How are you taking into account different schools' LRAPs in this hypo? The IBR for example doesn't kick in until after you use Boalt's LRAP for 10 years. I don't know what Penn's LRAP is like, but for certain situations it seems smarter to pay off the tuition upfront. (The interest rate right now on CDs right now is between 1 and 2%, so assuming that you invested the 100k in a CD with 1.5 interest rate, it would only bring about 16k of interest. And to be honest, the more likely interest rate would be in the lower 1%, not bringing any benefit really in investing the money rather than paying upfront, assuming X amount of income anyway.)
I am not considering the school's LRAP AT ALL. If she could qualify for Berkeley's LRAP assistance even with her cash, then she likely would not pay a single cent if her income remained below the 55 or 60K (below this amount Berkeley pays the entire IBR payment). My numbers were only for the government program, assuming she didn't qualify for additional school assistance because she had assets (I thought Berkeley's LRAP didn't have an asset test, but I don't remember).
I think it does have an asset test, as do most LRAPs. I think it also takes into account your spouse's income, etc. The asset test renders the notion of investing cash into CDs pretty pointless.
Also, I believe IBR only wipes out your loans with government jobs, so if the OP goes into non-government PI, then her loans would not be forgiven. (You can correct me if I am wrong there. I really have no interest in PI/gov work so I haven't done too much research on this.)
Wrong. It's not just government jobs. Legal aid qualifies, for example. At least when I checked on this information last year.
Yeah, I guess teaching, gov work, and certain non-profit work qualify. Regardless, I wouldn't want to pay a portion of my income to loan repayment for 10 years AND be tied down by a particular job if I don't have to be.
Another thing is that IBR takes into account interest earned on investments (IBR takes into account AGI, not just salary income) and dividends earned from stock to see how much you pay along with your salary. Wouldn't IBR take into account your assets (aka cash in CD accounts), and not just the interest earned on investment accounts, when calculating how much you pay as well? Seems odd if it does not...I haven't read the fine print on it, but from what I have seen on the website I know it takes into account interest earned on investments and dividends (basically it would take into account any income earned via interest on your CD account), along with alimony payments, etc. If it takes this into account it would seem odd to take out more loans in order to avoid the "opportunity cost" of paying 100k in present value because IBR would essentially adjust the income to take into account your investments.