Friday, October 19, 2007

Another set of classes, another set of books


I think I've mentioned, I'm planning to go back to school in January for a Master's in degree in my field (publishing). I got my official acceptance letter in the mail two days ago, and all my course registration paperwork yesterday...but still have not seen anything about financial aid.

I nearly tore my hair out early this summer studying for the GRE in order to qualify for a departmental scholarship and I made the cutoff with a couple questions to spare (or if you look at it another way, I missed the highest scholarship cutoff by one question--but you have to attend full time for that, and I can't handle that with work and everything else I've got going on. A part-time scholarship is fine with me, thank you!). I am desperately waiting on news of that scholarship so I can figure out how much I'm going to have to take out in loans.

This is something I'm really torn about. I've never had any debt at all. If I get this scholarship, I could probably afford to pay the difference up front out of my emergency fund...but school is not an emergency. I think the albatross of future payments will weigh less heavily on my neck than the knowledge that if something were to happen, I wouldn't have six months of expenses in the bank, especially considering that I'll be reimbursed everything I pay at the end of the semester depending on a B- grade average through tuition reimbursement at my job. Which is another argument both for and against loans vs. using my emergency fund: if I'm going to be paid back in four months and I'm reasonably certain of making the GPA required for the reimbursement, why not just pay it and not end up paying the interest?

Well, the same argument applies: If I pay up front with my emergency fund, I will be losing the financial security (in terms of interest) and the mental security (of six months of expenses in the bank) in favor of not incurring interest (which I'll have to pay back because the reimbursement will only cover the actual tuition cost).

So really the question boils down to which is greater: the loss of interest and mental security or the incurred cost of interest by taking out loans and paying them back at the end of each semester?

Until I meet with a financial aid advisor, I really won't know specifics, but here are a couple of guesses:

1. It will depend on what kind of loan I take out.
If I qualify for and take out only subsidized loans (the yearly maximum is higher than what I need, so it's a possibility), then it's entirely likely I won't even end up paying interest--the federal government pays the interest on the loans while I'm in school, and I'll pay them off before I graduate. If I only take out unsubsidized loans, the interest will be accruing during the months I'm in classes and I will have to pay that out of pocket when paying off the loan using the tuition reimbursement money at the end of the semester. It's also possible I might wind up with a mix of subsidized and unsubsidized loans.

2. It will depend on the tax consequences of everything else.
The scholarship might wind up being a tax liability for me, as I'd have to claim it as income. Same with the tuition reimbursement. But aren't taxes paid on student loans deductible? How would taking the loan in 2007 vs. 2008 affect the overall tax picture?

3. It will depend on whether what I'm planning is even possible.
I don't even know if the student loan system is set up to handle things the way I'd like them done. They'd probably prefer me to hang on to the loan until I graduate, incurring interest that will need to be paid then. I know with car loans, early payment penalties are written into the contract--could something like this bar me from my plan?

4. If I pay out of my emergency fund, would the cost of paying for the second semester while waiting on the first semester's reimbursement put me in a financial black hole? I'm not sure what my total cost per semester is going to be until I hear about this scholarship, and it's entirely possible that my responsibility will be less than $2,000 per semester (in a most perfect world). In that situation, yes, I can afford to be without the four grand for a few weeks. I won't like it, but I'd still be able to handle most emergencies, like hospital copays, rent, or groceries. If it's going to be more like $5,000 per semester, however, while I can afford to pay for one semester up front and wait for the reimbursement, I canNOT afford to be without $10k for even a few weeks and expect to pull through any emergencies. I'll need to figure out where my baseline cutoff is, and preferably before I find out what the cost is going to be.

Clearly, I have some research to do. I'm very antsy to get things taken care of, although I'm just going to have to wait. Once I get the financial aid information in the mail, I can set up an appointment with their office to get some answers to my questions. On November 8, I can apply for the tuition reimbursement (I have to apply before registering for classes but after I know what the cost is going to be, and I also have to wait until I've officially been employed here for 12 months, which is November 7). Once I'm assured of reimbursement and the cost of what I need, I can arrange for the loan and then register for classes.

And the only loophole in this whole process is that registration starts in three weeks, and there's no way on earth everything's going to fall into place for me in that span of time. I risk not getting the classes I really want. There are five or six that are applicable to my specialization, although one of the classroom courses is on Mondays (when I'm not available) and the three are online. So if I don't get my first choice classes, I'm stuck giving up dance classes FAR earlier than I wanted or taking one or both of my classes online.

I guess there's no point worrying about it right now--I've got my plans made as best I can, and now I just have to wait on the mail before jumping right into action. I guess it's a good thing at least that I'm excited about all this!

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