How can I use savings to my advantage b4 taking out student loans

[klm3098]

Hi there. I am planning to take out federal loans for law school, but I've never taken on debt before and I am kind of nervous about it. I'd like to get everyone's input on how to use the current money I have to maybe lighten the loan debt a bit or save it for the future.

I'm single, in my mid-twenties, and have about 23k liquid and 10k in a brokerage account. No other debts. No retirement account or anything. I've estimated I'll need about 150k in federal loans over 3 years. In my financial aid package for the first year, 1/3 of the ~50k will be from an unsubsidized (6.8%) loan and the rest a PLUS loan (7.9%).

My questions... Should I use everything I have towards my education so I take out the smallest loan possible? If not, how much should I keep for an emergency fund? Should I still keep the brokerage account? Is now the wrong time to start a ROTH IRA and start saving for retirement?

Thanks in advance for any of your help!

[jpg7n16]

Hi there. I am planning to take out federal loans for law school, but I've never taken on debt before and I am kind of nervous about it. I'd like to get everyone's input on how to use the current money I have to maybe lighten the loan debt a bit or save it for the future.

I'm single, in my mid-twenties, and have about 23k liquid and 10k in a brokerage account. No other debts. No retirement account or anything. I've estimated I'll need about 150k in federal loans over 3 years. In my financial aid package for the first year, 1/3 of the ~50k will be from an unsubsidized (6.8%) loan and the rest a PLUS loan (7.9%)

Whoa. Let's think this through a bit first. Are you really about to make a $150k decision by just estimating?

What are you going to school for? (what field of study/job path)
What is the overall tuition cost for the program?
How much more will you earn with the degree than without it?
What other degree programs would allow you to earn roughly the same amount in the same field, but spend significantly less on tuition?
What financial aid/scholarships/employer tuition assistance program are available to you?

My questions... Should I use everything I have towards my education so I take out the smallest loan possible? If not, how much should I keep for an emergency fund? Should I still keep the brokerage account? Is now the wrong time to start a ROTH IRA and start saving for retirement?

Thanks in advance for any of your help!

In order: No, you need cash on hand still while completing the degree. At least 3-6 months. I doubt it. Yes.

As a common reason for some of those answers, by taking risk in the market you can expect to earn 7-11% long term, which is not guaranteed. Right now your top loans are at 7.9%, and due to the amount of interest couldn't even deduct it all.. So you could pay off those loans and save yourself 7.9% guaranteed, and tax free -- or take risk and try for 7-11% not guaranteed (and possibly taxable). Which makes more sense?


And if we could find you a way to get you virtually the same job and salary, and save $20k, $40k, or $90k -- that would obviously be beneficial to you long term wouldn't it?

[klm3098]

I really cannot switch to any schools or programs because all law schools just as expensive. Thanks for the tips though. I'll probably just save for an emergency fund and use the rest on tuition, so I don't take the full amount for loans.

[BMEPhDinCO]

Since your loans are NOT subsidized, I would use the cash to pay the interest while you are in school, rather than reducing the size you take out.

I would start with the $23k and see how long that lasts you...either for paying interest or something else. Is part of the $150k for living expenses? If so, see what you can do to reduce that (roommates, careful shopping, etc). If that doesn't include any living expenses, what are your plans for that? With being (very) frugal, you could probably make $30k stretch 3 years to 3.5 years...so if you have no other income, keep that money for that purpose.

Good luck.