Saving for Graduate School

[esp165]

Hi Friends,

I am looking for advice regarding saving for grad school (law school, business school, or a joint JD/MBA program). Let's assume that my graduate education, including room/board/etc., will cost $150,000. Here is where my current finances stand. I am hoping that you can provide me with advice relating to where to put my money (cash, stocks, bonds, etc.), how much to liquidate for grad school, how much to take out in loans, etc.

Savings: Currently I have $30,000 invested in Vanguard funds(about 1/2 in bonds and 1/2 in stocks) and an addition $2,000 in silver

Income: I make $54,000 a year and manage to save about $400 every month (approximately $5,000 a year) for investments in addition to another $150 that goes to my retirement account.

I have about 2-3 more full years of work until I go back to school.

-Where do I put my savings now?
-How much of those savings do I liquidate and use for school?
-How much do I take out in loans?

Thank you so much in advance for your help.

[QuarterMillionMan]

1) Are planning to quit your job?
2) Do you have to relocate?
3) Are you intending to live off the student loans?
4) How much in savings do you anticipate you'll have in 2 or 3 years?

[lhkorn99]

If you plan on using the money in vanguard for school, I would keep the investments conservative - mostly bonds, money markets, and a small percentage in stocks - if the market crashes you don't have time to stay in and wait for the upside, so stay conservative.

[FrugalTexan75]

Are you single?
Do you have pets?
How far are you willing to go to keep your costs down, and thus the total amount needed for grad school down?

My point - I went back to school at 33. I downsized from an approximately 900 sq ft apartment to renting a room in a house for 1/5th of my apartment rent. I had to move 2 times for various circumstances. I also did whatever I could to make money - usually tutoring, sometimes up to 30 hours a week (if you include commute time, up to 35+/week.)

I also applied for every and any scholarship that I came within a centimeter of qualifying for.

Between the small savings (roughly $13k), my tutoring income, and the scholarships, I was able to pay for some major car repair bills (~$2k), all living expenses, all school expenses, four moves (including the one to my new job), and still had a few hundred dollars in the bank. No debt.

[esp165]

Hi All,

Thank you so much for your advice thus far. Here are my answers to your questions.

1) Are you single?--Yes
2) Do you have pets?--No
3) How far are you willing to go to keep your costs down, and thus the total amount needed for grad school down?--I could probably reduce my living expenses by about 25% compared to what I am spending now. That would yield a monthly budget of approximately $2,000
4) Are planning to quit your job?--Yes, I want to do school full time (they programs that interest me are not available part-time).
5) Do you have to relocate?--I will not have to relocate, but could find a less expensive apartment in my current city.
6) Are you intending to live off the student loans?--See below
7) How much in savings do you anticipate you'll have in 2 or 3 years?--I expect to have a total of $50,000 in savings in 3 years.

My ultimately question revolves around how to use my savings. Should I take out loans for all of my expenses (both the cost of school and living expenses) and then pay those loans off over time, saving all of my current savings? Should I liquidate part of my current savings to pay for either living expenses or school? Should I liquidate most of my savings and use that to reduce the amount I have to take out in loans?

Thank you all very much.

[FrugalTexan75]

Personally, I would reduce my expenses to as low as I could get them (be *brutal* cut cable, go to a prepaid cell, cut down or eliminate eating out, etc, etc. Sell anything you can live without. See if you can live without a car, or with a cheaper to run car ...) Then I would dig really deep for any grants or scholarships. Then I would see what I could do to bring some form of income in while still going to school. Then I'd spend my savings down to the point where I only have one - two months bare minimum expenses covered. At this point, and only at this point, would I even think about using loans. Then while using loans, I'd see if I could cut my expenses even further in order to have as little owed in the end as possible.

But that's what I'd do.

[siggy_freud]

I'd probably use my savings for debt servicing and living expenses while in school, and use loans to pay tuition. Then, after I'm done and making money again, use a portion of the savings to pay down the principle.

[snafu]

Kudos for completing your undergrad program without incurring long term debt. Have you taken LSAT & LMAT with the needed results? What is the probability of acceptance? Have you defined exactly the coursework and credits required? Does your current employer have any program to advance your education? What is the feasibility of getting your dream career in your field, in your location at your age on completion? I know that about 1/3 of MBAs begin their journey as part time students, often taking on-line courses created to allow them to move towards their goal while still managing employment.

During this transitional period, I hope you continue to monitor your holdings with a plan in place should continued improvements reverse.

[SeanH]

Why are you waiting 2-3 years and why are you considering law?

[QuarterMillionMan]

My analysis;


1) In 2-3 years you'll have approx $50,000 in savings to live off for the succeeding approx. 2years (best case senerio to complete law degree/joint MBA & law degree, hopefully it doesn't take longer)
2) $50,000/2 years equals, $25,000 per year to live off of.
3) $25,000 per year equals approx half of your current salary of $54,000
4) During grad school you'll have to live below your means by 50% of your current means
5) School loans will pay for school related loans/expenses
6) It can be done but it'll take a lot discipline on your part to get by with half of your current expenses.
7) Also this is assuming no major unexpected expenses rears its ugly head during the time you're pursuing the graduate degree.
8) Listen to your conscience and do what's right for you, only you can decide.
9) It'll be tough but if you can complete it, it'll all be worth it.


Edited to add: Also for me personally, I would rather fail trying than never have tried it at all within reason.

[esp165]

Reply 2

Thanks again to everyone for this useful insight!

To reply to the latest round of questions:

ave you taken LSAT & GMAT with the needed results?--LSAT is completed, however, I still need to take the GMAT. LSAT scores put me in range for the school(s) I want.

What is the probability of acceptance?-High. A little background, which is also important for job prospects (and thus debt prospects) after school. I graduated in 2011 with honors from a top three Ivy League school. Strong resume with high levels of experience for someone my age. Very strong network across sectors in my town. Many job prospects in my city, where I plan to go to school and to work afterwards. I think these factors make me feel a little more confident about taking on debt given my presumed ability to secure a well-paying job after school.

Have you defined exactly the coursework and credits required?-No

Does your current employer have any program to advance your education?-No

What is the feasibility of getting your dream career in your field, in your location at your age on completion?-Relatively high

Why are you waiting 2-3 years and why are you considering law?-Waiting because I am not ready (emotionally) to return to school, I will be a more desirable candidate with more than 2 years of work experience, and I can save more for school. Considering law because I actually enjoy the legal field and may want to practice corporate law, hence the JD/MBA thoughts.

Thanks again everyone!