I've got a question for all you no-debt-at-any-cost guys; what else do you suggest in life?
Pay for everything in cash? Up front? Let's break that down.
Let's say you graduate high school and make the average salary. This website says it's $29,950, but I'll spot you the extra $50 so we can call it an even $30,000.
http://nces.ed.gov/fastfacts/display.asp?id=77
You'd be paying in the 15% bracket, and this website says you'd take home $27,446 per year, or $2287 per month.
http://www.bankrate.com/calculators/tax-planning/quick-tax-rate-calculator.aspx
Pretty sweet!
So let's say you're the man, AND you're responsible. So you're not going to go to school, get married, or do anything really but save money. Let's say that you can put nearly half of your income every month away, call it $1,000 per month because the numbers are easy.
So let's say you're going to save first, and THEN go to school, because that's what somebody told you to do. You're also not going to do any flight training. Assume you go to an in state school, and let's assume that you'll just need to pay for tuition, because you'll work while you're in school. Let's use my alma mater's tuition rates, and assume you're living in state.
http://www.wmich.edu/registrar/tuition/fall2013-spring2014/main.html
Using some rough numbers, you'll need around $60,000 to pull this off ( (4732 * 6) + (5228 * 6) = $59,760 ). Now, these numbers aren’t PERFECT because they’re for full time enrollment, but frankly I’m lazy and I want to make this a little easier on myself. Let’s assume it’s close enough.
So let's knock out college first, because then you can make more money, and THEN start working on flight training debt.
$60,000 / $1,000 per month is 60 months, or 5 years. So sweet, you're going to work from 18 to 23 until you have all that ched saved up for college.
Awesome.
But because you’re working while you’re in school, it’s going to take you about 7 years to finish things up at 8 credits a semester. Now, I know somebody is going to claim to be superman and say that they did 22 credit hours a semester online while working 5 jobs, but that’s not realistic. I’m not going to lie, I nearly died while going to grad school part time and working full time. I think I had ten days off over a ten month period. So based on my personal experience it’ll take you a lot longer than you think, so work with me here.
Now at 23, you’ll start working on undergraduate while working full time. It’ll take you until you’re 30 to graduate. But you’re debt free!
So at 30, you'll start earning $44,970 according to the website I posted earlier. That's if nothing has gone wrong, you never bought a car, your rent is cheap, and you can actually save that much of your income. But the internet told you to do so, so we'll say that you did, because the internet always gives amazing advice. And because you're so awesome, we'll round to $45,000 a year.
So again at 15% you'll take home $40,196, or about $3,349. Now, again, let's say you're awesome and you double your savings every month, so you're going to save $2,000 per month to pay for flight training.
Let's say you want to get this done reasonably quickly, so you're going to do ATP's program, which if you include housing, is just about $70,000.
$70,000 / $2,000 per month is 35 months, or about 3 years.
So at 33 you start training, and even though I know you can do it quicker, let's say it takes a year.
So you're 34 years old and you're debt free with 250 hours and your CFI/II/MEI. You also have zero dollars in savings. And you don't likely have a reliable car. Nor do you have a house. A spouse and kids? Nope. But you're debt free!!!
But let's continue with this.
You instruct from 34 to 36, you make $15,000 a year each year.
You get hired at a regional at 36. Let's say you average $30,000 a year, every year (again, averages), and then it takes you 5 years to upgrade.
At 41, you upgrade to captain, and you make $60,000 a year, every year (again, averages), and it takes you 5 years to get to a major.
At 46, you've made it. You don't have a car, a house, a spouse, or a kid, but you're debt free and at a mainline carrier.
Let's say you make $100,000 a year for 10 years, and then upgrade, and make $200,000 a year until you retire at 65. Frankly, if this happens, you've hit the lottery, but you're awesome because you're debt free, so we'll give you that much. So over the course of your flying career, you've made $4.8 million at the mainline carrier, and retired at 65. You bought your first house at 46, got married at 46, and didn't have kids because you can't afford them.
So let's back this up, and make some assumptions about taking out the debt.
At 18 you enter undergraduate and pay $60,000, plus do a flight program so you're in the hole for flight training to the tune of $130,000. Lots of money, right? Maybe.
At 22 you graduate, but you did your training quickly and started instructing at 20. At 22 you're hired by a regional. At 27 you upgrade. At 32 you're hired at a mainline carrier. You make $100,000 a year for 10 years, then $200,000 a year for the remainder. You make $7.6 million over the course of your flying career at a mainline carrier, and have to repay $189.271.20 in student loans back (MAYBE, more on this in a second).
If you make the same assumptions for career expectations, you come out MUCH further ahead, by MILLIONS OF DOLLARS if you're able to get to working quicker.
But what about repayment options? Can you really afford that $1500 a month loan payment every month while you're instructing?
Of course not, and every lender knows this, which is why they have alternative repayment plans.
Let's say you enter into the Pay As You Earn repayment program, because you did your flying in college, and you have Direct Loans through the federal government.
When you're making $15,000 per year you will owe zero dollars per year.
http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn/calculator
So listen guys, you need to understand one thing.
I'm not saying that you need to take out student loans, at all, ever. Nor am I saying they're a good idea. Nor am I recommending you study aviation. Frankly, I'm not recommending anything at all.
What I AM recommending is that no matter what, you need to be discussing this stuff with people that do this stuff for a living (you know, financial aid counselors) and making these kinds of calculations using facts and figures that represent the level of risk that YOU'RE willing to accept, with outcomes that you think are realistic. Simply saying, "DON'T HAVE ANY DEBT EVER" reveals a persons true nature (and the simplemindedness of their thinking), in the same way that "YOU NEED TO TAKE OUT AS MUCH DEBT AS POSSIBLE RIGHT NOW" does (and in that case, it would scream to me that somebody is reckless and short sighted).
Debt is a tool, not a curse. If you can make the tool function in a manner so that it works FOR YOU, then it's useful. But if you don't know what you're doing, then bad things will happen, just like the time erm....MY FRIEND, decided it was a good idea to operate a jack hammer with zero training and little oversight.
