Debt, Education, The Home 
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Reader Question: Going to Graduate School with a Mortgage

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Here’s a question I received today from a reader and as I understood it, he’s planning on going to graduate school, has saved up some money and owns a home in NYC, and wants to know how to best go about balancing a mortgage with the school payments. My suggestion was to aggressively pursue financial aid especially since any equity he’s built up in his primary residence won’t count against him as well as look for payment plans. If you have any additional suggestions, please leave a comment, thanks!

I am currently 23 years old and living in New York City. I purchased an apartment almost 2 years ago and have no other debt outstanding besides my mortgage and maintenance payments which is currently about 22% of gross annual income (that’s very good for NYC!). I’ve also been fortunate enough to save up quite a bit as well.

This fall, however, I will be applying to business schools in New York for admission in fall 2007. As I have no experience in trying to balance a graduate degree’s incredible costs while maintaining my mortgage, I was wondering if there is any advice you might be able to give on how to sustain both. Will the financial aid office hold my investment in real estate against me, or can I claim that as my living expense since I will continue to live there?

I want to come out of an MBA program with as little debt as possible, so I’m trying to plan in advance. Just wondering if you might have any insights or recommendations in terms of how to approach the financing of my education.

My response:

[...]

As for the mortgage and financial aid, what will happen is you will offset your property ownership value by the amount of your mortgage. So, let’s say you have a $500,000 condo and a $490,000 mortgage, your half a million dollar condo’s value is reduced by the $490,000 debt you have. Since you’re 23 and going to graduate school, you’re likely not a dependent of your parents so the equity in your primary residence (if you live in this property) won’t count against you when they calculate need based financial aid. Financial aid will come in the form of grants and loans, the latter you’ll have to repay but at very attractive interest rates and payment is usually deferred until after graduation. FinAid.org is a useful site for financial aid information.

Another suggestion is to look into payment programs where you can spread a semester’s payment across months rather than paying it all up front. That can soften the blow of graduate school.

Have you considered looking for a job that will pay for continuing education? While a full time MBA is generally more valuable than a part time program, having a company pay for it is certainly more attractive than paying for it yourself.

Anyone else have any input?

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One Response to “Reader Question: Going to Graduate School with a Mortgage”

  1. dakboy says:

    The only thing I’d be wary of is the employer paying for the MBA. You normally have to remain with the company for a specified period of time after completing the degree or else have to repay the company a pro-rated amount.

    Additionally, many of these setups require you pay up-front out of pocket, and upon completing each semester with satisfactory grades, the company reimburses you for the amount.

    A friend had this happen to him a few years ago. He started an MBA program while working for our mutual employer, and left the company before he finished. He had to write a sizeable check to cover all this his last week there.

    Just 2 things to consider so you don’t get suddenly hit with a large & unexpected bill.


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