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12 November 2012

Today My Students Loans Are Due or The Realities of Paying for Architecture Education

I went to a private graduate school for architecture, the Illinois Institute of Technology (IIT). A three year program that costs a little over $30,000 a year just in tuition. On top of that you probably need $1,000/month to live plus money for model supplies, architectural travel (a large part of your education I might add), and books.

There are three types of loans available:

Federally Subsidized at 6.8% - you don't start paying interest until six months after you graduate. This caps out at $8,500/year.

Federal Unsubsidized at 6.8% - you start paying interest right away. This caps out at $14,000/year.

Private loans at 8.0% - interest start right away. This is what people use to live on and pay the remaining tuition with.

Note: the Obama Administration as of this school year (Summer 2012) got rid of the Federally subsidized loans in order to help close the budget deficit. Also, along with alimony, students loans are not eligible for dismissal if you file for bankruptcy. Basically, you will have to pay them back.

I got lucky in many ways and I owe about $38,000 because I was able to make many large sum payments thanks to a generous wife among other things. If I pay off my loans over ten years my monthly payment is roughly $440, and I'll end up paying $14,500 in interest on the $38,000 I owe. My current income is about $2,000/month after taxes and my living expenses are roughly half of that, so my effective purchasing power will be reduced by half for the foreseeable future. That is, until I get a raise or my ten years is up. Given the state of architecture right now I'd say it's a coin toss.

About 2/3-3/4 of the people from my class have jobs that pay money; many work for free or do not have jobs. For what it's worth less than half of the undergrads have jobs and most of them are not in architecture. An undergraduate degree in architecture at IIT is five years. Most of these jobs are $12-20/hour. After taxes that's $20,000 - $32,000 per year. The average debt for people who were in the three year program is about $160,000. Math time:

If the Federal loans top out at $22,500/year multiplied by three years that's $67,500. $160,000 (rough average just from talking to classmates) with $67,500 deducted is $92,500 in high interest rate loans.

Over a 10 year pay off period that's:
$777/month for the 6.8% loan - $25,715 in interest over the life of the loan
$1,020/month for the 8.0% loan - $42,175 in interest over the life of the loan
$1,797/month total for 10 years - $67,890 in interest over the life of the loans

Over a 25 year pay off period that's:
$469/month for the 6.8% loan - $73,050 in interest over the life of the loan
$714/month for the 8.0% loan - $121,680 in interest over the life of the loan
$1,183/month total for 25 years - $194,730 in interest over the life of the loans

Source for numbers. It's an amortization calculator. If you don't know what that is go learn. It'll be the most important thing you learn all week.

At an average of about $30,000 (probably high) salary after taxes that means the average person in my (three year, the two years students are far better off) class more or less must choose the 25 year repayment plan. If they bring home $2,500/month and $1,200 is taken out for their loans that leaves them with $1,300 to live off of.

$11,170 is the poverty level for a single person in 2012. They're pulling in $15,600 so technically they're not poor...?

To actually become an Architect one must pass seven tests (with a passing rate of about 60%-80% per test) which cost $225 each plus yearly fees and accumulate 5,600 hours of internship to become an architect. Until then you're an intern with a masters degree (Edit: to those who complain about this title, this is nomenclature from the AIA).

Note: The interest calculation is actually quite a bit simpler as I show it here. The majority of the loans taken out start to accrue interest the moment they're dispersed, so much of that money already has several years of compounding 6.8 and 8.0 percent on it by the payback date (Nov. 12, 2012 if you started in the Fall of 2009 for the three year program).

Also, a lot of people on Reddit seem to think this is me complaining or feeling I've been tricked or I work at a bad firm and I'm untalented or something. Nothing could be further from the truth. This post is more just a snapshot of a moment in time of a somewhat unique situation. I know more about grad. student loans at this very moment than about 99% of the population; three years ago that was not the case. Even so I was very aware of my financial decision and its implications. That's why I never took out the 8% loans and paid as much of as humanly possible as early as possible. The larger problem is that it takes increasingly more to get your foot in the door in the field of architecture while the starting salaries remain low. It's essentially an arms race for education and experience where only those with money or who are willing to live as working poor are going to advance. It's less than ideal.


Anonymous said...

Should have dropped out of college and started flipping burgers. You were privileged enough to not do a real job for all the years of your education and still survive on govt loans. If you don't have a way to pay them back, then take a second job.

First world problems.

Anonymous said...

Not necessarily, homie, I am in school full time while working 30 hours a week. Every day is a 12 hour day for me.

Anonymous said...

I agree with the above statements, I'm about to graduate from Georgia Tech with no student loans whatsoever. Hard work waiting table and busting my ass at school at the same time. The student loan story is a sad one, but it could have been avoided with some gumption and elbow grease!!

@logantreed said...

I feel like no one actually read the article. I don't have that much debt, others in my class do.

Hard work? I worked full time as a pipe-fitter/mechanical contractor for four years in Chicago before grad school. I worked right up until the day I started.

Anonymous said...

I remember when architects didnt require a college degree, let alone a masters...

Ben said...

Holy shit, did any of the reply posters actually go to school...the reading comprehension displayed is fucking atrocious.

"Dropped out of college and started flipping burgers." Lace those clown shoes up tight buddy.

Hey homie, the article was not a "woe is me" narrative. It simply presented the amount of interest paid over certain periods for different types of school loans.

Getting a job to pay for grad school while attending grad school seems feasible...oh wait, no, not at all. Treating grad school like an 80 hr work week to get the most out of your investment is feasible.

I remember when gas cost $1.13/gal. Times they are a changing.

Jesus fucking Christ, there is no tonal inflection in the article. Not sure how the dolts responding could hit their keyboards from their high horses. Logan is not crying about loans. He states in the final paragraph he knew the financial jump he was taking pre grad school.

The article brought to light how a loan calculator, aka: amortization schedule calculator might be useful.