Mormons are often told not to get into debt. But we are also told that two types of debt can often be justified: a sensible mortgage and student loans. Well, as in everything else, every kind of debt can be a millstone. Check out the story of this woman who ended up with $550,000 in student loans. She’s a doctor in her 40s. She will be paying off the debt into her Seventies. Meanwhile, her credit rating has been destroyed.
It’s tough to take any generic lesson from this story. Should you not go to medical school? Obviously not. Should you never take out a loan? No. Perhaps the only lesson is what modern-day prophets have been telling us repeatedly, which is to be extremely careful about debt.
To be fair, it was less than half that amount when she finished med school. Still a lot of money, sure, but a lot more manageable (especially for a doctor). What’s sad is what happened after–over $50,000 when the loan was turned over to a collection agency, etc.
I’ll probably be $30,000 to $40,000 in debt when I finish law school. The first two years is entirely subsidized loans (a great deal for grad students). Part of me wishes that I would’ve borrowed money for my undergrad too, instead of working through it to pay my way. I could’ve finished a lot sooner had I taken classes during the summer instead of working. On the other hand, some of the better jobs I took as an undergrad were great experiences and look good on a resume, and those jobs were definitely worth taking.
Back in the dinosaur age, I graduated from a private school with a huge mountain of $20k in debt. I did everything possible to immediately pay off the debt. Every spare dollar went to paying it off. I got very lucky and was able to get debt-free within five years. A $550k debt would make me sleepless for decades.
To be clear: I am NOT saying people should not go into debt to go to grad school. Most people have a plan to pay off the debt, and very few will end up like this poor doctor.
This is a common story. Students get into debt with no real plan of how responsible they will need to be to pay it back. They assume that “someday” they will be a grown up with a real job and it will take care of itself. This doctor took years and years before she realized “someday” had arrived and passed long ago and the debt she had ignored and only half-heartedly started to pay had been getting larger and larger.
I will definitely try to help my kids understand that every borrowed cent needs to be repaid and they need to imagine themselves having to make sacrifices in the future to pay it. In fact, it is better to make sacrifices now. We’ll see.
550,000 isn’t what it used to be, when I was a kid. Based on my first husband’s income, which was pretty good at the time, it would be….give me a minute, I’ll figure it out. Maybe about 10 years average income today? So, in 1973, it would have been $120,000? It used to be if somebody had $100,000 they were loaded. Nowadays there are a lot of millionaires and the really rich are billionaires. I mean, it’s still a lot to owe, but comparatively speaking, she could work her way out of debt. Especially if she’s a really good doctor.
I mentioned to my hairdresser the absurd amount I owe on my credit card and she was totally unfazed. “I owe a lot more than that.” It’s the times. If people could get used to the nerve-wracking concept of being deeply in debt, they could just go on and pay their monthly bills and live their lives. As long as you have a roof over your head and food to eat, it’s all good.
Bill doesn’t agree, of course. I’m not saying it’s good, I’m just saying it’s survivable. Large debt.
I think modern-day prophets are pretty concerned about the number of Latter-day Saints who graduate from BYU, take their first job and then think they have to have a new car, a new house, etc. A lot of those McMansions in Utah were bought by people who had no way of paying off all that debt. I think it creates a lot of stress in marriages to be saddled with a huge amount of debt.
Not that anybody can get a mortgage these days, but that’s another story…
my sil is doing time in the deep northwoods of wisconsin working on an indian res to pay off her med school loans- something like 5-7 years of service (does anyone know about this?). So far,they’ve built a beautiful home in town, they have horses, the kids play pond hockey and the in laws are not too far away. it’s a pretty great set up and she seems to like her work.
the point of my little story was that there are options for paying down med school debt. i think a lot of folks aren’t willing to make the sacrifice for a few years.
so is it ok for me to suggest here that some degrees are just too expensive and probably not worth the price tag? i know there’s a lot of lawyers ’round here. 🙂 i’m not suggesting that people shouldn’t get advanced and very expensive degrees, but I am suggesting that they have a plan for paying off those degrees (and if it’s going to cost 500k, perhaps they loook into a job as a PS or NP).
aw, look at me, i’m rambling…
(i’ll give you a gold star if you can name the movie that came from)
geoff! we agree on something.
today is a great day.
People are always surprised, as they spend more time with me (either on-line or in-person), how many things we agree on. I must make a very strange first impression.
i always look for things to agree on with people. though i come across as a total meanie butt, i’m actually a big softy.
goodness, i just realized how awful my gravatar is.
Some degrees aren’t worth it.
But 3 years and $60,000 so I can get a job that pays 2.5 times my previous job of science teacher? Plus (unfortunate, but true) boosts the level of respect other adults have for me? Plus a job I enjoy more?
It’s hard to raise a family on a school teacher’s salary. I think that’s one reason so many members of the church go to graduate school–it’s hard to afford living in a nice neighborhood (with good schools, etc.) with just one wage-earner in the family if that wage-earner doesn’t make decent money.
As the saying goes, though, be poor in college and rich later, or be rich in college and be poor later. I’m looking forward to the day where I can drive a car that doesn’t cramp my legs up when I drive and is newer than 13 years old; I’m looking forward to the day where I don’t have to take the bus every day so my wife can have the car; I’m certainly looking forward to having a house of our own.
I’m not sure if members of the church have a bigger problem with debt than most other people, but I know it’s a problem. We struggle with greed–with having material possessions–even if we can’t afford it. And we deal stupidly with debt when we get it (ie–credit card debt instead of taking out a loan, not making monthly payments, etc.) There would be a lot less worry, a lot less fighting in the family, and a lot more money for ourselves if we learned to manage our money well.
Amen, Tim. I really respect your decision to get an advanced degree. Never had the time or dedication to do it myself.
Good discussion all.
#10 Tim, I think the problem with LDS, is some/many, believe your material status in the world is a direct result of righteous living. I believe many will go to great odds to “look” wealthy and therefore righteous
I definitely agree that some degree programs lead to more debt than they are worth. As was already mentioned, it’s essential that one carefully weigh these things and then have a payback plan.
BTW Geoff, Thanks for the discussion and article. I had 17-year-old-senior-in-HS Piano Man read the article for future reference.
@ jks,
This is a common story. Students get into debt with no real plan of how responsible they will need to be to pay it back. They assume that “someday” they will be a grown up with a real job and it will take care of itself. This doctor took years and years before she realized “someday” had arrived and passed long ago and the debt she had ignored and only half-heartedly started to pay had been getting larger and larger.
To be fair, graduate and professional schools have been complicit in the ballooning of student debt. Law school tuition, for instance, has been increasing at an alarming rate over the past several years; annual tuition at the top private schools is now $45,000-$50,000 per year. There are many factors driving this trend, but when most students were all but guaranteed a high-paying job upon graduation, there wasn’t much pressure on schools to rein in costs.
But students are now facing a very different economy. Suddenly the jobs aren’t so plentiful. So you get a lot of twenty-somethings with little to no work experience graduating with $150,000-$200,000 in debt and no job. What looked like a good investment in 2005 or 2006 has turned into a nightmare. Unfortunately, the professional schools have not even begun to admit that they may have played a role in creating this nightmare.
Look at Tim here. He is excited to get the debt and get a higher paying job and all the wonderful stuff that comes with it. Another car. A house. It is this type of mentality that makes it difficult to pay the debt. Because with the higher paying job comes the debt payments but also the mortgage and the car payment and we ought to be able to go out to eat now and we should be able to enroll junior in piano lessons and go out on dates. People aren’t willing to still be “poor” because they are out of school.
Here is my uphill both ways story.
When my husband graduated and we moved for him to start his job, we were POORER than when we lived in Provo with cheap rent and my job. We actually had no student loans (thanks to scholarships and my job and help from my parents for my schooling). I do not know how we could have paid anything, but we would have if we owed anything. Then we bought a house. We went out to eat WAAAAAYYYY less than we did in school. But I was home with the baby so I cooked our dinner from scratch every night.
Anyway, the point is that students don’t live poor enough and then when they get out of school they don’t live poor enough. Debt sucks. We don’t buy into it. I feel poor, but I also feel rich because we don’t have to make any payments. If we had had to, I would have done the student loan. My husband and I took out our second loan (that wasn’t to buy a house) that we have ever had to get in 18 years of marriage. But I grew up learning about compound interest being the most powerful force in the universe so I am being serious about repayment.
I graduated from law school about 8 years ago from a private school. I left with about $130k in debt.
My monthly payment is $1400/month. It hurts. I often wonder if I did the right thing by going to the higher-end law school
instead of taking the scholarship at the 2nd tier school.
I make sure to point out to prospective LDS lawyers that I haven’t been asked where i went to law school in over 5 years.
hindsight and all that…
Another consideration that ties into law school debt is the long term perspective. Even if all goes according to plan (top school, good grades, job offer) you might not be pleased with the outcome because you are limiting your options. Sometimes it’s referred to as “golden handcuffs” but, from a traditional LDS perspective, it doesn’t even have to be related to living the material good life. What if after your first couple years at the big firm you realize that you haven’t been home for FHE in months, you can’t coach your kids soccer team, and you are always frazzled? There are other career options that might provide more professional fulfillment and greater schedule flexibility such as government, military, academia or public interest law. However, if you are burdened by excessive student debt those are not realistic options because you can’t afford to take the pay cut those careers paths would require.
Really, it’s hardbreaking to see young families deal with the reality that they stepped off the treadmill of law school and right on to another one running at higher speed with no end in sight. I made a conscious decision to attend a good but not ranked great state law school where I got in-state tuition and lived relatively cheaply. Coming out with comparatively little debt (paid off early) has given me a great deal of flexibility in choosing my career path. Most importantly, I have what I think is proper balance in my life.
I’m not sure how many people go into debt to look rich so that people think they’re righteous–at least where I’m living now, I don’t get the impression that that’s what’s driving debt. It might be. In other areas (wealthier areas?) that might be going on. Certainly there’s the “Keeping up with the Jones’s” mentality.
For college students, though, I think the main factor is that they feel confident that they’ll make good money later, so they feel they can at least be comfortable now. They figure (often wrongly) that they’ll have little problem paying off the debt later. And they’re not smart with their money–with both how they spend it (eating out every day, etc.) and with how they handle the loan after graduation (like the doctor in the original example).
I’m not guiltless there. My wife and I could have gotten a one-bedroom apartment in a poorer part of town, but we decided to fork out an extra $100-$200/month for a nicer 2-bedroom with a decent kitchen in a nicer part of town. We’re more comfortable, we feel safer, and our baby has his own room–but in the end we’ll be $5000 or more in debt. Is it worth it? I think so. But I’m sure most students that go into debt for comforts would say the same thing.
Geoff B–
There are a lot of professions where a graduate degree doesn’t help all that much.
I’m not sure going back to school for a degree should warrant respect–I think those who sacrifice good incomes for a job like teaching or for a call to serve as Mission Presidents deserve the respect. I know people in both positions who could make good money (as engineers or as businessmen) who gave up those jobs (at least temporarily) for a higher calling.
Tim #19- I guess it depends on where you are located. In my ward/stake, many people bought homes/business way out over their means, because they could get a loan with low payments and a balloon payment at the end. They did not save for the balloon payment, instead they lived a luxurious lifestyle “robbing Peter to save Paul” refinancing as they went. Of course when the economy went sour, the balloon payments came due, and the lifestyle crashed. While all of this was going on, other people were pointing out how “sos and so are righteous. Look how much the Lord is blessing them”.
When my husband was at BYU, it was common talk for the students ( including Mike) how much money they would be making. We did not have more than 20 thousand between the two of us in student loans. It was wonderful then the debt was paid off, so we could get a house. It was well worth it in the long run to take out those student loans. I think part of the problem today is education assistance is limited and hard to get. You have to get into the mind set of paying off debt before you acquire a better standard of living, and live as poor as you can as a student so you can live better later.
My experience with six figures of law school debt mirrors that of several other commenters, so I’ll just say “ditto” and leave it at that. I will mention, however, that I observed a brief bench trial last month that was a student loan collection case. The defendant took out about $10,000 in Perkins loans back in the 1980’s and didn’t pay them back. Congress retroactively removed all statutes of limitations on student loans in 1991, so he’s back on the hook for those loans and the interest has more than doubled the amount. And since attorneys’ fees are provided for and the debts have been turned over to collection agencies, people can still make money by going after the old debts. Like I always tell people considering law school, don’t rely on a high future salary and don’t sign those loan agreements until you understand exactly what you’re getting into.