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student loan debt for architecture school?

j

excellent question - it's a personal decision. first, mortgage interest is tax deductible, so that will be the last debt i pay off. next, if i had credit cards, yes, i would pay them off before the student loan, but i don't.

i'm not going to borrow money to invest in the market. some do; i don't. could i borrow money at 3% and feasibly get a 10-12% return? yes. but i'd still have to pay taxes on the interest and i'd be exposing myself to more risk by holding on to debt that i don't need.

3% on $50k over 30 years isn't even close to free. i know that when you do the math, i would likely come out ahead but, again, there is risk involved. i won't fault anyone who decides to do something different, but i just don't want my stupid student loan hanging around forever.

Apr 3, 07 9:32 am
laura lu

26k from B.S. in Architecture- 4 year state school, + 107k from M.Arch, 3.5 year private school. Total $133,000. Monthly payments for 10 year plan is $1474. Currently down to $104k. Working as many side hustles as I can to pay it off much sooner than the 10 year plan!!   

Jan 19, 18 9:30 pm
Non Sequitur

100k for a M.arch.... wow.

accesskb

$1474 each month for 10 years... YIKES!!!!!!!

RickB-Astoria

Change the payment plan process. You need more than 10 YEARS. The amount you would be paying is disproportionate to your income unless you are making like $90,000 to $100,000. Federal student loans are capped at 10% of your disposable income which means you will need to be earning close to $180,000 to pay that much off a month. At this point, you will be consuming half your income. You won't even be able to pay rent, utilities, taxes, and also pay for food at that level. There is something SERIOUSLY WRONG with that picture unless you are telling them that you are earning $180,000 a year. I would beg the question, why the hell did you not just save up for 3 years and then pay for your private school education out of pocket? Get this loan payment restructure so you can pay it off in amounts you can actually afford on a $35K to $65K a year income. I'm curious how you will pay that off in LESS than 10 years. Are you earning a passive income from inheritance or something?

@RickB-Astoria. Totally agree that the amount is insane! I actually do have payment plan switched to income based to give me some flexibility in case I can't make payments. And I deferred them while I was laid off an unemployed for 3 months. I'm glad mine are all federal loans and not private. But for the most part, I've been able to pay the 10-year plan amount or more each month. No, I don't have an inheritance (Thank God no deaths in the family recently!) I make 46k at my day job. I live in a city where I can rent a 1 bedroom apartment with my boyfriend and my half of the rent is $350. I picked out my apartment and job so that they are within biking distance. I don't own a car. My expenses are just really low. I'm intentionally delaying having pets or kids or buying a house. Any money that I make at my side gigs (teaching at the local University & consulting) goes directly to my student loans.  If I just made the income based payment each month it wouldn't cover the interest. At the end of 20 years when I was forgiven (if the government doesn't change its mind) I would pay income tax based on an amount that would be more than the original principal. So I will pay as much as I can and become debt free as soon as I can in move on with my life. And no I would never recommend anyone go into debt for school! Saving up and paying cash for a cheaper school is what I would've recommended to my younger self!

JBeaumont

Rick the 10% cap is only for those who borrowed their first loans fairly recently and have certain types of federal student loans. For a lot of us the IBR cap would be 15%, which makes the minimum payments considerably higher. In any case people should be careful about IBR, because in the long run it's a very expensive proposition. It's ok for temporary reduction of payments in your first few years of low-paying jobs, but continuing in IBR is a bad idea in the long run.  If you just keep paying the income-based amount, and that amount stays considerably lower than the 10-year based full payment would be, then in the long run you'll end up paying back much more than you borrowed AND you'll still have a balance that gets forgiven at the end of 20 or 25 years (depending on when you took out your first loan), but you'll end up paying taxes on what's written off that year, as if it were income. Example: if your full 10-year-based monthly payment is $1000 but your IBR payment is only $400, and you pay that for 20 years, you'll pay 96k over that 20 years - but because you were barely touching the principal, and interest continues to accumulate after the first 3 years, you end up at the end of 20 years with >100k still due at the end of the 20 years, which gets forgiven, and then you get taxed on that >100k as income, all due in one lump sum in that 20th year.

JBeaumont

Also only FFEL loans can be consolidated or otherwise restructured into loans that will qualify for the 10% IBR plan. Those of us who started our educations long enough ago that we had other types of subsidized federal loans, or first consolidated prior to IBR, usually don't have the option to restructure in a way that qualify for the 10%-based IBR, PAYE, REPAYE, etc. in the first place.  Some of the older federal loan types qualify for 15%-based IBR, and some don't qualify at all.

RickB-Astoria

For a time period older than most anyone is alive to remember, there was still a top limit of about 20% or so of your income because. This doesn't stop a person from voluntarily exceeding what the IBR amount is in paying off. Such as the option to outright payoff loans from your loan servicing entity such as MyFedloan.org site of Fedloan Servicing. The issue is you have to be careful not to overwhelm your financial capacity to payoff the loans and then they get into a nasty attitude on your credit score.

RickB-Astoria

Laura happens to have her loans recent enough to fall into the 10% rule rule in the IBR. It seems the amount is awfully high to the income level. Just my thoughts because you wouldn't want to be saying that your income is that of the managing principal. She might be able to pull this off IF she has the income and cost under control.

Non Sequitur

... and people still force themselves to believe 100k for an M.arch is a wise investment. Fools.

JBeaumont

Rick I'm writing from experience on this:  there is no "20% cap" on some types of older student loans, unless you consolidate them for 25+ year terms.  I'm not talking about loans from before most on this forum were alive.  I had loans from my undergrad degree (early to mid 1990s) for which this was the case.  They were federal subsidized student loans, but do not fall into the FFEL category.  Those loans have a 3-year cap on income-sensitive repayment, after which they go into full payments regardless of income.  They can be consolidated if you also have more recent loans, and then once IBR came along in the mid 00s that let them go into the 15% category - but only if you put them on a 25-year or longer repayment plan.  They can't be consolidated or restructured in such a way that they can ever go into the 10% category.  Laura doesn't say what year she first borrowed in.  Generally the first loan type that you take out, in the earliest year that you borrow, greatly affects how you can consolidate and whether you can qualify for IBR, PAYE, REPAYE, etc.

Jan 21, 18 2:32 pm
RickB-Astoria

Lets just start with something more simple. She first borrowed around 2007. A quick google search and comparison to her name and face..... resulted to her website with a resume. Those older loan types you are talking about will likely not exist.... most certainly not part of her graduate studies which began in 2011.

http://www.lauraschmitzdesign....


JBeaumont

If she first borrowed in 2007 then she's in the 15% IBR category, and forgiveness would happen after 25 years of payments. I think her plan to pay this off in less than 10 years by living frugally and taking on additional jobs is a much better plan than paying 15% of her income every month for 25 years, and then still owing income tax on an amount that's likely to be near or possibly even in excess of the original principal when she gets to the end of it.

RickB-Astoria

I think so.

Formerlyunknown

For me grad school resulted in much less debt than undergrad.  I didn't have parent support so in undergrad I took out about 40k in loans.  For my M.Arch I got grants for most of the tuition, and was a TA in most semesters and had a part-time and summer job in a local architecture firm so all of those things paid most of my living expenses.  I had 14k in loans over the 3 M.Arch years.  The grad school loans were all Perkins loans, so pretty low interest and I repaid them within a few years of graduation.  The undergrad loans were more problematic - they were from the 80s and 90s when interest rates even for federal subsidized loans were in the 8% to 11% range so the payments were much steeper than they would be now for the same loan amount.  There wasn't any Income Based Repayment or any of these other plans to limit payments at that time. You could apply for a hardship deferral if your income was sub-poverty level, but then interest would still accrue the whole time, so you'd be much worse off after the deferral maxed out.  There was a rule back then that people working in architecture firms full time and enrolled in IDP could defer their payments and interest for their first 2 years after graduation, so that was helpful, but that policy went away in the mid 1990s. I consolidated for lower payments, but then tried to double up on payments whenever I could so that I wouldn't end up in repayment for 20 years, and ended up paying them all off in less than the original 10 years by living/working in a fairly affordable mid-sized city during that time.  I don't regret the schools I chose or the route that I took, but I do kind of wish that I'd gone to school a decade later when interest rates were much much lower.

Jan 21, 18 3:41 pm
RickB-Astoria

Right on there Formerlyunknown. $38K in loan payments during the last year so as to make it a bit smaller. I'm for the most part way the hell ahead of schedule on those loans.

Formerlyunknown

Huh? You have more than 38k in loans from 2 or 3 years at a state school, when you went there in your 30s after running 2 or 3 businesses for more than 10 years and living with your parents? I imagined you had a pretty healthy savings account built up at that age to put toward college and wouldn't have had to borrow. What do you spend your money on?

RickB-Astoria

Lets see, when I was at the university, I wasn't living at home. Lets not forger in 2011 to 2014, we were still in the recession and crawling out of it. My principle office in Astoria and still also had operate in Eugene, Oregon as well in the midst of the recession and had to pay in advertising services in two areas. I also had to get some new equipment, new software, etc. The original principal amount from the direct loans were about $35,800. That's is for 3 academic years. The recession was in full swing at the time and we hadn't really got out of it until about 2015 to 2016. Some areas starting feeling the recovery sooner but where I was, the simple answer is.... no. As for my savings, I'm not using it all up at the time of the recession because I was not entirely sure how long and bad it was going to be. Lets not forget that I spent money out of pocket for my classes at the community college since 2003. Therefore, I was not on financial aid for my CAD education and historic preservation education at the community college.

I also spent money on books and resources for teaching myself architecture, engineering and so forth as well.


Formerlyunknown

Where did the 38k come from that you put toward paying it back this year?

RickB-Astoria

To what extent do you think pays for in some part of the student loans.

Formerlyunknown

It still doesn't seem like the math works out. Community college tuition was what... $100 or so per credit? So even if you took 36 credits a year, you'd only be paying a few thousand dollars a year. It seems like you should have had about 18 full-time earning years at this point, right? Even assuming 8 of them were spent primarily as a student and had little or no income, what about the other 10? You live at home so probably have minimal rent. You say you don't really socialize, you talk about living on ramen noodles... you'd have to be spending a hell of a lot on books and advertising to use up 10 years of income. Do you have some sort of expensive hobby, or habit?

RickB-Astoria

Let me put it like this for you, the student loans isn't for community college. 3 years at university and it's not the tuition but paying for the living expense and misc. expenses that is the real bite. The university was from September 2011 to mid-to-late June 2014 but effectively paying for remainder of June 2014. My building design business was only open regularly from 2005. That is only 5 to 6 years time for saving money but I wasn't just saving money. I had my business and business overhead expenses. I was also paying for college classes during that time frame out of pocket. 

My software work from prior to year 2000 when I first took classes at the community college, much of that work was most financially active in the 1987 to 1997 time frame in video game development (1985 to 1987... to learn programming and video game design/development). By 1997 to 1998, money from that work became just a trickle to nothing.

Between 2000 to 2005, I was doing a variety of computer / software work. A little overlap with my building design work in 2005 to about 2007 other than an once in awhile small video game or demo project or something. In 2005 to 2007, other than a degree in computer programming and networking, I was primarily working on computer software applications, utilities, networking work. It wasn't big fanfare stuff like video games. 

Lets remember, this was during the time of the dot com bubble crash and immediately after the dotcom crash. This was before crowdfunding and usually big projects are financed by venture capitalists. You can imagine how that can effect business when they won't be financing big projects. Since I was working on smaller projects, it didn't hit me as hard as it did some but I wouldn't be totally immune to it. I stepped away from the video game industry mainstream by the mid-1990s because it was clearly apparent that video game development for the kinds of video games on Windows PC, Sony Playstation, and similar platforms would require substantial studios. Working without a substantial size project team in your employ would be very difficult to near impossible levels to compete in that environment. 

In those days, you either bootstrap and develop your projects on your own or you get venture capital. By the mid to late 1990s, large and complex projects that would compete in the video game industry at the time was almost exclusively venture capital funded. Non-VC funded projects don't earn much if anything. Remember, the internet was new and platforms for indie software development was not very good and didn't yield good sales. While there were some money from the time, then shifting from a product developer model business to a consultant model business was somewhat of a learning process with a train of mistakes to learn from. From 2001 and afterwards, I also began learning architecture on my own. I was learning about a new career field for myself other than computer programming/software development. It began as an interest that grew but in 2001, I wouldn't been able to say I would be in the building design business by 2005. In 2005 to 2008, I was working on some projects during that time and it was keeping me busy. 

By 2009, the effects of the recession was slowing down projects some and would be to be expected. You can't assume that from 2009 to 2011 would be great years financially. Since 2005, computer projects work wasn't anymore the main line work. In 2009 to 2011, I had to rely more on various 'jobs' in computers to keep the bottom line and balance sheet in order so I don't draw down the 'saved earnings' from prior years so to keep the balance. In 2011, when I went to University, I was using the loans but the overhead was going to increase so some level of draw would happen but also try to procure projects. You know being at university at full-time enrollment level would make it partly difficult to be as active. My intent at the beginning was to get an architecture degree so I can get the architect license at some point so I can work on more projects than what is exempt. 

Fast forward, 2014, I return back to Astoria but this also comes with some impact. You don't leave an area for 3 years without some impact. Recession recovery was slow and by the time people were ready to do projects, it was about late 2015. The bigger cities started seeing it a little before hand but the small towns like Astoria would be a little behind. Lets remember that the recession had caused the price ceiling in the marketplace to drop pretty low and fewer projects. This will impact ability to save up money. Therefore, 2009-2014 weren't really giving much room for building up savings. The bulk amount of saving built from building design was during 2005 to 2009. Other saving would be from pre-2000 and some during 2000-2005. Most of pre-2000 stuff was from earnings in 1991 to 1995. Much of that is effectively gone. As I said, SOME part of the student loans was paid using saved income. Some of it was paid using income from 2016 and 2017.

I have been also a student to varying enrollment levels for about 15 years out of the last 17 years. Some of them at FTE and some of it a 3/4 FTE and some below that level.

code

I paid for all my tuition out of savings - my Mormon neighbors told me I was not being realistic " you should put that money away for retirement" it was a great return on investment - a case were idealism won out over pragmatism 

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