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Debt and a graduate degree

Chris Farrell Jul 9, 2010

Question: I have been accepted to a graduate MSW [Masters Social Work] program out of my state. The graduate degree would take me a year to complete but will cost about $30,000. I already have about $30,000 in student loan debt already. I have no other debt but have only $35,000 between checking and savings. I have not worked outside of my home in 5 years (another long story). This degree will allow me to eventually get licensure as a private practitioner but also allow promotion beyond what my BSW undergrad degree allows. Help! I could have attended a program in my state for 1/3 -1/2 less but I’m just ready, really ready, to leave the state. Help Please! Shontale, Anchorage, AK

Answer: It’s clear that you’re ready to move to another state. And I don’t want to throw cold water on dreams orminimize your desire to move. But my job is to raise trade-off between risk and reward when you’re making an investment like this.

The goal is to boost your career in your chosen field. The question is how to best do that. It seems to me that it’s financially worth it to wait another year, get your degree at the much lower in-state tuition, and move to another part of the country with your diploma in hand a job waiting for you.

What’s more, if you go this route you can keep some savings on the side to defray the cost of moving. It always more expensive than we think to move, especially when you’re picking up and heading off to a new state.

That said, let’s turn to the numbers to help you decide the right course for you. The amount of debt you’ll be carrying is only one line of information. For instance, there’s a rule of thumb that says you shouldn’t carry more debt than your first years salary after getting your degree. So, what can you realistically expect to earn in the first couple of years after you earn a MSW? How is the job market for graduates with the degree? And what is the cost of living in the city you want to move to? A one bedroom apartment in Manhattan is about two to three times more expensive than a comparable apartment in Minneapolis, and Memphis cheaper than the Twin Cities. You can then set up a budget.

So, how much will you have to borrow; how much can you expect to earn; what is your budget while in school; and how costly will the monthly carry be after you graduate.

You can then make a judgment about how much debt it’s sensible for you to carry to get your degree. I would then compare the two financial scenarios and make your choice. But I still like the idea of getting your degree for $15,000 to $10,000 less by staying for one more year. Twelve months goes by quickly.

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