UNDERGRAD: How Much Debt Is Too Much Debt

LePrestige's picture
Rank: Gorilla | 584

Hello All,

I'm currently a senior in highschool who received admittance to NYU where i would take Economics in the College of Arts and Sciences. I am a URM from south New York, and you might of been able to guess, will have some serious trouble affording NYU. You probably already know that NYU is notorious for terrible financial aid.
I'm looking get into Asset Management and Equity Research. Hopefully after some experience I can make the jump to the sell side.

Obviously I'm going to have to take out loans. My parents can pay a little but not much. I didn't want to pass more than 50k because it would be some where around 80k cash I'm paying after( correct me if I'm wrong). Now I'm thinking maybe I should take out around 70-80. I'm just afraid that if I take that out, and I get into Equity Reaserch that I'll be paying off this money for a long time. I don't want to have this on me for forever (even though ER pay is pretty nice). What do you guys think? Is 80k worth it/too much? All advice is much appreciated.

Comments (61)

Dec 27, 2015

80k total is not that bad. My parents paid roughly $80k for my 4-year undergrad education

Dec 27, 2015

If you're on WSO going into it; then I would say that 80-100K is the upper limit.

For those who don't know about careers like you learn on WSO then I'd say don't pass 50-60K.

Rule of thumb is to not take out more than 100% your starting salary coming out of school. Since most finance jobs will be roughly 50-60K and high finance approaching 6 figures I'd say that your 80K number isn't too bad.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

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Dec 28, 2015

Did you get into any other schools? Do you have other options?

Dec 28, 2015

@mrharveyspecter Thanks for the response. I got into Fordham Gabelli School of Business also. I haven't heard back from their Financial Aid office yet. NYU Is really my dream school though.

Dec 28, 2015

Go to Fordham. NYU is saturated.

Dec 28, 2015

That's a lot of cash.

Dec 28, 2015

@ConPanna Right, I'm just afraid that I'm going to be overwhelmed with having to pay back that much cash. Like if I'm paying it off relatively quickly, how long is it going to take me to pay that off?

Dec 28, 2015

80k isn't the total is it? You mean 80k per year?

Dec 28, 2015

80k for NYU ain't bad. Sure, it'd be better to owe 80k and have an ivy league school on your resume but that's not always an option. I'd rather owe 80k for NYU than 30k for Fordham.

I mean, unless you have rich parents or got a full ride, I don't really see any reason to choose Fordham over Baruch.

Dec 28, 2015

@Pokemon Master Wow thats a strong statement "rather owe 80k to NYU than 30k to Fordham" (thats really potentially what i'm going to face)

I didn't really think Fordham and Baruch were that comparable. I thought Fordham business school was significantly better than Baruch.

Dec 28, 2015

My apologies. I skimmed over it before. I thought we were talking about NYU Stern vs. Fordham. I stand by the above statement for Stern or if you have a decent shot of transferring into Stern.

IMHO, Fordham and Baruch are very comparable. We can bicker about which one is better, but the price difference is fucking huge. I'd bet Fordham is more fun though.

Dec 28, 2015

I would hesitate to take on anything greater than $60k. I'm generally fairly risk-averse though.

Dec 28, 2015

$80K is definitely steep but I would say its worth it for NYU. If you do well at NYU CAS you will line yourself up very nicely for a top finance job (AM, S&T, ER, IBD). You might also be able to transfer into Stern because they like internal transfers more than external so provided you do well a transfer is also possible

NYU get's an inredible finance recruiting so I would definitely go there

Dec 28, 2015

@qwertyzxc Thats the plan, but i think I might look to do 60-70, 80 is kind of a lot, especially when its time to pay it back.

Dec 28, 2015

Not to sound inconsiderate but you really shouldn't fret over 20k - 30k when you are talking about these kinds of jobs where the ceiling is very high.

You will be able to easily pay that off $80k less than 5 years after graduating if you are able to land a top finance job and the chances of you landing one is much much higher from NYU than from Fordham. If you start prepping as soon as you get to school meaning you keep a GPA above a 3.7 or 3.8 from CAS, do some relevant internships, get involved on campus, and you will be well on your way to getting a top job in field of interest.

It is very possible to get it done from Fordham as well but it will much harder. If you are getting a full ride from Fordham or only have to take out a nominal amount 10 k- 20K you should take that and just really crush it there and transfer after a year or two or try to network aggressively and intern during the year at Fordham which is still possible to do.

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Dec 28, 2015

Any other options than Fordham and NYU? I graduated with no debt and paid all my loans while working full time during college. As a risk and debt averse person I'd recommend taking the least burden. NYU might be worth it but you will be repaying it for quite a few years if you want to enjoy life in NYC.

Dec 28, 2015

@CFACandidateLevel1 How did you manage to work full time during college?? I got into Manhattan College and i bet i could get into Baruch, but I mean placement isn't really comparable to NYU. I would assume breaking into AM and ER is still pretty competitive so I need all advantages possible. Maybe I'd try to work during college but Id like to focus on my studies. - I see you're in AM, any advice? what major were you in undergrad?

Dec 30, 2015

Finance, Econ and Math and I did work in the industry during school year and all summers. Its tough but doable.

Jan 5, 2016

@qwertyzxc @Dedline thanks for your responses guys, guess I'll be taking out a crap ton of loans for NYU, but one more question: if I do get into Equity Research out of undergrad, how much would I be looking to make?
This is for a pre MBA ER associate 1st year

I thought ER was a position within the Asset Management division of a BB? Am I wrong?

Thanks guys

Jan 5, 2016

Congrats on NYU - it's one of the heaviest recruited schools for UG finance positions and you definitely made the right choice.

Just keep your grades up and hustle to grab internships early and you will be fine. Have some fun and get involved on campus about things you are passionate about as well.

For ER/AM you can expect same base salary as IBD but maybe a 30% discount on bonus. You'll be clearly six figures for most FO finance roles. Where ER is situated depends on the bank.

Jan 5, 2016

Well if you get a banking job you'll have the means to pay it off, but even then you're going to have to sacrifice.

Jan 5, 2016

thank you jeff skilling for taking the time to respond to my question from your jail cell :)

Jan 5, 2016

Sell your cock, its gotta be worth something. I wouldn't expect much though

Jan 5, 2016

$68k ain't that much in the long run of things. Now go make some money.

Jan 5, 2016

If you headed to banking don't worry about it man. You'll pay it off before you know it

Still I Rise

Jan 5, 2016

Most kids I know graduated with around 100k in debt. There's this kid I know and once he graduates med school he'll be 500k in debt (ugrad and med school). Sucks to be him.

Jan 5, 2016

You have to spend money to make money. Don't lose sight of that. Thought $68,000 in debt might seem heavy now, 15 years from now when your hedge fund is earning multiple offers you'll reflect and be glad you spent $68K (and likely you'd be willing to do it again!)

Jan 5, 2016
the burberry boy:

You have to spend money to make money. Don't lose sight of that. Thought $68,000 in debt might seem heavy now, 15 years from now when your hedge fund is earning multiple offers you'll reflect and be glad you spent $68K (and likely you'd be willing to do it again!)

Exactly. As long as you put your degree to use, you should be fine.

Jan 5, 2016

The average undergrad student loan debt is $23k at graduation. $68k in debt isn't terrible considering you went to upenn. You'll be able to earn yourself out of that hole pretty quickly. Ivies are an investment in your future.

Best Response
Jan 5, 2016

Lol these comments are exactly the reason for the massive ammounts of student debt in this country.

http://www.wallstreetoasis.com/blog/the-student-lo...
Baffles my mind that people think becasue they went to an ivey league school that 100k in debt is an "investment" in their future. I undertand not everyone can afford college without debt, but if that is really the case is the extra 80k in debt worth it over your state u? If were driven enough, you would become successful from bumbfu*k state.

fml I sound like IP. I swear I dont live in hoboken

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Jan 5, 2016

Just out of curiosity, with that much debt already would you consider taking on more debt and going to get your MBA or some other Masters?

Jan 5, 2016

I had $20,000 worth of debt in completing my undergrad and masters.

Honestly, from what I read around various forums, that seems the norm. It all balances out I guess once you get the right job.

UPenn is a great school so consider it an investment.

Jan 5, 2016

Dude, you went to fucking UPenn, you've got nothing to worry about.

Congrats on the Ivy League degree!

Jan 5, 2016

Depends what it is comprised of. Government subsidized while you are in school and only carrying 6% after graduation isn't a big deal. But if you're paying credit card rates on that, better hunker down for the next couple years.

Jan 5, 2016

My friends have student loan loads anywhere from 20k through 70k. None are having issues making payments and a few have paid off completely. Obviously this is a biased sample - everyone of them majored in something relevant (no art history majors with 100k debt) and the ones making payment work in finance making at least 65k. Your 68k debt load means that you are looking at around $700 in monthly payment. That can certainly be done if you break into IBD/S&T (which shouldn't be tough coming from penn). Ya, you will not save as much as someone without student loans but you will still live a decent lifestyle.

Personally, I graduated with 35k in debt (I personally covered most of my education) and I am not worried. My monthly payments will be around 350 which is very reasonable considering I got a top-10 degree. Much better than having an under water mortgage like most households. One decent bonus year and I can wipe that debt loan clean. Just be responsible.

Jan 5, 2016

If you're looking for BB, I don't think any of those are target or semi-target and would be pretty hard to break in. I interned at a BB this summer and looked at the list of our analyst class and what schools they were in. None of the summer analysts or summer associates were from a Florida school. You might have better luck with a Florida based school in a regional bank, something like SunTrust out of Atlanta.

The military background is definitely a plus. There are a lot of networking events that you can take advantage of so make sure to attend those.

That's a tough call. Free tuition vs debt... I think I'd go with the free tuition personally.

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Jan 5, 2016

I'd put UF on the back burner, and since you only have 2 years left, see what kind of scholarship you could get out of a Vanderbilt / UVA / Gtown / IU / UT / BC / UNC.

Depending on what you have saved up, the scholarship size, and which schools you can get into - that's when you make a decision.

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Jan 5, 2016

First, Thank you for your service. Second, I think it depends on what you value more- being able to start your career without debt but maybe at the risk of having better career opportunities. If you think no debt is more important, then definitely pick UF. Great flagship state university and well respected business program. However, breaking into IB will be an uphill battle and you will have to network your ass off. Conversely, you can also try your hand at Vanderbilt, Rice, Emory, or UVA (I'm assuming you want to stay in the south) and then take UF if it those don't work out. I would do the latter, but good luck to you either way!

"Even if you're on the right track, you'll get run over if you just sit there" - Will Rogers

Jan 5, 2016

While UF is no where near other schools, it still recruits decently.

- Target for SunTrust IB and CB (I think we had 3-4 in IB, ~10 in CB/ABL)
- Semi-Target with BAML and Wells in Charlotte (Know 3 kids going to wells)
- Some Ops at BB in NYC

If you want to stay in the South and don't mind going to a MM, then UF will be just fine. But if you're looking for BB or NYC/Chicago/SF then go elsewhere.

Jan 5, 2016

Consider looking into the MSF combo at UF.

Jan 5, 2016

Thank you all for the input. I'd love to be able to get in with a BB in NYC/SF/Chicago so I don't want to sell myself short on my education.

Jan 5, 2016

what do you mean, how you're dealing with them. most debt is manageable, even if well into the upper 5 figures or low 6 figures.

Jan 5, 2016

Shit, this is the cheapest longest term debt you're likely to get next to a 30 year mortgage with a good credit score. You can earn almost as much in a CD these days as your student loans cost.

Since this is on an Ibanking forum, the answer should be something along the lines of "its just another fixed expense" or "who the hell cares" perhaps "i paid it all off with my first bonus."

Even if you paid for both undergrad and grad with student loans and had about $250k outstanding, your payment should be around $1,500 a month. You can easily deal with this on a $60k salary as long as you don't go ball out very often. Plus if it's really that crushing you can pay down a portion of it with your bonus each year. Moreover if you had grad and undergrad debt you would be an associate (I hope and if not thats pretty much a waste of a degree) and you would have a $90k salary and a ~$40k stub rolling around right about now (actual amount of stub may differ according to market conditions and firm).

This question should be more addressed to another group of people. I have some friends doing things like paralegal work before law school and what not that are pulling in ~$40k. These people struggle with the debt.

Jan 5, 2016
PowerMonkey:

Shit, this is the cheapest longest term debt you're likely to get next to a 30 year mortgage with a good credit score. You can earn almost as much in a CD these days as your student loans cost.

Since this is on an Ibanking forum, the answer should be something along the lines of "its just another fixed expense" or "who the hell cares" perhaps "i paid it all off with my first bonus."

Even if you paid for both undergrad and grad with student loans and had about $250k outstanding, your payment should be around $1,500 a month. You can easily deal with this on a $60k salary as long as you don't go ball out very often. Plus if it's really that crushing you can pay down a portion of it with your bonus each year. Moreover if you had grad and undergrad debt you would be an associate (I hope and if not thats pretty much a waste of a degree) and you would have a $90k salary and a ~$40k stub rolling around right about now (actual amount of stub may differ according to market conditions and firm).

This question should be more addressed to another group of people. I have some friends doing things like paralegal work before law school and what not that are pulling in ~$40k. These people struggle with the debt.

I think you're underestimating the cost of debt here. The payments for 150k would be $1500/month. 250k would top $2k/month.

Jan 5, 2016

A $250k loan with a 20 year amort profile at 6% costs $1,791.08/month, at 6.75% it's $1,900.91
A $250k loan that was consolidated would put you in the 25 or 30 year amort though with a payment of $1,610.75 or $1,498.88.

So, I was a little under depending on the exact interest rate and amortization profile, however student loans can also be structured in interesting ways if you consolidate, including changing amortization profiles, payment type, and period.

Jan 5, 2016

If you went to school and paid ALL 250K yourself I would be suprised... I would also be suprised by the a person who didn't get any help from family (aunts, uncles, cousins, mother/father, g-parents) in some way, shape, or form (aid via a free car, assuming your car payments thereby freeing up your cash flow, paying your tuition).

Most of the people Iknow (even lower class) have had either grants, scholarships, or hand-outs from family that lessened their debt burden.

Jan 5, 2016

Also, the interest for student debt is tax-deductibe up to 4 or 5 K...erasing 4 or 5K from your income tax.

Jan 5, 2016

First, if the interest rate on your debt is something reasonable like 5% or less (most federal student loans fall in this category), you should pay the minimum amount because you can earn a higher return with other types of investments. The only exception would be if you have an exorbitant amount of debt somehow and just want to get it paid off... I don't really even see how this is possible because I think there's a limit on federal borrowing each year (I forget the specifics now).

Where people get into trouble is with private loans that charge higher interest rates. If you're being charged 7%-9% or somewhere in that range you may want to consider paying off debt earlier because you can't necessarily get a higher tax-adjusted return on investments (at least, not easily).

Interest paid on student debt is tax-deductible only up to $65K salary - if you make over that it goes away entirely (see http://www.wwwebtax.com/adjustments/student_loan_i...). So in your first calendar year when you start, you can deduct student loan interest, but in your second year of reporting taxes you can't deduct interest unless you somehow only get a $5K bonus.

Jan 5, 2016
dosk17:

First, if the interest rate on your debt is something reasonable like 5% or less (most federal student loans fall in this category), you should pay the minimum amount because you can earn a higher return with other types of investments. The only exception would be if you have an exorbitant amount of debt somehow and just want to get it paid off... I don't really even see how this is possible because I think there's a limit on federal borrowing each year (I forget the specifics now).

Where people get into trouble is with private loans that charge higher interest rates. If you're being charged 7%-9% or somewhere in that range you may want to consider paying off debt earlier because you can't necessarily get a higher tax-adjusted return on investments (at least, not easily).

Interest paid on student debt is tax-deductible only up to $65K salary - if you make over that it goes away entirely (see http://www.wwwebtax.com/adjustments/student_loan_i...). So in your first calendar year when you start, you can deduct student loan interest, but in your second year of reporting taxes you can't deduct interest unless you somehow only get a $5K bonus.

When I made the 250k comment I was refering to private debt. So, yes, 250k in federal debt is managable. However, 250k in private 10% debt is unmanageable on anything less than 120k/year, net.

Jan 5, 2016
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Jan 5, 2016