<p>@SimpleLife - No, I was making a point that was completely separate from the TAship. It was in response to ‘professors expect loyalty’ from you. It’s true that they will expect a certain level of commitment, but if a given student wanted to get into a PhD program he’d need to be prepared to give that commitment so that he could get the research experience.</p>
<p>@jack63 - that someone would be me. First of all, the government no longer subsidizes loans for graduate students, so there’s that. So graduate students do not get the interest paid.</p>
<p>Second of all, you have to be eligible for Pay as You Earn, and there are certain caveats to it. Let’s say that you borrow $100,000 to get an MS at a top program ($41,000 Direct loans with 6.8% interest and $59,000 PLUS loans at 7.5% interest), and let’s assume that you have average levels of undergraduate debt ($27,000 at 5.6% interest). Let’s also say that after your MS you get offered a job with a $80,000 income. Under standard repayment, your monthly payments would be $1466/month, which is a ton of money. Over the course of the loan, you have paid a total of $175,931, including nearly $50K in interest.</p>
<p>Now, let’s say that you go do the Pay as You Earn plan, where you pay your loans for 20 years at 10% of your income. At $80,000, you’re only paying $521/month to start out, but of course as your income rises so does the monthly payment. But because PAYE is not a subsidized program, you’re not even paying off all of your interest each month, and you’re accruing more interest over time. Although you pay less every month, even with a projected 5% annual income increase the total amount you pay under this plan - $216,029 - is much more than you would under standard repayment. Furthermore, at the end of your 20 years, you’ll still have to have $75,154 of your loan forgiven…and you have to pay taxes on that amount. So let’s say that you are 26 when you get your MS - at age 46, the year you pay off your loans, you’ll be hit with a huge tax liability because that $75,154 is counted as income. You’ll have to find a way to repay $25,000, basically. And if you don’t have a lump sum of $25,000 sitting in the bank waiting for this, you’ll have to make a payment plan with the IRS…which means you’ll be back to monthly payments.</p>
<p>Plus, if you miss even one payment - fall on hard times, or simply forget - you’re ineligible for the plan and you automatically go back to standard repayment, so your payment shoots up to the $1466/month.</p>
<p>The income-based repayment plans were never intended so that people could borrow more than they could afford to repay; they were intended for students who were burdened with student debt to be able to cut their monthly payments to affordable levels so that they could feed their families.</p>
<p>Where maybe it makes more sense is if you borrow less money. Let’s say that instead of borrowing $100,000, you only borrowed $60,000 - either because you went to a less expensive public university or you are paying your own living expenses because you have some kind of RAship or TAship (or other job). Keeping everything else constant, I just reduced the amount of the PLUS loan to $19,000. Now under PAYE, you still pay more overall than you would’ve paid under standard repayment ($150,846 vs. $118,972), but you don’t even have to pay for the full 20 years. Your loans will be paid off in a little over 16 years, and you will have nothing forgiven which means you don’t have to pay taxes on an unexpected windfall. You’ve still shelled out over $30K more than you would’ve under standard repayment though.</p>
<p>And if you could completely avoid debt through a TAship because it comes with a tuition waiver and enough money to live on - I would take that in a heartbeat over the loans. Even $521 is a lot of money every month. Sure, you can technically afford it because you make $80,000. But that $521 could be going into a retirement account. At $80,000 a year, if you put that 10% of your income towards a retirement account instead of loans, you’ll have over $2 million by the time you’re 67 (assuming you are 26 when you finish). By age 75, it’ll be nearly $5 million. You could also invest it, save up for the down payment on a house, or just travel and enjoy it. If you want to have kids, you could use it for their college savings, private school, lessons, summer camps, and all of the other kids’ things that cost a lot of money. If I could choose to have an extra $521-996/month in my pocket (that’s my car payment and then some!) for the next 20 years in exchange for a little extra stress and elbow grease for 1.5-2 years, I definitely, definitely would. And have.</p>
<p>To me, working 20 hours a week for a professor is definitely the lesser evil. You get to earn money instead of spending it; on top of that, you are getting experience that both PhD programs and employers value, particularly if you have an RAship.</p>