‘I can take up to $15,000 at a 2% interest rate’: I have student loans and financial goals post-graduation. How much should I borrow?

Hi Money Minder,

I’m about to start my second year in a clinical MSW program and I have $46,000 in student loans. I have two bachelor’s degrees and used my scholarship money to help my family during a tough time in my freshman year. Tuition for this year is $17,000, but I have a $10,000 grant and I’m hoping for a $2,000 scholarship for the spring semester. My grandma is a member of PEO and they offer a loan program for women in graduate programs with a 2% interest rate. They allow up to $15,000 to be borrowed and to be paid back in 6 years. They can be flexible in extenuating circumstances.

My first thought is to take the full $15,000, pay my remaining tuition, and use the rest to pay off my higher interest student loans from last year. Once I graduate and become an LMSW, I anticipate making around $55,000 in the Midwest. I don’t want to work with populations for loan forgiveness, like substance use. Is this a good plan?

After graduating, my partner and I plan to live in his family’s home for a year to focus on paying off debt and saving. Is this a bad idea?

Thanks,
Life Ready

Response from THE MONEY MINDER:

Hello There,

Hello, I understand the financial predicament you are facing as you prepare for your second year of the clinical MSW program. Firstly, congratulations on reaching this point in your education journey, despite the challenges you have encountered. It’s commendable that you are seeking advice on how to manage your student loans and make informed decisions about your financial future.

Considering your current circumstances and financial obligations, it’s essential to approach the decision of taking out a loan from PEO with caution and a realistic mindset. While the option to borrow up to $15,000 at a 2% interest rate may seem appealing, it is crucial to assess whether you genuinely need the full amount. It’s wise to only borrow what is necessary to cover your tuition expenses for the current year, ensuring that you don’t accumulate unnecessary debt.

Your plan to use the leftover funds to pay down higher interest rate graduate student loans demonstrates a proactive approach to managing your debt. By strategically allocating the borrowed amount towards reducing existing loans, you are taking steps towards financial stability and reducing the overall interest paid over time.

Additionally, your intention to live in your partner’s family home post-graduation to focus on debt repayment and saving for the future reflects a practical and responsible approach. Living frugally during this period can significantly impact your financial well-being and provide a solid foundation for your transition to a new state in the future.

Ultimately, it’s essential to make informed decisions based on your individual financial situation and goals. Carefully consider the long-term implications of borrowing additional funds and prioritize debt repayment and savings. By adopting a realistic and practical approach to managing your finances, you will be better positioned to achieve your financial objectives and lay a solid foundation for your future.

All the best from THE MONEY MINDER.