Get Loans or Pay Cash Money

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
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Marionberry
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Get Loans or Pay Cash Money

Postby Marionberry » Tue Feb 22, 2011 9:53 pm

So here's my situation, I'm trying to decide if the best course of action is going to be to take out loans or not. I have some money put aside from an inheritance, which along with my SO's income in the next three years will allow me to pay tuition without taking out loans. However, I am going to GULC which has a good LRAP, and I'm really interested in PI. So here are the two options I'm considering:

1) Take out loans, and then upon graduation pay them off in cash if I'm going into private practice. If I do get a PI gig, then I would let LRAP pay them off for as long as possible.

2) Pay cash up front.

Will I even be able to get loans/qualify for LRAP if I have money in savings and my spouse's income is substantial? If so, my thinking was that if my loans didn't start accruing interest until graudation, I could wait until then to choose. Will I even qualify for loans that wait til graduation to start accruing interest, if I qualify for loans at all?

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Eugenie Danglars
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Re: Get Loans or Pay Cash Money

Postby Eugenie Danglars » Wed Feb 23, 2011 9:11 am

If you are not married (or if you are married and filing separately), your SO's income shouldn't matter. However, I believe that LRAP does take into account your assets, so you should look into it carefully before going this route.

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AreJay711
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Re: Get Loans or Pay Cash Money

Postby AreJay711 » Wed Feb 23, 2011 9:35 am

I think you should take out loans and keep your inheritance for a rainy day / large purchase. The extra liquidity might help you in a long job search since it should be enough to pay living expenses and loans for several years and not paying up front will give you a chance to get lucky with a PI job where you profit hard. I would try to find a way to hide those assets though.

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swc65
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Re: Get Loans or Pay Cash Money

Postby swc65 » Wed Feb 23, 2011 9:43 am

TAKE OUT LOANS. Save the cash! It's always better to gamble/invest with someone else's money. Plus, you can defer payments after you graduate for years if you do not have a job and would still have the cash to live on.

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Malcolm8X
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Re: Get Loans or Pay Cash Money

Postby Malcolm8X » Wed Feb 23, 2011 9:45 am

Just like with any huge purchase, if you got money to put money down, do it. I wouldn't put all your eggs in one basket but something like 30% cash, 70% loans is a favorable debt structure. This really all depends on how much you have and what you do plan to make though (and the odds of you making it) and only you can answer that.

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Marionberry
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Re: Get Loans or Pay Cash Money

Postby Marionberry » Wed Feb 23, 2011 9:52 am

Thanks for the help guys! From what I've read, it looks like it will probably be wise for my wife (we're getting married in July) and I to file our taxes separately for the next few years.

Does anyone know what the eligibility requirements are for loans that do not start gathering interest until after graduation? I feel like this, if it's not a possibility, is something that I should take into consideration. One of my biggest goals at the moment is to find a job in a public defender's office in a big metro area, which while I recognize is still competitive, should hopefully not be too unattainable unlike say, a job at the ACLU or an environmental moon law org.

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Malcolm8X
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Re: Get Loans or Pay Cash Money

Postby Malcolm8X » Wed Feb 23, 2011 9:56 am

Marionberry wrote:Thanks for the help guys! From what I've read, it looks like it will probably be wise for my wife (we're getting married in July) and I to file our taxes separately for the next few years.

Does anyone know what the eligibility requirements are for loans that do not start gathering interest until after graduation? I feel like this, if it's not a possibility, is something that I should take into consideration. One of my biggest goals at the moment is to find a job in a public defender's office in a big metro area, which while I recognize is still competitive, should hopefully not be too unattainable unlike say, a job at the ACLU or an environmental moon law org.


Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:

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Marionberry
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Re: Get Loans or Pay Cash Money

Postby Marionberry » Wed Feb 23, 2011 10:10 am

Malcolm8X wrote:
Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:


Any Idea how much interest I should expect to accrue by graduation if I take about ~$150k in loans? If it is rare, then I'm willing to bet I'm not one of the people for who it's a possibility.

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Malcolm8X
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Re: Get Loans or Pay Cash Money

Postby Malcolm8X » Wed Feb 23, 2011 10:29 am

Marionberry wrote:
Malcolm8X wrote:
Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:


Any Idea how much interest I should expect to accrue by graduation if I take about ~$150k in loans? If it is rare, then I'm willing to bet I'm not one of the people for who it's a possibility.


Oh man.. Somebody correct me if I'm wrong (just an estimate). Set according to semester disbursements:
Year 1, 30K*(1.075)^3 =~37000
Year 1.5, 30K*(1.075)^2.5=~36000

Year 2, 30K*(1.075)^2=~35000
Year 2.5, 30K*(1.075)^1.5=~33500

Year 3, 30K*(1.075)^1=~32000
Year 3.5, 30K*(1.075)^.5=~31000

Sum (after subtracting $30K from each) =~$24,500

This depends on the interest rate of course (this was assuming a weighted average of cost of capital of 7.5%)

$25K just in interest. Interest will EAT your money up. That's why it's important to pay it off if you can or put some money down..

Edit: and this is $180K in loans. So shave off like $3-$4K for ~$150K

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Marionberry
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Re: Get Loans or Pay Cash Money

Postby Marionberry » Wed Feb 23, 2011 10:30 am

Malcolm8X wrote:
Marionberry wrote:
Malcolm8X wrote:
Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:


Any Idea how much interest I should expect to accrue by graduation if I take about ~$150k in loans? If it is rare, then I'm willing to bet I'm not one of the people for who it's a possibility.


Oh man.. Somebody correct me if I'm wrong (just an estimate). Set according to semester disbursements:
Year 1, 30K*(1.075)^3 =~37000
Year 1.5, 30K*(1.075)^2.5=~36000

Year 2, 30K*(1.075)^2=~35000
Year 2.5, 30K*(1.075)^1.5=~33500

Year 3, 30K*(1.075)^1=~32000
Year 3.5, 30K*(1.075)^.5=~31000

Sum (after subtracting $30K from each) =~$24,500

This depends on the interest rate of course (this was assuming a weighted average of cost of capital of 7.5%)

$25K just in interest. Interest will EAT your money up. That's why it's important to pay it off if you can or put some money down..


Good to know. Thanks a lot for the help. I'm just now starting to look at all of this stuff so I'm still kind of in the dark.

BeenDidThat
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Re: Get Loans or Pay Cash Money

Postby BeenDidThat » Wed Feb 23, 2011 10:42 am

http://www.law.georgetown.edu/finaid/

Consider this fact-finding mission a preview of legal research (minus the cite-checking inanity).

GMVarun
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Re: Get Loans or Pay Cash Money

Postby GMVarun » Wed Feb 23, 2011 11:02 am

Malcolm8X wrote:
Marionberry wrote:
Malcolm8X wrote:
Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:


Any Idea how much interest I should expect to accrue by graduation if I take about ~$150k in loans? If it is rare, then I'm willing to bet I'm not one of the people for who it's a possibility.


Oh man.. Somebody correct me if I'm wrong (just an estimate). Set according to semester disbursements:
Year 1, 30K*(1.075)^3 =~37000
Year 1.5, 30K*(1.075)^2.5=~36000

Year 2, 30K*(1.075)^2=~35000
Year 2.5, 30K*(1.075)^1.5=~33500

Year 3, 30K*(1.075)^1=~32000
Year 3.5, 30K*(1.075)^.5=~31000

Sum (after subtracting $30K from each) =~$24,500

This depends on the interest rate of course (this was assuming a weighted average of cost of capital of 7.5%)

$25K just in interest. Interest will EAT your money up. That's why it's important to pay it off if you can or put some money down..

Edit: and this is $180K in loans. So shave off like $3-$4K for ~$150K


Yeah this is true, but keep if you 25k laying around in cash that also should be earning interest (very unlikely at 7% but should be able to get 1-2% easily out of it). I would also recommend paying some portion in cash (say 20-30%) and taking the rest in loans (at the very least take out full amount of stafford subsidized (no interest grows on this)). Meanwhile let the remainder of your cash grow interest in some riskless assets.

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pjo
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Re: Get Loans or Pay Cash Money

Postby pjo » Wed Feb 23, 2011 11:03 am

Malcolm8X wrote:
Marionberry wrote:
Malcolm8X wrote:
Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:


Any Idea how much interest I should expect to accrue by graduation if I take about ~$150k in loans? If it is rare, then I'm willing to bet I'm not one of the people for who it's a possibility.


Oh man.. Somebody correct me if I'm wrong (just an estimate). Set according to semester disbursements:
Year 1, 30K*(1.075)^3 =~37000
Year 1.5, 30K*(1.075)^2.5=~36000

Year 2, 30K*(1.075)^2=~35000
Year 2.5, 30K*(1.075)^1.5=~33500

Year 3, 30K*(1.075)^1=~32000
Year 3.5, 30K*(1.075)^.5=~31000

Sum (after subtracting $30K from each) =~$24,500

This depends on the interest rate of course (this was assuming a weighted average of cost of capital of 7.5%)

$25K just in interest. Interest will EAT your money up. That's why it's important to pay it off if you can or put some money down..

Edit: and this is $180K in loans. So shave off like $3-$4K for ~$150K


Thanks for posting that calculation. I ran a similar projection and it came out to around the same amount. OP, I'll be in a similar situaiton to you, although I only have enough to pay for my first year. I'm leaning toward just using the money to pay for my tuition outright;however, I'm trying to get a firm job and I'm hoping I'll be making enough that I won't even be able to qualify for IBR. Plus, at the end of the day I just feel better looking at a statement with 120K in loans rather than 180K, even if I have the money sitting in the bank. Considering you want to work gov/PI, maybe you might want to think more about it considering there's a good chance you'll end up using LRAP. I'd love to hear more ppl's thoughts on this, I'm still leary about what to do.

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afc1910
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Re: Get Loans or Pay Cash Money

Postby afc1910 » Wed Feb 23, 2011 12:30 pm

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Last edited by afc1910 on Fri Mar 18, 2011 10:05 pm, edited 1 time in total.

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AreJay711
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Re: Get Loans or Pay Cash Money

Postby AreJay711 » Wed Feb 23, 2011 12:44 pm

Malcolm8X wrote:
Marionberry wrote:
Malcolm8X wrote:
Dunno the requirements BUT I do believe it is rare for grad schools. I was unable to get a int deferrable loan for my grad program. :roll:


Any Idea how much interest I should expect to accrue by graduation if I take about ~$150k in loans? If it is rare, then I'm willing to bet I'm not one of the people for who it's a possibility.


Oh man.. Somebody correct me if I'm wrong (just an estimate). Set according to semester disbursements:
Year 1, 30K*(1.075)^3 =~37000
Year 1.5, 30K*(1.075)^2.5=~36000

Year 2, 30K*(1.075)^2=~35000
Year 2.5, 30K*(1.075)^1.5=~33500

Year 3, 30K*(1.075)^1=~32000
Year 3.5, 30K*(1.075)^.5=~31000

Sum (after subtracting $30K from each) =~$24,500

This depends on the interest rate of course (this was assuming a weighted average of cost of capital of 7.5%)

$25K just in interest. Interest will EAT your money up. That's why it's important to pay it off if you can or put some money down..

Edit: and this is $180K in loans. So shave off like $3-$4K for ~$150K


I agree with what you said above about splitting it between cash and loans but if the OP were to get a PI job then he could profit big time by taking out loans. I think the risk might be worth the reward. Also, if he has enough $ to pay for law school I think maybe he should give that $ to someone he trusts like his mom or something so can hide it.

Edited for grammar... and spelling

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afc1910
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Re: Get Loans or Pay Cash Money

Postby afc1910 » Wed Feb 23, 2011 12:51 pm

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Last edited by afc1910 on Fri Mar 18, 2011 10:04 pm, edited 1 time in total.

Anonymous Loser
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Re: Get Loans or Pay Cash Money

Postby Anonymous Loser » Wed Feb 23, 2011 12:56 pm

afc1910 wrote:FAFSA asks about your assets . . . .


In the interest of clarity, it is worth pointing out that for the great majority of borrowers, assets are not considered in the EFC calculation. The "simplified" EFC formula is utilized for graduate students with an AGI of <$50,000*; this formula does not consider assets. Moreover, when assets are considered, a .20 conversion rate is applied to arrive at the expected asset contribution figure utilized in the EFC calculation.


*The formula also requires that the borrower be eligible to file a 1040A or 1040EZ, and does consider spousal income.

See generally The EFC Formula 2010-2011, available at http://ifap.ed.gov/efcformulaguide/atta ... 102011.pdf

BeenDidThat
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Re: Get Loans or Pay Cash Money

Postby BeenDidThat » Wed Feb 23, 2011 1:48 pm

afc1910 wrote:
Marionberry wrote:Thanks for the help guys! From what I've read, it looks like it will probably be wise for my wife (we're getting married in July) and I to file our taxes separately for the next few years.

Does anyone know what the eligibility requirements are for loans that do not start gathering interest until after graduation? I feel like this, if it's not a possibility, is something that I should take into consideration. One of my biggest goals at the moment is to find a job in a public defender's office in a big metro area, which while I recognize is still competitive, should hopefully not be too unattainable unlike say, a job at the ACLU or an environmental moon law org.


FAFSA asks about your assets, so you will probably not be eligible for the subsidized stafford loans, which are the ones that do not accrue interest until you graduate. The unsubsidized loans do accrue interest while you're in law school, but you do not need to pay them out until you graduate. The interest rate on these loans is 6% (or a bit more - I don't remember exactly). Although, if you have good credit, you can likely secure private loans with low interest rates.

And why would you file taxes separately
? If you're in law school and have no income, shouldn't she be able to claim you as a dependent? Also, I think if you're married filing a joint return you can claim your tuition as a deduction, which will give both of you an additional deduction up to $4,000 when calculating net taxable income, in addition to general tax breaks provided by the government for married couples.


LRAP won't kick in the same. See: link I provided earlier in the thread.

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sundance95
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Re: Get Loans or Pay Cash Money

Postby sundance95 » Wed Feb 23, 2011 1:51 pm

Surprised that this point has not been brought up: if you are in fact eligible for the subsidized interest loans, you should at the very least max those out. Your inheritance will continue to accrue interest while your debt will not, so even if you pay off all the loans with that inheritance money at the end of school you will come out ahead.

Edit: RC fail, I see this point has been raised.

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afc1910
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Re: Get Loans or Pay Cash Money

Postby afc1910 » Wed Feb 23, 2011 2:25 pm

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Last edited by afc1910 on Fri Mar 18, 2011 10:02 pm, edited 1 time in total.

sarahh
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Re: Get Loans or Pay Cash Money

Postby sarahh » Wed Feb 23, 2011 4:37 pm

afc1910 wrote:And why would you file taxes separately? If you're in law school and have no income, shouldn't she be able to claim you as a dependent? Also, I think if you're married filing a joint return you can claim your tuition as a deduction, which will give both of you an additional deduction up to $4,000 when calculating net taxable income, in addition to general tax breaks provided by the government for married couples.

You can never claim your spouse as a dependent. But yes, it generally it is more beneficial to do married filing jointly. You really need to research how your assets affect your eligibility for the LRAP before you decide that you are just going to borrow. I don't know about GULC, but I know at Harvard any amount that you borrow to cover your assessed student contribution (they expect that you will use all of your assets to pay for law school) is not covered by the LRAP. Also, after graduating, if you have assets above the protected amount, that reduces your subsidy.

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Marionberry
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Re: Get Loans or Pay Cash Money

Postby Marionberry » Wed Feb 23, 2011 10:38 pm

If you have decent enough credit, are there commercials loans that are usually a better deal than GradPLUS?

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prezidentv8
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Re: Get Loans or Pay Cash Money

Postby prezidentv8 » Wed Feb 23, 2011 10:51 pm

AreJay711 wrote:II would try to find a way to hide those assets though.


Big Tymers wrote:Got everything in my mama's name, but i'm hood rich dada dada...!

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Marionberry
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Re: Get Loans or Pay Cash Money

Postby Marionberry » Wed Feb 23, 2011 10:55 pm

prezidentv8 wrote:
AreJay711 wrote:II would try to find a way to hide those assets though.


Big Tymers wrote:Got everything in my mama's name, but i'm hood rich dada dada...!


Alarming when you're taking financial advice from the Big Tymers.

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fatduck
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Re: Get Loans or Pay Cash Money

Postby fatduck » Wed Feb 23, 2011 11:05 pm

Marionberry wrote:If you have decent enough credit, are there commercials loans that are usually a better deal than GradPLUS?


keep in mind that georgetown's new lrap no longer covers commercial loans.

but yes.




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