In this post I explain how I took out almost $15,000 in loans that I didn’t need during my first year of graduate school. Here’s my story and three things you can learn from it.
I pursued a PhD because I’ve always been successful in school, because I love to learn, and because I was deeply interested in a field of study. But having attended a small, public liberal arts university as an undergraduate, there was a lot I didn’t know about the PhD trajectory at a large research institution. This post outlines some of the financial mistakes I made because I wasn’t fully aware of the academic norms and options available to me as a PhD student. In sharing my story I hope others can learn from my experiences and make more informed choices for themselves. To my fellow graduate students, my advice is this: do research, forgive yourself, and develop a plan. Let’s take those one-by-one…
1. Do research.
If you’re just starting out, in addition to researching programs and institutions, research your financial options too. When selecting my graduate program, I was motivated more by interest in my future advisor’s research than by funding opportunities. I turned down an offer at an ivy league institution attached to a very good multi-year funding package and committed to my first-choice program before I had a complete funding package. Luckily, I was granted a research assistant position my first year and had consistent funding throughout my studies. But that was more luck than any savviness on my part because I committed before I knew whether I would have any funding at all. The fact is, I hadn’t done much research on how people pay for graduate school and I didn’t have a knowledgeable network of people who could advise me. I don’t regret my choices, but I could have been more strategic about how and why I was making them.
My advice—regardless of whether you’re a first-year or are further along but want to make better financial choices—is to do some research and seek advice. The financial aid landscape can be treacherous if you don’t know what you’re doing. Industries stand to make a lot of money on your uninformed decisions. In my field I was fortunate enough to work with an advisor who had research grants that she could fund me on. If you’re in the humanities or aren’t at a major research institution, you might not have that option. But your university may have other opportunities like working as a consultant in the writing center or fellowships you can apply for. Each field has its norms, so find out what people in your field do to fund their studies. Ideally, there are options that align with your longer-term academic goals and which can benefit you professionally and financially.
2. Forgive yourself.
The spring before graduate school, I did what I had always done as an undergraduate. I submitted a FAFSA and I took out loans to cover my first year of studies. Because my position as a project assistant ultimately awarded me a monthly paycheck, health insurance, and tuition remission, I spent that loan money on unnecessary things–over-priced lattes, dinners with friends, and attending academic conferences that I didn’t need to go to. I didn’t spend lavishly, but those unnecessary purchases added up. It wasn’t until my second year that I realized I could get by on a research or teaching assistantship without taking out additional financial aid. And it wasn’t for another two years that I realized just how much money I was going to pay in interest on those loans I took out my first year.
If you’ve made financial mistakes because you didn’t know the financial aid landscape, forgive yourself and move on. And if you have to take out loans because your circumstances require it, do it and don’t feel bad about it. Your situation is not identical to mine. Just don’t do what I did and take out loans that you don’t need. It might be tempting to use loans to boost your quality of life throughout graduate school, but when you finish you’ll spend a lot of time and money paying those loans back rather than investing in your retirement or saving for a down payment on a house. Borrow the money you need, but no more. And if you can get creative and get around taking out loans, all the better.
3. Develop a plan.
Amazingly, when I was in school I wouldn’t have been able to tell you how much money I had taken out in loans. I saw those as something to worry about later, so I didn’t take the time to calculate how much I owed and I didn’t always make interest payments to minimize what I would owe later. If I hadn’t taken those first-year loans, I would have been able to pay off all of my student loan debt in the first year after grad school on my postdoc salary. But because of those extra loans, I’m still plugging away. And the interest rates are higher compared to the loans I took out as an undergraduate. I could have minimized my debt with better planning.
If you have student debt that you’ll need to pay off when you finish school, develop a plan now. Know how much you owe, document what the interest rates are on those loans. Are you paying interest on them now or does that not kick in until you graduate? Keep a spreadsheet of those loans and develop a plan for how you’re going to tackle those when you leave school. I’ll have more advice on this process in future posts. A good first step for anyone, however, is knowing what you owe and forming a basic plan for how you’ll approach your payments when you graduate.
No matter what your circumstances are, you can benefit from doing research about your options, forgiving yourself for what you didn’t know earlier, and moving forward in the future with an plan. Don’t obsess about the past. Instead, go forth with good strategies.