Should I be more concerned about debt?

[rangardrum]

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I'm assuming I'll pay ~$1500/month after graduation to pay off student loans no matter how much or how little debt I accrue (number of years will vary depending on total debt). I've already lived for years on under $20k/year without a problem (supporting myself 100%), so what remains on after-tax income (let's just say $45k annual post-tax income to be conservative) after $18K of annual loan payments would still be $27K...still above and beyond what I need to live comfortably in the Midwest, where cost of living is, by and large, much cheaper than at the coasts.

I'm not going to have children, and I don't require a house (or any expensive housing arrangement). Also, I only want a cheap and reliable vehicle to get me from Point A to Point B.

Am I overlooking any huge expenses that would make $1500/month payments impossible, or should I really not be too concerned about debt given my personal situation and lifestyle preferences? Perhaps it's strange, but I just don't have expensive tastes for, well, anything. I suppose the more negative interpretation would be that I'm cheap, haha! Given that, should I be AS concerned about debt as a person who wants a more expensive lifestyle? I'm not going into this profession for money, but rather for my genuine interest.

Obviously I'd rather have less debt than more, and I'm making cost of attendance a major factor towards my decision (still waiting on 5 schools to respond to hopefully give me an option). With less debt, I'd pay it off faster and probably just save any money that would otherwise go toward student loans.

 

[noyceguy]

Why do you assume you will have to pay $1500 a month in student loans?

 

[rangardrum]

Why do you assume you will have to pay $1500 a month in student loans?

Haha, I know that's really high. I'm just assuming I'll want to pay off debt quickly, even if I go to a cheaper school. Because of that, I think I'd be willing to pay at around that rate. There do seem to be several payment options for paying off debt though (including one that is capped at 10% of your income), so it's not as though people will have to pay that much per month.

 

[noyceguy]

So you are pulling this number out of thin air? Let's put it this way: how much money are you going to borrow?

 

[rangardrum]

So you are pulling this number out of thin air? Let's put it this way: how much money are you going to borrow?

$125,000 at 6.8% for 10 year pay-off plan would amount to $1438.50/mo. payments according to this calculator: http://www.finaid.org/calculators/scripts/loanpayments.cgi

At this point, I don't know how much money I will borrow. If I get into my first choice school, I will not have to pay tuition at all. Otherwise, I could potentially borrow over $100,000. Obviously I'm pulling for my first choice school! 🙂

EDIT: I should add that I'd prefer to pay off whatever amount I borrow in far less than 10 years if I can. Even if I borrowed $50,000, I'm thinking $1500/mo. would be a good target. In that scenario, I could be all paid up in as little as 3 years.

 

[noyceguy]

To answer your question, yes, you should be very concerned about taking on this much debt. Unless you are making a doctor or lawyer's salary, $1500 a month in student loans payments is excessive. Although you might not want a house now, you may later. You may marry later and have kids. You may need to purchase a car at some point in your life. No amount of frugality will allow you to live comfortably with a $1500 a month student loan payment.

 

[rangardrum]

To answer your question, yes, you should be very concerned about taking on this much debt. Unless you are making a doctor or lawyer's salary, $1500 a month in student loans payments is excessive. Although you might not want a house now, you may later. You may marry later and have kids. You may need to purchase a car at some point in your life. No amount of frugality will allow you to live comfortably with a $1500 a month student loan payment.

Oh don't worry, I'm not having children. I'm NOT a kids person. 😀

If I had ~48k in after-tax income (seems like a plausible and conservative estimate as a new PT) and make $18k in student loan payments (result of $1.5k/mo.), that's still $30k remaining though right? As I said earlier, I lived for several years supporting myself on less than 2/3 that amount without any hardship or stress at all. To me, that = $10k I don't even need.

If I need a new vehicle, I'll go for an inexpensive used car to last until I'm done paying off student loans (anywhere from 2-10 years max). I'm not really sure what, if anything, I'm overlooking as far as expenses go that would make $1500/mo. too aggressive considering my personal situation.

 

[noyceguy]

Good luck.

 

[rangardrum]

Good luck.

Hehe, thanks. I should also note that I don't have any other debt right now (school, credit card, etc.). I know that isn't the case with most people.

 

[pumpkinpatch]

Oh don't worry, I'm not having children. I'm NOT a kids person. 😀

If I had ~48k in after-tax income (seems like a plausible and conservative estimate as a new PT) and make $18k in student loan payments (result of $1.5k/mo.), that's still $30k remaining though right? As I said earlier, I lived for several years supporting myself on less than 2/3 that amount without any hardship or stress at all. To me, that = $10k I don't even need.

If I need a new vehicle, I'll go for an inexpensive used car to last until I'm done paying off student loans (anywhere from 2-10 years max). I'm not really sure what, if anything, I'm overlooking as far as expenses go that would make $1500/mo. too aggressive considering my personal situation.

Maybe if your life continued exactly in the same way that it's going along now, you might be right. Your aggressive payback plan is a nice idea, and maybe it'll work out for you. But there are a lot of things that could come up in life that might make this harder for you... you say you don't want kids, but sometimes it happens anyway! Maybe you'll fall in love with someone with slightly less cheap tastes, and you'll want to be able to make that person comfortable. Maybe a family member will have some sort of troubles and will need support. I have no idea what your personal situation is, but I think you get my point that unexpected things happen in life. If I were you, I would plan on not being able to make such large monthly payments -- that way if it ends up you can't, you're not in serious trouble; if you end up being able to do it, then more power to you.

Not to mention, you say that you lived comfortably on a smaller salary... this is good, but were you able to save? This should not be neglected!

But that's just me. It sounds like you're planning on going to the cheapest school anyway, which I fully support, so this shouldn't influence your decision. Your life will be different when the time comes to figure out a payment plan, so I would hold off on making set plans until then.

 

[pumpkinpatch]

Oh and by the way... I see that you're applying to Northwestern. Just the other day I actually looked at a loan calculator to see how much I'll have to pay back, and out of curiosity I put in the amount I would've had to pay if I went to NU. I approximated about $140,000 principle (which honestly, given all the extra fees you have to pay, books, expensive rent and living expenses in Chicago, and truly crazy tuition, is probably on the conservative side). With 7% interest (I have no idea what interest is on private loans, so this is a rough guess) over 15 years, it ended up being something like $260,000 in total.

You're looking at it from the month to month perspective of 'Can I survive off this much?' But don't forget the big picture perspective - that is some crazy money to spend on three years of school. You could buy a pretty nice house for that much.

(Don't mean to insult anyone who does go to NU or another expensive school - everyone's situation is different, and NU is an excellent school.)

 

[stopitmarcy]

this is just my opinion.....

but life should be about embracing everything it has to offer
i think people when they are extremely frugal now, they remain that way for a long time
its hard to get out of those ways because of all that you have accomplished
but what you may be forgetting is time
you can't buy more time
time is all that you really have
so you should take this "time" and enjoy it!
your youth!
travel!
pamper yourself!
explore what there is out there!
because before you know it, you'll be old, RICH, but no wanting to do much because... well youre just used to it.

just my opinion....

 

[rangardrum]

Excellent input from you both. Thanks!