Taking out student loans to pay for college is one of the biggest — and for many, scariest — financial decisions young people will make.
When you factor in the cost of advanced schooling, like master's and professional degree programs, it can be enough to make anyone feel a bit sick. That is certainly the case for one New York-based, 33-year-old financial professional who had over $100,000 in student loan debt after getting his MBA.
Below, he shares his story.
I work in corporate finance. I build budgets, track financials and KPIs (key performance indicators), and help make investment decisions for my business on a daily basis. I get numbers.
But in 2011, I received my MBA and $100,000+ in student loans that came along with the degree. Fortunately, I had a solid internship in management consulting and a finance job waiting for me upon graduation. I could "afford" the loans.
Still, when I made my first payment, I threw up in my mouth a little. Every time I make a payment I do.
Five to six years ago, I got fixed rates of 6.55 percent and 8.25 percent for my subsidized and unsubsidized loans, respectively — 8.25 percent!!! Umm thank you, government, for helping to fund my education ... and you're welcome, loan defaulters, for covering your risk.
While many would tell you that MBAs are the safe bet as compared to other graduate degrees, the rates that the U.S. federal government provides for advanced degrees are the same across the board. So, where six-figure salaries and (comparatively) low likelihoods of loan default are fairly common for MBAs, the same cannot be said for postgraduates with master's degrees in psychology (no disrespect).
In other words, the government charges a premium to all borrowers to cover the risk of those who default, which is why the rates are so high. At least that's what I was told.