lead to a high salary, meaning high enough to pay off the loan and the interest within a reasonable time.

Paying for the rest of your mortal days is not a loan, it is a slavery to the bank. It means you didn't make enough salary to justify the loan.

The world is full of people who borrowed to study things that did not end up paying enough, or even any, salary. Including lawyers.

You don't say what his dream career is.

There may be other ways to get to DO what he wants to do without this. It's the DO that counts.

Such as, apprenticing, on the job training, getting a job at a company that pays your tuition, a few courses at a small college paid for as you go, just plain learning it online, hiring a consultant who knows it and picking his brains.

That consultant would be the one who has to do piece work like this because, wait for it,

.... he can't pay his student loans.

He know the material and needs to teach it to your husband for an hourly fee, because in this economy, that's what's there for him.

Here are the C's of credit: capacity, collateral, character, conditions.

Today, the Conditions are abysmal.

A plumber with no debts today is happier and richer than the unemployed and under-employed "intellectuals" or white collar workers or knowledge workers, who have clean hands and don't have to crouch under sinks.

Dolly Welsh

Thu, Jul 25 2013, 9:20 pm

And there is the character of the man.

Is he a quick study? Do people naturally love him, so he will be pushed forward by the teachers, and will make contacts, and get job offers even with no experience once he graduates?

Is his energy level very, very high? Some people just work, work, work. To have a wife and children, and school work, is a big challenge. Some can and some can't. It's genetic, not a character failing.

Does he test well?

Does he whip out readable prose easily? He is going to have to write papers. If that's agony, problem.

Is he organized in his papers?

Does he word-process easily?

How is his math?

Is he able to schmooze and pick brains? Do peole love to show him something?

If he is an introvert, lacks social fabulousness, ponders a lot and learns slowly, is fuzzy about deadlines, I would be concerned.

He might still be a truly dear man to be married to, but perhaps a man like that should do business, one that suits his character.

Maya

Thu, Jul 25 2013, 9:27 pm

Quote:

5. If we take out a loan to cover living expenses, the result would be that we would have more money to spend, but it wouldn't actually be money that we have - it would be money that we owe later. But we'd be living like people with more money than we have. Will this affect our eligibility for government programs like medicaid and food stamps? If we could get on those programs it would save us about $1500 a month that we would not have to owe later with interest... Right now we don't qualify but if DH quits his job to go to college our actual income would drop by about half, putting us squarely below the poverty line for our family size. Does having money that you will owe back later count as having money? (I feel like it shouldn't but I want to make sure. There's QUITE a difference between borrowing to cover rent and tuition, and borrowing to cover rent and tuition and health insurance and food)

If you are going to qualify for Medicaid and food stamps, you will likely qualify for financial aid. Especially if he is going full time and will be pursuing an undergraduate degree. Did you look into that at all?

TwinsMommy

Thu, Jul 25 2013, 9:51 pm

My husband and I both did student loans--- we were young and stupid and didn't get educated on any other options. Everyone was doing grad school straight out of university and so did we.

We're 39 with 2 kids now. (we had the kids before financial stress hit). I paid off my student loans but have left the field in which I have my masters because I needed more money and more flexibility. Hubby still owes $70,000 on his student loans and he makes about $20,000 a year. Yes, you read that correctly. He used to make triple that AND have health insurance but for years now we've had no health insurance, we've relied on me having an income and because we refuse to leave where we're living, he took the job he could get. On his income alone we'd probably qualify for government assistance some months.

(no health insurance because I'm self employed, we both have pre-existing conditions and private pay would be $1200+ per month--- we DID do that for some years, but ICKKKKK, that's MORE than the student loan payments!)

If we had to do it over again I wouldn't have gotten a masters at all, and he would have gotten a completely different one. I will always recommend lots of life experience first and THEN going back to school IF the couple can make it on one income without going to government benefits. At this point I'd love an MBA, but given our situation I can't not work and we can't take out more loans and at age 39 we've never even owned a home. (we rent--- thinking about buying soon).

In your case I'd probably say it's not the right time since it sounds like you can't cut your family income in half without going to government assistance. If you are able to cover all family expenses and he can quit working THEN taking a loan for his schooling might be a good option. But at this point, I'd say no.

Does he want to purchase my master's degree? I'm not using it. Smile

So nu, what's the dream career?

amother

Thu, Jul 25 2013, 9:53 pm

OP here. Thanks for sharing.

DH's passion is medicine. He toyed with other ideas to see if they would satisfy him to some extent, but it really seems that other fields will neither fulfill him nor be lucrative enough to justify the lack of fulfillment. There is NOTHING you can do in medicine without a real college education, as far as I know. I draw the line at full medical school; too much work and expense. We compromised on Physician Assistant - considerably less schooling, still medical, pretty well in demand, and pays well enough (I think the average is supposed to be somewhere between 90-120k) So there's good reason to believe (hope?) that we will be able to repay the loans. However we still need to go on living both while he's in school and after, so the loans would have to be big to cover that, and we wouldn't be able to repay them all at once because much of the income would have to house and feed us. And there are no PA programs that aren't full time where you must follow the schedule with your cohort - no two classes at a time at nights while you keep your day job. There is one program that is in the evenings but it cancels itself out by costing about 3 times more than less expensive programs, and even that is only evenings for the first year and a half - then you have to quit your job and spend your whole life doing clinicals.

So, it's not like $100k for art history, but it's also much more than $30k for engineering. We did a little sketchy math and to meet our living expenses we would need about $30k PER YEAR, above what I make in my own job (and living a stressful life with a husband in college full time is not going to be a time for me to take on extra side jobs, even if I hadn't already tried that without success). That's much more than you can get subsidized. If the idea of loans was starting to warm up to me, the actual numbers are when the panic sets in! I hear "a total of 120k over 4 years at 6.8% interest and don't know how many years to clear it" and dive under the covers with my hands over my ears!

I've always had that philosophy of "better to take work beneath your dignity than to go into debt" except right now we're in a position of not making ends meet even with all kinds of attempts to make a living in various non-degree pursuits. It is just not working out. This seems to be the only way out and up.

I think he would do excellent in college. Until now he has been in kollel (besides his job attempts) and is considered quite the illuy. He also knows a lot about the sciences in addition to his Torah learning (average kollel guy might know the laws of kosher, but he truly understands the exact anatomies and pathologies of animals that would affect their kashrus; the botanical background of tens of plants that impact the questions of haadama vs haetz; the origins of ingredients of questionable kashrus and their chemical functions in products... I think he could do great in engineering or botany or anything but PA is the profession that is calling him... anyway, point is he is brilliant) Everyone he meets is impressed with him.

Federal subsidized loans are limited (I.e. not NEARLY enough to cover our expenses) and unsubsidized says the interest rate is 6.8. Your debt grows by 6.8% even while you're still just starting college?! AAAAAUUUUGH. And that's considered a small number?!

I don't know how to figure out if it's worth it. It just seems like the only way to go Sad

We're very stuck, otherwise. Stuck in dead end, low paying, unfulfilling jobs, with rising expenses. I guess it's better to go into debt in the name of having a paying profession a few years down the line, than to go into debt just to live until tomorrow. What

Is there any gemach for interest-free or low-interest or deferred-interest student loans? If not, I think it would be an excellent investment for the community. With all the organizations trying to help people with jobs and businesses and what-have-you, this is another piece of that puzzle. And it's not charity down a hole, it's a loan with a pledge to repay. Anyone know where I could access something like that?!

I did look into financial aid but it seems to be very limited. Most of the schools we're looking into, the financial aid part of their website basically just says "Yay! You might qualify for subsidized federal loans!" But I will send DH down to their offices to see if a financial aid counselor can help any better. He doesn't qualify for PELL grants because those were used to pay his yeshiva tuition (whose credits we hope to use to get him through a chunk of prerequisite requirements)

amother

Thu, Jul 25 2013, 10:06 pm

TwinsMommy wrote:

So nu, what's the dream career?

Seems we were posting at the same time, TwinsMommy. I have read your story before around imamother and it's one more in my bank of "student loans are stupid" feelings. Ouch!

He doesn't have TONS of life experience but he does have some. He has worked a little in related professions as well as some different types of fields, to know that this is something he's more interested in.

I'm not sure where I wrote something unclearly, but we would not be cutting our income in half. DH's current scrounging-for-work makes less than half our income. But going into college would preclude him from seeking/taking a real job during that time. He also helps a lot around the house, which I don't think he'd be able to continue while in an intense college program, so we would have to factor in some convenience expenses like cleaning help. I work and have a stinky tiny 24-hour clock and have kids, and there is no way I could manage without it.

As it is, we are already not making it. This is not a matter of leaving something that works and taking on loans to go to college for fun. The situation is "Nothing is working. We are not making it. Maybe we should stop what we're doing, take out a loan, and go to college so that maybe someday we will make it."

Whether that is a good idea, I am thoroughly unsure.

amother

Thu, Jul 25 2013, 10:16 pm

amother wrote:

This.

Maya wrote:

Quote:

And this.

amother

Thu, Jul 25 2013, 11:54 pm

Wow! I feel like you are writing the story of my life.
My husband is in school now hoping to become a PA, after many years of Kollel. It was a very hard decision, but he is very happy right now and really enjoys his studies. I honestly can't imagine him going into another profession aside for medicine.

From the research that we have done, I would say go for it! Take out the loans and do what you have to do. The way the healthcare in this country is heading, PAs have a very bright future. Also, I'm assuming you live in the NY area, but I have heard that salaries can go into the mid 100,000s in other states if you would eventually be willing to move.

Is there anyone that can help you out a little? We have family that has agreed to pay for the ungraduate part while we will take out loans for the graduate degree. Also look around at all the schools, there are huge differences in the prices.

One last thing, don't assume that his yeshiva credits will get him much. From 13 years in yeshiva, my DH was able to transfer about 30 credits.

Good luck!

amother

Fri, Jul 26 2013, 12:18 am

amother wrote:

*&%$ about the credits, I know there are prerequisites for PA programs but I was hoping that yeshiva credits could fill in just about everything else.

What school did your DH choose? Can you help me make sense of the choices? Which ones did you consider? I know there are huge differences in price; he originally was thinking Touro but that is $$$,$$$ so now we're thinking SUNY which is more like $$,$$$... not really sure what else to look into, whom to ask, etc.

And what do you mean undergraduate/graduate? MOST of the PA programs my searches turned up are BS (Touro is combined BS/MS) and you don't need a master's to become certified and work as a PA. DH spoke to a current PA who said the most important thing is get yourself into the field as soon as possible, because the first criteria for getting a job is licensing and then the next tends to be experience rather than advanced degrees, so just jump into getting experience. But if there are other perspectives, I'd love to hear what you researched and found because I don't even know where to start (and this is after considering this for half a year already!)

Moving out of NY is possibly an option AFTER graduation, but not before, because I have a decent job here that I can't give up until DH is considerably more employable. So unless there is something extremely compelling, colleges in other cities are not really on our radar right now. Maybe if we could find a good, inexpensive college, plus lower living expenses, plus a great part-time job for me... yeah right, may as well just stay put and save ourselves the move and adjustment.

We have family that will help but it won't be nearly enough (don't get me wrong, we appreciate it TONS, I'm just being practical by saying that we will need lots more. Not unappreciative at all. Just trying to figure out where the gap will be made up) They VERY GENEROUSLY offered to pay his tuition to a place like City College AFTER applying for financial aid from the govt and college, but even if he does go there (but I am very not sure it is the right program for him at all) there is still the huge issue of our living expenses. And if he goes to a pricier college then there's the difference in tuition plus our living expenses. Plus commuting and textbooks and all that.

Any way we could talk off the forum about PA-specific stuff, and leave this about loans in general? Maybe we could start a new thread, or one of us could post an email address or screenname...

amother

Fri, Jul 26 2013, 12:24 am

Dolly Welsh wrote:

amother wrote:

No way. His personality is very not salesman. Not businessman either. He needs to be a regular salaried employee.

So, he is technical but not a people-y person? Maybe a technical or medical editor, writer, or medical or technical information specialist or archivist? A specialist in medical billing? If he can draw, a medical illustrator? Or a pharmacist? Podiatrist? Physical Therapist?

School Administration person, whether in Admissions Department, plant maintenance, records keeping, Registrar. Perhaps in a medical school setting. Those are good jobs. And, if you work in a university, you can take courses for free! Or pay a greatlly reduced rate.I am not trying to throw cold water.

He is good with people but not with sales/business. More bedside manner kind of good.

Tell me how you become a medical editor, writer, or illustrator without any medical education Scratching Head

Oh and also how you send frum kids to school and marry them off on the salary of a writer, editor or illustrator? Any kind of record keeping, registrar, administration type stuff would bore him to death besides not paying so handsomely. This is what we're trying to avoid by letting him follow his passion.

Pharmacist we considered, it has all the same problems as PA with less of the job prospect (very intense, long, expensive schooling but not predicted to have tens of thousands of new job openings over the next decade, like PA does). Podiatrist is a type of doctor, as far as I know, and if we can't swing PA school we sure aren't doing medical school. Physical therapist was also considered but it has no advantages over PA either - I don't remember whether it requires a doctorate level but certainly masters, including a science/medicine-specialized bachelors. So if it's all the same amount of schooling, he'd rather just be the PA already.

Thanks for trying...