

How can I get out of a mountain of grad school debt? - albacore

I’ve dug myself into a hole and I’m wondering what advice people could give me on how to get out of it.<p>As a kid I dreamed of being a star entrepreneur, after reading the countless stories out there.  As I grew up I held that dream tightly, deciding to first go to engineering school (a tiny school), where I got my bachelors and masters degrees.<p>I was hired right out as a product manager at a software company and I did that for four years, hoping to learn how products get made and sold.<p>After a few years I wanted to learn more about business, and was encouraged by those around me to go to business school for an MBA.<p>I did that, without thinking hard enough about the debt that I would be taking on or for that matter the debt I had already.  I went to an alright school (top 100), I had a low GMAT (entrance exam) score and I graduated with average grades (3.44/4.00 GPA).  I did not do an internship, due to an illness.<p>I then got married, and took on my wife’s debt (she got a master’s degree in writing and makes barely anything as a professional writer).  Added to that I came down with a psychiatric illness; this cut into the MBA career prep, and kept me from making strong interpersonal connections.  While I’m fine now, I had to use credit cards to stay afloat and pay the bills for a while.<p>All told, I’m $400k in debt and living with the in-laws.  If I made a $100,000 salary at a “high paying” job it would just get me by.  Right now I have a year’s supply of cash (on a ramen budget), a place to stay and no kids.  I have a lot of free time as I’m still unemployed.<p>Part of me wants to use this desperation right now to try and start a project, develop a product and try to make a fortune off it.<p>The more logical part of me wants to find a ridiculously high paying job (well over $100,000), although my experience so far has given me significant doubts anything like that exists for someone who has been out of the workforce for coming up on four years and was not a stellar MBA student.<p>So I’m asking for some advice for going forward (I’m well aware I didn’t make the right choices in the past and that I didn’t have the best luck).<p>PG says the best way to get rich is to do a startup.  But he doesn’t say what the best way to get rich is for people with a heavy debt load (if there is a way).<p>I want to get rid of this debt ASAP and I’m wondering what out-of-the box ways people can think of (if there are any).<p>Thanks in advance for your comments.
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gpav
I have $30,000-ish in student loans for my MIS, and I keep my loans in
deferment status by staying enrolled as a half-time student at the local
community college. I typically take web-based classes where I can bulldoze
through the assignments and be done with classwork until the next semester. I
got pretty good at the web-based format because my Masters was completely
online.

Student loans in the US can generally be deferred, but as I understand it
dismissal in bankruptcy is likely only if the court becomes convinced that you
will never be able to repay -- such as if you become 100% disabled, or are
simply too old to earn enough to repay the loans. I figure I can stay enrolled
until I'm 85 or so....

I try to take classes that I'm actually interested in or have some bearing on
my career or looks good on the resume, but if nothing is available (or when
something I wanted gets canceled) I can take literally anything so long as it
is for credit AND I don't withdraw from the class (but failing the class is
okay). I am enrolled in a degree plan for an Associate of Applied Science in
Digital Video because of interest, but the school doesn't nag me about what I
take, and I don't care. I could have gone for undeclared major, but when I
picked a major the school put an estimated date of completion on my record. I
had to go back once already and have that extended. It does have to be an
accredited school, but community colleges don't make a habit of turning anyone
away and they're usually extremely cheap. Textbooks are often available used
on Amazon or eBay or Craigslist but be careful of version.

At one point we moved and the classes I wanted didn't make, so I ended up
taking Principle of Real Estate 1 and 2. Moving took too much time and I blew
off the class work and (for the first time in my life) deliberately chose to
fail the classes. As long as my GPA stays reasonable, I can weather a few bad
grades. A + F = C, or A + A + F = B, and getting an A is really easy, so I can
fail quite a lot before I end up on academic probation.

My free advice, worth every cent you're paying for it, is: Look into whether
you can get your and your wife's student loans put on deferment. (AND PAY CASH
OR GET SCHOLARSHIPS FOR CLASSES, DON'T TAKE ON MORE STUDENT LOANS!!!) For me,
one semester of tuition costs me about the equivalent of one student loan
payment. Your savings would be considerably greater than mine. Interest
continues to accrue and get rolled into the loan balance and that compounds
the interest, but if you can use the money you free up to pay other credit
card debt you can dig your way out of that, and then work on the student
loans.

I don't know if you can get your loans put in deferment, but do so if you can.
WHETHER YOU CAN OR NOT, it is WAY past time to talk to a bankruptcy attorney.
You can probably get a fresh start on everything else that way, put your
student loans on deferment for a long time, and get a job -- practically any
job -- and start paying the student loans off and getting a life. And if your
wife doesn't want a bankruptcy on her credit, consider getting a no-contest
divorce and take all the credit card debt on yourself, and then get the
bankruptcy. Once you're out of the bankruptcy, you can consider re-marrying.
But the feasibility of that approach hinges on your state laws. That's why you
need a lawyer.

You do NOT need to gamble on making a successful start up out of your year of
meager cash, complete lack of marketable ideas, and further sponging off your
in-laws. Anyone, not just you, would be far too likely to end up with no cash
and p.o.'d in-laws who decide that their daughter might be welcome to live
there but not as long as you are there with her.

I made the same stupid mistake you both did, of taking on huge debt without
sufficient thought. You and I, at least, had reason to believe that we needed
our degrees to make ourselves stand out above other candidates for jobs. I
know that once I am in the job, my work and my ideas will keep me in the job
and move me upward, but I need to be able to get past the interviews. I failed
to pay enough attention to what the costs were going to be, and to the
reputational value of the school I chose. I also spent the extra money I
borrowed above actual school expenses to supplement my day job's income. Bad,
bad, bad idea. I could have gotten more bang for 2/3 the tuition cost with a
degree from my State university, and been instantly admitted to the "old
boy's" network that informally influences state government hiring. The school
on your degree won't get you the job, but it seems to strongly increase your
chances of getting an interview, or at least of getting your resume read.

Your wife made an additional mistake in thinking that she needed an MFA to be
a writer. I am a professional writer. You just have to write to be a writer,
and subscriptions to Writer's Digest and The Writer are sufficient tools to
help you learn what you need to know to write good fiction and non-fiction.
She also failed to fully research and understand how much the average writer
makes. (Hint: she's finding out now.) Only an infinitesimal fraction of a
percentage of writers make a good living writing fiction, or even magazine
articles. We all want (desperately) to be as successful as JK Rowling or Tom
Clancy or anybody who owns a permanent spot on the best-sellers lists. If you
want to make a living as a writer, find a good niche. Write newsletters for
homeowner associations, or medical practices, or... whatever niche she can
find that needs filling.

My niche happens to be documentation of extremely complex legacy computer
systems. But I am an extremely technical technical writer, and I paid my dues
by writing a whole lot of Step 1, Step 2-type end user documentation, and
learning a lot of really ancient technologies. (My current major project is a
FoxPro 2.6 for DOS application that is still in daily use across the entire
state of Texas. But we're replacing it as fast as we can.) I've made a good
living as a professional technical writer for 30 years and the only writing
classes I took were Freshman Grammar and Composition, and one class in
creative writing. And _zero_ college classes in technical writing.

You had some bad luck: illness and a really sucky economy and job market.
Trying to fix your situation by striking it rich as a software or services
entrepreneur makes almost as much sense as loading your burro with fifty
pounds of beans, a pickaxe, and a sluice pan, and heading off into the nearest
Bureau of Land Management property to take advantage of the 1850-something
Mining Act and looking for gold. You have no track record as a rainmaker. So
get someone to pay you for managing something and building something, do it
successfully, and build up that track record. Then get some good ideas and
start building your empire. But don't keep believing that if you wish _really_
hard the next time you see a meteor, you'll create the next Google. Managers
and entrepreneurs fail when they focus on the dream and ignore the reality,
but they _can_ succeed when they keep a firm grip on reality while pursuing
their dream.

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glimcat
Right now, you don't need to get rich. You need to get some of the pressure
off and get stable. If you can reasonably land a six-figure job which you can
stand doing for a few years, DO IT.

Desperate and looking for get-rich-quick schemes is not conducive to
successful entrepreneurship. Most successful businesses take years to build,
and most business ventures are not successful. You should consider whether it
can be a part of your ongoing career plans, but it's not a likely solution to
your immediate problems.

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mattm
<http://news.ycombinator.com/item?id=2471229>

How much is student loan debt vs credit card debt?

As I understand in the US, you may still have some of the student loan debt
remain after a bankruptcy.

I haven't started a successful business, but I've heard many, many
entrepreneurs say not to expect a significant income for 2-3 years. And even
then it would probably be minimal and not cover your debt obligations.

Bankruptcy is obviously a personal choice to make.

However, please realise that some people are more prone to getting into debt
and even with a bankruptcy, if your behaviour doesn't change, you may wind up
right back in the same situation in a few years.

I don't mean this as a personal attack, but from what you wrote, your wife
sounds like she has similar issues with money.

I came out of college about $40,000 in debt and paid it off in about 2 years.
I listened to Dave Ramsey a lot during this period to keep me motivated -
<http://www.daveramsey.com/radio/home/>

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paulsutter
How cool are you and your wife with living like students, deferring a home
purchase, and deferring children? If not, the entrepreneurial path could be
really hard. Entrepreneurship probably means avoiding further big obligations.

Next factor, what's your monthly debt payment, how much can your wife earn,
and how cheaply can you live?

Entrepreneurship is usually light on cash income. I'm embarrassed to say that
it took me 10 years of entrepreneurship before I got my first payout that
could cancel out your debt. I'm probably in the slow class, and you'll
probably not be as much of a dunce as me. But to be on the safe side, is your
wife cool with enduring 10 years of uncertainty before buying a house and
having kids?

You could pay that down more deterministically by finding a job in finance or
another high-income / lower upside field. Really depends on what is right for
you. I'm an advocate for the entrepreneurial path, and wish you the best of
luck with it. Just make sure you and your wife understand the potential
sacrifices.

~~~
albacore
Our expenses (car, phone, food, fuel, medicine, toiletries, etc.) are $1600 a
month without the loan and credit payments (living with the folks). My student
loan payment (most of it from b-school) is $1200 and the credit cards are $300
a month. Her student loan (also most of it from grad school) is $1000 a month.
Note that we could do income based repayment where the loan payments are lower
(it's 15% of your income above the poverty level, which I think is around
$11,000 dollars). The balance is forgiven after 25 years of payments.

Her income is virtually non-existent right now.

We don't mind deferring a home purchase for the next few years (though we
would like to move to Boston in a few years [which has a high cost of living])
and we can't have children for medical reasons.

As for finance jobs or other high-income jobs I have been under the impression
that these are hard to come by if you're not near the top of the MBA class (my
GPA 3.44/4.0), haven't done an internship, and don't get hired shortly after
you graduate. Let me know if I'm wrong about this though.

~~~
actionbrandon
you should do the income based repayment right away. it will take some of the
stress off.

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helen842000
I've spent a long time paying off my debt from University so from my own
experience I know what a weight it is.

Starting a startup solely for the money is really putting yourself under huge
pressure to succeed, - the majority of startups fail regardless so you're
setting yourself up for a fall if you pin all your hopes on making it big
first time round. You also won't be able to afford to take up opportunities
that might help traction for your startup and that can be very frustrating.

It sucks bad enough when your startup fails even when you aren't counting on
it for your living expenses never mind when you need it to repay debt too!

Every decision you would make in the business would be based on 'what brings
in money now' and that isn't always the best decision longer term.

My suggestions are :-

1)Start income based repayments on the student loans

2) List out your other debts, get exact balances & know your APR for each.

3) If you are mentally & physically ready you & your wife should both search
for some form of guaranteed income, min of $25k each (even if it's part time)
The debt belongs to both of you so it should be tackled together.

4)Use the snowball method to clear your non-student loan debts.

5) Your current living expenses are $4100 pcm or $49200 p/a, so even if you
earned $100k between you, that would give an extra $50k p/a to reduce your
debts down year on year.

6) Allow your creativity to run free and pursue your own ideas in the
evening/weekends. Test out lots of ideas (for free)

7) Hold onto your guaranteed income & let your startup grow naturally.

8) Find ways to reduce your debt (0% cards etc) & up your income (freelance
work)

Worst case scenario it takes 8-10 years to clear your debt but you DO get
there. Best case scenario you find higher paid jobs, you earn income from your
startup and it transitions into a full time role for you. Debts are paid off
in in a fraction of that time.

If you go straight into trying to think up a startup full-time you're not even
guaranteed it will be clear in 10 years. Debt will probably just carry on
going up! At least with the worst case scenario you will be clear in a
reasonable time frame & a successful startup bring your debt free date nearer
and nearer.

When side projects aren't working out and you're having a bad day it feels way
more personal if you need that money to live. Starting a startup should be
fun. Needing the cash, takes that fun away.

I know it feels like you need some kind of miracle to get out of debt but it
all starts with a single dollar.

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ssylee
Your wife totally sounds like the story of Michael Ellsberg
(www.ellsberg.com), while yours is similar to Joe Mihalic
(www.nomoreharvarddebt.com).

What's your income situation right now? You can try to negotiate the interest
rates down to minimize your monthly payments. Once you are able to handle the
payments and workload with ease, I strongly suggest to start with freelancing
on the side. Most successful entrepreneurs I know start off with consulting
and freelancing before productizing their services or physical products.

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redspark
If you have a years worth of runway (ramen budget), you are way ahead of where
a lot of entrepreneurs start out.

Do you have any ideas? What are you passionate about, or what do you have a
lot of insider knowledge about?

~~~
albacore
Getting through my MBA was the toughest thing I have ever done in my life,
particularly due to my psychiatric illness at the time. During this time I
sought high and low for a practical, easy to understand, non-wishy-wahsy, and
logical self-help book that would at the very least give me some guidance on
how to deal with the stress I was under. I hated almost everything I found. I
felt so trapped, I started looking at US Army POW survival manuals for clues
on dealing with stress and fear.

Since then I've been hoping to write something or develop a website that would
help another person going through a tough time (of any sorts) get through it
successfully. Not sure how I would monetize it, but it would be cool if I
could come up with a way to bring some sense to the self-help market.

Since I don't have training in counseling or psychology I even thought about
going for the one year Master of Positive Psychology program at UPenn, but of
course dropped the idea as it would add to my debt.

Anyway, that's the only idea I have had and only topic I really have passion
for at the moment.

Maybe if I did some exploratory research on different things I could come up
with some more areas I'd be interested in.

But I need to move fast as I'm terrified of defaulting on my bills when the
year is out.

~~~
sjg007
Some of it is acceptance. You might find that Buddhist meditation may help.
You feel stressed and overwhelmed because you feel a lack of control over your
situation/life and expected responsibilities. However, what you really lack is
perspective because you are anxious about future unknowns. This is what drives
your search through the self-help books. Caveat, if you do have a major
disorder seek medical treatment. Those programs are organized around
stabilizing the chemicals in your brain and at the same time providing
cognitive therapies to help bring some perspective and rational decision
making. Essentially you are fighting against your fight or flight responses
and attempting to reengage your brain. It helps when you can stop your brain
from producing too much speed or other stimulants. Likewise, for depression.
We are drug responsive machines, people exercise like mad for the oxytocin
high released after enough activity.

So what you search for is perspective and a feeling that everything is ok and
will be ok. The thing is, you end up where you started but see things
differently.

The financial issues are solved one day at a time.

~~~
albacore
Just wanted to add that I did get professional help from the excellent doctors
at Mass General Hospital during my time in business school, and it is mostly
to their credit that I made it through those tough times at all.

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nns1212
Read this - [http://www.beingpractical.com/2012/02/03/best-advice-any-
ent...](http://www.beingpractical.com/2012/02/03/best-advice-any-entrepreneur-
can-ever-get/)

It will really help a lot.

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donutdan4114
<http://wiki.answers.com/Q/Should_you_declare_bankruptcy>

~~~
glimcat
Student loans tend to be ineligible.

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slosh
use your free time to learn to program <http://www.codecademy.com/>

~~~
albacore
I actually do know how to program (I have an MS and BS in Computer Science as
well)

~~~
sjg007
You can code so start writing iPhone apps, pick something, iterate.. Find some
freelance jobs while unemployed. Apply to finance companies as a quant. You
can even find QA or dev jobs at around 100k to relieve pressure. QA is easier
and if you can code you are a very valuable QA person. Why? Because you are
breaking the code and turning it into a viable product. Any company that ships
values QA.

Treat the job search as a full-time job. Since you have flexibility living at
home, you can afford to wait for a _good_ job in some sense. Otherwise find a
larger company that hires MBAs into training programs. Use your school MBA
network. If you don't know many people, but live close, reconnect to the
program, go to all the events you may have missed. Find an internship at the
very least. Some of the bigger businesses will repay your MBA loans over time.
Once you get in somewhere with a high upside, solve their problems for them.
Find a mentor. Maybe your MBA school will hire you? Go into public service,
work for the government or teach (in those cases your income based repayment
loans are wiped after 10 years). Work for a nonprofit as an MBA. They always
want such folks, usually pay well, and also qualify for the 10 year program.

Join the Peace Core for a year, go abroad, see the world, the problems, come
back and apply for exclusive service related Federal jobs. They also have the
10 year loan forgiveness program.

Find a smaller company that has a hard time getting top MBAs but needs them.
The MBA has some value, it can be just a scam as everyone makes it out to be.

Hell, go work for Yahoo, they are all about change right now. In your
application pitch ideas about how to turn the organization around.

Your wife needs to write since she is a writer. If you are a coder you need to
code. If you want to solve business problems, go solve business problems. The
GPA is meaningless long term. Use your strengths, acknowledge your weaknesses,
work around them, and above all stay hungry.

It's hard, I have a high debt load as well. What you cannot do is sit around
and worry about it. You have to move forward. If you want, declare bankruptcy,
learn from it and keep moving forward.

But you can make it work.

Pick tasks that make you better: code, write, solve.

Don't expect a lump sum salvation. Work at it, chip it away... Call your
credit card companies and negotiate. You have the power. They want to be
repaid.

You are not alone in your struggles.

~~~
jholman
> Any company that ships values QA.

This is factually untrue.

I have worked at three companies that ship, and watched close friends at a
dozen others. A few didn't value QA at all, and allocate zero resources. A few
genuinely value QA and allocate significant resources. The great majority
purport to value it, but spend as little as they can, and treat QA staff very
poorly (poor respect, poor tools to do their job, and poor pay).

~~~
sjg007
Sure, I should rewrite that as: Great companies value QA.

