Graduate Financial Aid

I’m sure you’ve heard that a Master’s Degree is the gateway to a greener tomorrow, and it’s true. Statistics support the fact that more education equals a higher base salary. But do you really know why MBA holders get paid the big bucks?

I used to be one of those people who would walk around saying it’s just a piece of paper, and that I can do whatever that guy can do. Actually, I still kinda believe that. Partly because while a student is sitting in a classroom learning the subject matter, real world solutions are changing by the minute. So while I agree the lesson is important the solution is not always viable.

Sometimes it’s more about the people than the piece of paper itself that makes the difference in landing that high paying job. Many employers essentially let the colleges do the employment screening for them. They figure to get into grad school you needed to take an entrance exam and have solid letters of recommendation. Clearly you are motivated, they surmise, so they hand you that job based on your previous academic commitment. The fact is in most instances you need to learn the business you are joining from scratch. Everything doesn’t fit neatly into a classroom box.

So while you learn powerful tools that will help navigate your success in grad school, it is not always those tools that help you land your next job. However, that piece of paper serves as your boarding pass.

If you need a graduate Stafford, Plus, or Private school loan (click here).

Monday Rant!

Why do graduate students need to submit letters of reference? The official reason is that letters of reference are designed to promote applicants qualitative abilities. What the school hopes to discover is specific descriptions and examples which illustrate a students potential to make a difference in the world. Personally, I find this part of the application process laughable.

Depending on the school, you’re required to submit 2 to 3 letters of recommendation. This antiquated, and in my view, irrelevant practice should die like the hornets in my gutter as any student with good grades can get a professor to essentially type a form letter.

If you’ve been out of school for a lengthy period of time you’re allowed to use work/personal references. I know three graduate students who actually typed their own letters of reference and then had their references sign it. The process is a joke and the professor’s many times are a joke too.

Having to rely on incompetent professors to ensure your entrance into these programs is simply ludicrous. Perhaps this process works at top tier schools where professors enjoy ego stroking themselves and their top students, who in turn enjoy the attention and need the validation; but at the State level the requirements should just be one letter of recommendation sent by the professor’s choice of media (I would say do away with the reference completely but I know that won’t happen).

Anyone who has gone to school knows that professors can be absent minded. My one reference requirement allows you to hedge your bet. With a one reference requirement you could ask three professors to write a letter, knowing that one would come through and not hold up the process for you. The extra letters (assuming they actually did them) could then be optional.

I realize schools are trying to delineate between worthy candidates, but the reference letter devalues this process. You might as well pick up a magic 8-ball and shake away. Will I get into graduate school magic 8-ball? “Ask again later.”

You know the market is tough when Harvard University is holding seminars on how to handle rejection. Yep, I’m afraid the days of the red carpet being rolled out for freshly minted college grad students are gone – or at least temporarily suspended.

Many experts advised while the job market was slumping it would be prudent to go back to school, beef up your skill set, get your MBA, and resurface ready to market yourself and land that high paying job. But those dreams appear to be just that – dreams.

What graduate students find awaiting them now is a heap of student loan debt and an even more competition job market than when they entered grad school. In April of ‘07 the unemployment rate was at 4.5%, opposed to the staggering 8.9% we currently see today (the highest it’s been since September ‘83). As good as your alumni network is you’re asking a lot to land a high paying job right now. More polished candidates with years of experience are scooping up those jobs, and doing so for thousands less than their degree would have garnered them a few years ago.

Things will turn around as Warren Buffet said earlier this year. “Amid this bad news never forget that our country has faced far worse travails in the past…and we’ve overcome them.” Buffet was referring to the two World Wars and Great Depression that has plagued our nation. But those words ring hollow to those who don’t have a billion in the bank. For them the future can’t get here soon enough.

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At this point we’ve all heard the statistics. Graduate students on average earn between 15-20% more per year than those with just a bachelors degree. But what no one discusses is the mountain of debt many students find themselves in as a result of said degree.

However, the debt is manageable and worth it if you land the right job out of school. But in this tough job market many are accepting lower paying jobs than their degree is deserving of which is making it challenging to make ends meet. Fortunately federal student loan payments are going to become a bit more affordable later this year.

Under the College Cost Reduction and Access Act borrowers will be able to cap their monthly student loan payments at a reasonable percentage of their income. The plan takes effect July 1. It is an Income-Based Repayment program that caps students and borrowers monthly payments at just 15 of their discretionary income. Any current or future borrower whose loan payments exceed 15 percent of their discretionary income will be eligible. After 25 years in the program, borrower’s debts will be completely forgiven.

One word for you. NO! You’ve got to love the financial aid forum where people post questions freely and ask me for my coveted advice regarding their financial aid and their student loans. I recently received an intriguing post that I thought should be shared with the general student population:

To Whom It May Concern
I have a question about paying student loans. I attend graduate medical school and now in debt of $200000. But I want to drop out since I dont feel it’s the right field for me. I wonder if I drop out and come back for school for accounting degree. How can I pay off the loan? Do they have income sensitive payment? If I cannot pay the loan can it be cancelled? Thank you.

I did not make this post up. And believe it or not, this poster is not the only one who is in this situation. I just don’t understand why it would take you $200,000 to realize that it is not the right field for you. $200,000 is a A LOT of money. It results in a student loan payment of $2300 per month. This is a classic example of someone who borrowed money with no concern about how it would be paid off. Blind borrowing I like to call it. It’s not smart and it hurts no one but yourself. This person (unless they win the lottery or inherit some serious dough) will probably default on the loans…because $2300 is a lot to have to pay per month. Heck, if he/she consolidates the loans the monthly payment would still be $1500 a month. Now I made some mistakes of my own (don’t we all??) and I am paying for them now. But my mistakes are manageable…200k is just way too much debt to take on if you aren’t 110% sure of the profession you are borrowing it for.

So for anyone else who has this problem…PLEASE know that you are responsible for paying that loan back even if you can’t afford to pay it. You can put the loan payments on hold for 3 years give or take but all in all you will need to pay that loan back. The results of not paying it will leave you financially paralyzed. You will not be able to buy a house, lease a car, or in some cases get a government job. Your tax returns will be seized and your paycheck can be garnished. This is not something you can sweep under the rug.

Is anyone else in this situation? Are you regretting the decisions you made? Please share your story and leave a comment….you might be able to save someone else from going down that same road.

Marketing yourself is the name of the game, and having an MBA is the equivalent to a flashing neon sign in a pile of bachelors degrees; it stands out.

Yes, other variables are considered when a hiring manager is looking for the right candidate. Experience, how you present yourself in an interview, and if you were referred by someone at the company are all important factors, but wearing that MBA crown is undoubtedly the best chance you’ve got. Imagine if they had an actual MBA crown you could wear, or perhaps a huge wrestling style MBA belt? Now that would be priceless!

According to a recent article in the Pacific Business News, MBA’s degrees are holding their value among young professionals. Nationally, MBA graduates on average earn $106,000, according to a survey by the Graduate Management Admissions Council. MBA’s open so many more doors.

My friend Brian who is an MBA student, not a graduate, landed a paid internship with an excellent company in Boston last month. They liked the fact he was enrolled in an MBA program. It’s a great way to spark up a conversation. I have a BS in Economics, but am currently studying toward my MBA in International Management. Now that has some cache. Sometimes just taking that one class can open an unexpected door. And once that door is open you can have some real fun.

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I am the moderator of a financial aid forum where students post all sorts of questions regarding their financial aid, their tuition, and basically anything else that relates to college. I recently have been seeing a lot of posts about how to cover graduate school programs, and even in some cases undergraduate programs that will cost in excess of 150k-200k. All I have to say to that is WHY? Why would you do that to yourself?

One person who posted wanted to go to Vanderbilt because it has a good name and a good reputation, but it was going to cost her $200k to get a bachelor’s degree; and when I say cost her, I mean that she has to pay it all…she didn’t get scholarships from the school, or grants from the government. She simply wanted to go to Vanderbilt and borrow $200k to complete her bachelor’s degree there.

It is one thing if you get in to a reputable school and they offer you an action packed financial aid package…leaving you with maybe $20k to pay a year…that is doable, but to borrow that much for a bachelors degree is just absurd to me (and I think it is just as absurd to borrow that much for a graduate degree as well). $200k in loans will give her a monthly payment of at least $1300, and that is only if she consolidates and stretches the loan out to 30 years of repayment. On the standard 10 year repayment her monthly payment will be $2400. There goes her financial future.

I recently filled out a Stafford loan entrance counseling form…and they had this neat little page that asked me how much I was planning on making per year once I am done with school. It also asks you how much you are planning to borrow. With a student loan debt of $35K it advised me that I would need to make at least $45k a year to afford my monthly payments. I have always said that people borrow way too much in loans when the degree they are getting will not provide them with a salary large enough to pay off their loan debt. A friend of mine is getting her graduate degree in teaching, and she is borrowing 60k to get it. Do you know any teachers that make upwards of 75k a year? Some teacher’s might be lucky to make this 10 to 15 years into their teaching career. So what will they do for those 15 years when the loan collectors are knocking on their door?

What are you willing to borrow to get the degree you want from the school you want to get it from? Where is the line drawn? Let’s hear it people.

Join the forum! I need help replying to posts, so if you feel confident in your financial aid knowledge or you just have a lot of experience dealing with the happy folks in your Financial Aid Office PLEASE JOIN.

Redeem your points!!! Code: EXCESSIVEBORROWING101

My friend’s girlfriend Jenny is attending Grad School and has been approved for a Graduate Stafford loan for $20,500, which is great. However, she may be eligible for the Teacher Education Assistance for College and Higher Education (TEACH) grant for up to $4,000, which would be even better. This grant is designed for students who intend to teach in a public or private elementary or secondary school that serves students from low-income families. The program was rolled out in 2008-2009. The conundrum Jenny is facing is how much money she should request.

Let’s say Jenny needs $10,000 for her Grad classes, has been approved for up to $20,500 in federal loans, and may receive up to $4,000 for the TEACH grant. How much money should she request?

Answer : $10,000. Request the highest amount you may need to cover your tuition. In this case we already know that figure is $10,000. The financial aid office at the school will notify Jenny at a later date, but before classes begin, if she will receive the TEACH grant, and if so for how much (the grant is based off your FAFSA and specific high-need area of study). So what if she finds out she is getting a TEACH grant for $2,000 right before the semester starts? Jenny has already requested $10K, and it is not prudent to take out more than you need.

Answer: Send the additional funds back. You may cancel all or part of your loan at any time by notifying your school before your loan is disbursed, and within certain time frames after your loan has been disbursed. These time frames, and procedures for canceling a loan, will also be explained in notices that the school is required to send you. In this case Jenny would be sending back 2K as she would only need to borrow eight thousand to go along with her grant money.  That means Donald Duck is hauling $2,000 back to the bank.

You’ve finally decided that now is the right time to get that graduate degree. You’ve put it off long enough and are mentally ready to commit the time and effort required. But before you get snug in that lecture hall there are a few t’s that need to be crossed and i’s that need to be dotted.

1) Admissions Test: You’re not getting in to any grad school if you haven’t taken your admissions test. Your major will determine which test you need to take to get in. Obviously if you’re a business major you’re not going to be taking the PCAT, which is the Pharmacy College Admissions Test. Instead you will need to take the GMAT. If you are unsure which admissions test you need to take read Knowing Your College Test (1 of 2) and Knowing Your College Test (2 of 2).

2) Selecting a Grad School: Find out which schools offer your graduate program. That may sound rather elementary but you’d be surprised how many students have their heart set on a particular school only to learn it doesn’t offer their program. U.S. News & World Report offers grad school rankings by location, tuition, school size, and test scores.

3) The Mighty Dollar: How much is this going to cost? If your company is not picking up the tab will you be able to afford the monthly payment when you get out of school? The Graduate Stafford loan and Graduate Plus loan are the most common loan options utilized.

4) Job Prospects: Perhaps the most important thing of all is knowing where your degree will take you. I know these days it is hard to predict with the economy in a state of flux, but knowing the demand in your field is important. You want a degree that will open doors not keep them closed.

Monday Morning Rant…

President Obama’s recent plan to eliminate private lenders from the private student loan market would be damaging to students and take away a students right to choose.

At present there are two primary lending options for students; the government’s in-house program and private lenders such as Sallie Mae, Suntrust, Discover Student Loans, Wells Fargo, Bank of America, and Citigroup to name a few. Obama’s plan would move all federal loans such as the Grad Plus and Graduate and Undergrad Stafford loans over to the government’s in-house program leaving private lenders out in the cold.

The private sector has been supplying funding for students for years and now, by 2010, the government could pull the rug out from underneath them if Congress gives the O.K. This would have a crippling effect on the public sector costing thousands their job.

Having options is what makes this nation so great. If we didn’t have Burger King and Wendy’s than McDonald’s could charge $6 bucks for a cheeseburger with no competition. What kinds of fees will the government be attaching to these loans? What type of borrower benefits would exist? Private lenders help the student loan industry, not hurt it.

I don’t know about you, but I don’t want any one entity monopolizing the federal student loan industry. As a consumer I want options.