What to do with saved $$

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
005618502
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What to do with saved $$

Postby 005618502 » Thu Feb 09, 2012 7:21 pm

So I am working this year and going to one of MVPB next year. After the year and all the expenses I have it looks like I will have 10-15K saved up. I will be paying full sticker at school (think 200K). I have 15K in student loans from UG.

Should I:
1.) Put all the money I save into my UG student loans as the year progresses so to avoid interest on the full amount and be debt free before I go take 200K in loans over 3 years.
2.) Put my saved money toward living costs at law school and only take out loans for tuition/fees my first year.
3.) Bank the money I save just in case, and take full loans and keep paying minimum on student loans (200 a month with 90 of that going toward interest) then defer UG loans until after law school along with other loans.

Curious to get advice on this situation as I am struggling. I want to pay off my UG debt, but then feel dumb because I will be taking so much more. My UG interest rate is about the same as my grad school loans will be 6.4-6.9%

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dingbat
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Re: What to do with saved $$

Postby dingbat » Thu Feb 09, 2012 8:05 pm

AssumptionRequired wrote:So I am working this year and going to one of MVPB next year. After the year and all the expenses I have it looks like I will have 10-15K saved up. I will be paying full sticker at school (think 200K). I have 15K in student loans from UG.

Should I:
1.) Put all the money I save into my UG student loans as the year progresses so to avoid interest on the full amount and be debt free before I go take 200K in loans over 3 years.
2.) Put my saved money toward living costs at law school and only take out loans for tuition/fees my first year.
3.) Bank the money I save just in case, and take full loans and keep paying minimum on student loans (200 a month with 90 of that going toward interest) then defer UG loans until after law school along with other loans.

Curious to get advice on this situation as I am struggling. I want to pay off my UG debt, but then feel dumb because I will be taking so much more. My UG interest rate is about the same as my grad school loans will be 6.4-6.9%


You're probably best off borrowing less - Stafford is only up to $20.5k, after that its' gradplus at 7.9%
It's better to keep your UG loans, as the interest rate is lower.

005618502
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Re: What to do with saved $$

Postby 005618502 » Fri Feb 10, 2012 12:26 pm

dingbat wrote:
AssumptionRequired wrote:So I am working this year and going to one of MVPB next year. After the year and all the expenses I have it looks like I will have 10-15K saved up. I will be paying full sticker at school (think 200K). I have 15K in student loans from UG.

Should I:
1.) Put all the money I save into my UG student loans as the year progresses so to avoid interest on the full amount and be debt free before I go take 200K in loans over 3 years.
2.) Put my saved money toward living costs at law school and only take out loans for tuition/fees my first year.
3.) Bank the money I save just in case, and take full loans and keep paying minimum on student loans (200 a month with 90 of that going toward interest) then defer UG loans until after law school along with other loans.

Curious to get advice on this situation as I am struggling. I want to pay off my UG debt, but then feel dumb because I will be taking so much more. My UG interest rate is about the same as my grad school loans will be 6.4-6.9%


You're probably best off borrowing less - Stafford is only up to $20.5k, after that its' gradplus at 7.9%
It's better to keep your UG loans, as the interest rate is lower.


Even though I am paying interest on my UG ones for the next 6 months before LS starts?

Thats what I was thinking as well. Just found out I will not have to pay for living expenses (rent/food) so now my total cost is looking like 150,000 for LS

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bernaldiaz
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Re: What to do with saved $$

Postby bernaldiaz » Fri Feb 10, 2012 12:29 pm

AssumptionRequired wrote:So I am working this year and going to one of MVPB next year. After the year and all the expenses I have it looks like I will have 10-15K saved up. I will be paying full sticker at school (think 200K). I have 15K in student loans from UG.

Should I:
1.) Put all the money I save into my UG student loans as the year progresses so to avoid interest on the full amount and be debt free before I go take 200K in loans over 3 years.
2.) Put my saved money toward living costs at law school and only take out loans for tuition/fees my first year.
3.) Bank the money I save just in case, and take full loans and keep paying minimum on student loans (200 a month with 90 of that going toward interest) then defer UG loans until after law school along with other loans.

Curious to get advice on this situation as I am struggling. I want to pay off my UG debt, but then feel dumb because I will be taking so much more. My UG interest rate is about the same as my grad school loans will be 6.4-6.9%


This is relevant to my interests. By the time I graduate undergrad, I'll have 40-50K saved up. What do people normally do with this money? Just pay off the first year and then take loans for the last two? Keep it in the bank and take loans for all three years?

Also to note, I don't have any loans from UG but will be fully (more or less) paying for law school

005618502
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Re: What to do with saved $$

Postby 005618502 » Fri Feb 10, 2012 12:32 pm

bernaldiaz wrote:
AssumptionRequired wrote:So I am working this year and going to one of MVPB next year. After the year and all the expenses I have it looks like I will have 10-15K saved up. I will be paying full sticker at school (think 200K). I have 15K in student loans from UG.

Should I:
1.) Put all the money I save into my UG student loans as the year progresses so to avoid interest on the full amount and be debt free before I go take 200K in loans over 3 years.
2.) Put my saved money toward living costs at law school and only take out loans for tuition/fees my first year.
3.) Bank the money I save just in case, and take full loans and keep paying minimum on student loans (200 a month with 90 of that going toward interest) then defer UG loans until after law school along with other loans.

Curious to get advice on this situation as I am struggling. I want to pay off my UG debt, but then feel dumb because I will be taking so much more. My UG interest rate is about the same as my grad school loans will be 6.4-6.9%


This is relevant to my interests. By the time I graduate undergrad, I'll have 40-50K saved up. What do people normally do with this money? Just pay off the first year and then take loans for the last two? Keep it in the bank and take loans for all three years?

Also to note, I don't have any loans from UG but will be fully (more or less) paying for law school


Damn man, congrats on that savings! If I had that kind of money and no UG loans I would probably take loans until I knew I wasnt going to use the LRAP from my school. Once I knew I was going into provate practice I would then pay as much of my loans off as possible. Or if you already know you are not doing work for the state or anything that qualifies LRAP it would be good to take 0 loans your first year as that saves you a year of accumulating interest

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bernaldiaz
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Re: What to do with saved $$

Postby bernaldiaz » Fri Feb 10, 2012 1:49 pm

Yeah that's a good call. I don't anticipate using the LRAP but you never know where things are going to take you. Maybe I'd start paying off loans if I get a BigLaw 2L SA.

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20130312
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Re: What to do with saved $$

Postby 20130312 » Fri Feb 10, 2012 1:52 pm

I'm interested in this as well. Even though I have UG debt, I'm just sitting on cash because I'm afraid I might need it. As a finance guy, I kick myself every time I look at the interest accruing, but what can you do?

005618502
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Re: What to do with saved $$

Postby 005618502 » Fri Feb 10, 2012 2:00 pm

InGoodFaith wrote:I'm interested in this as well. Even though I have UG debt, I'm just sitting on cash because I'm afraid I might need it. As a finance guy, I kick myself every time I look at the interest accruing, but what can you do?


Thats what I am seeing. Half my loan payment goes towards interest. Kills me, I never pay interest. Thats why I went with Amex when chosing credit card lol

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bernaldiaz
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Re: What to do with saved $$

Postby bernaldiaz » Fri Feb 10, 2012 2:01 pm

InGoodFaith wrote:I'm interested in this as well. Even though I have UG debt, I'm just sitting on cash because I'm afraid I might need it. As a finance guy, I kick myself every time I look at the interest accruing, but what can you do?


For me, there's also a psychological aspect. I'd rather lose my money gradually and pay a bit of interest than just see all my savings disappear writing one check.

Also, shit, half the payment is in interest? Is it like a morgtage where you pay off more of the interest up front?

005618502
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Re: What to do with saved $$

Postby 005618502 » Fri Feb 10, 2012 2:04 pm

bernaldiaz wrote:
InGoodFaith wrote:I'm interested in this as well. Even though I have UG debt, I'm just sitting on cash because I'm afraid I might need it. As a finance guy, I kick myself every time I look at the interest accruing, but what can you do?


For me, there's also a psychological aspect. I'd rather lose my money gradually and pay a bit of interest than just see all my savings disappear writing one check.

Also, shit, half the payment is in interest? Is it like a morgtage where you pay off more of the interest up front?


Basically on 15K in loans the plan I am on it happens where I am paying about 90 a month in interest. With my total contribution each month being 200 about half is hitting the principle

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dingbat
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Re: What to do with saved $$

Postby dingbat » Fri Feb 10, 2012 10:03 pm

bernaldiaz wrote:
InGoodFaith wrote:I'm interested in this as well. Even though I have UG debt, I'm just sitting on cash because I'm afraid I might need it. As a finance guy, I kick myself every time I look at the interest accruing, but what can you do?


For me, there's also a psychological aspect. I'd rather lose my money gradually and pay a bit of interest than just see all my savings disappear writing one check.

Also, shit, half the payment is in interest? Is it like a morgtage where you pay off more of the interest up front?


That's how most consumer loans work. Basic finance 101: interest is charged on your loan balance.
Let's say you have a loan at 10% interest.
When the loan balance is $10,000, your interest is $1000
If your payment is $1,000, you're only paying interest and the loan is not shrinking at all.
If you pay, say, $1,500, then the first $1,000 is for interest, and the remaing $500 is for principal.

Next, you owe $9,500. Your interest is $950.
If you again pay $1,500, the first $950 is interest, and $550 goes to principal, reducing your debt to $8,950
Let's say after a few years your loan is loan down to $1,364. The interest is $136.
Your final payment of $1500 is $136 for interest and $1,364 principal.

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dingbat
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Re: What to do with saved $$

Postby dingbat » Fri Feb 10, 2012 10:10 pm

AssumptionRequired wrote:
dingbat wrote:


You're probably best off borrowing less - Stafford is only up to $20.5k, after that its' gradplus at 7.9%
It's better to keep your UG loans, as the interest rate is lower.


Even though I am paying interest on my UG ones for the next 6 months before LS starts?

Thats what I was thinking as well. Just found out I will not have to pay for living expenses (rent/food) so now my total cost is looking like 150,000 for LS[/quote]

Without more detail and running a series of discounted cash flows I can't be certain. However, a quick rule of thumb is that a lower interest rate loan is (almost) always better than a higher interest rate loan.
So, unless your new loan qualifies for an LRAP that you're 100% certain about, I'd recommend sticking with the lower interest rate loan and not swapping it for a higher rate loan.

On $10,000, a gradplus loan at 7.9% vs an older student loan at 6.4% makes a difference of $150 per year, which may not sound like a lot, but it can be. Especially if you then use that extra $150/year and use it to pay off your gradplus loans faster.

Here's a tip for when you graduate: If you can pay more than the minimum, keep paying the minimum on your lower interest rate loans and max out payments on the highest interest rate loan. Once that one's paid off, work on the next highest interest rate loan. Financially, you'll be ahead of the game.

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Elston Gunn
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Re: What to do with saved $$

Postby Elston Gunn » Fri Feb 10, 2012 10:33 pm

OL, and am in a similar position as you, but thought I'd add: at least at the school I'm going to, I'm pretty sure you're required to burn through all your liquid-ish assets in the first two years--i.e. they will reduce the loans you're offered by 50% of what you have saved up for your first two years. So unless you spend it on paying down debt before applying for loans, I don't think you'll have much choice of what to use it on.

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20130312
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Re: What to do with saved $$

Postby 20130312 » Fri Feb 10, 2012 11:46 pm

Elston Gunn wrote:OL, and am in a similar position as you, but thought I'd add: at least at the school I'm going to, I'm pretty sure you're required to burn through all your liquid-ish assets in the first two years--i.e. they will reduce the loans you're offered by 50% of what you have saved up for your first two years. So unless you spend it on paying down debt before applying for loans, I don't think you'll have much choice of what to use it on.


That's only true of HYS as far as I know. So... congrats?

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bernaldiaz
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Re: What to do with saved $$

Postby bernaldiaz » Fri Feb 10, 2012 11:47 pm

InGoodFaith wrote:
Elston Gunn wrote:OL, and am in a similar position as you, but thought I'd add: at least at the school I'm going to, I'm pretty sure you're required to burn through all your liquid-ish assets in the first two years--i.e. they will reduce the loans you're offered by 50% of what you have saved up for your first two years. So unless you spend it on paying down debt before applying for loans, I don't think you'll have much choice of what to use it on.


That's only true of HYS as far as I know. So... congrats?


haha he has a 4.0/180 so I'd it's safe to assume

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20130312
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Re: What to do with saved $$

Postby 20130312 » Fri Feb 10, 2012 11:52 pm

bernaldiaz wrote:
InGoodFaith wrote:
Elston Gunn wrote:OL, and am in a similar position as you, but thought I'd add: at least at the school I'm going to, I'm pretty sure you're required to burn through all your liquid-ish assets in the first two years--i.e. they will reduce the loans you're offered by 50% of what you have saved up for your first two years. So unless you spend it on paying down debt before applying for loans, I don't think you'll have much choice of what to use it on.


That's only true of HYS as far as I know. So... congrats?


haha he has a 4.0/180 so I'd it's safe to assume


According to LSN, in at all three. I hate some people.

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bernaldiaz
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Re: What to do with saved $$

Postby bernaldiaz » Fri Feb 10, 2012 11:56 pm

InGoodFaith wrote:
bernaldiaz wrote:
InGoodFaith wrote:
Elston Gunn wrote:OL, and am in a similar position as you, but thought I'd add: at least at the school I'm going to, I'm pretty sure you're required to burn through all your liquid-ish assets in the first two years--i.e. they will reduce the loans you're offered by 50% of what you have saved up for your first two years. So unless you spend it on paying down debt before applying for loans, I don't think you'll have much choice of what to use it on.


That's only true of HYS as far as I know. So... congrats?


haha he has a 4.0/180 so I'd it's safe to assume


According to LSN, in at all three. I hate some people.


Haha I think you spelled admire wrong? I'm off to bed gotta smoke the LSAT tomorrow!

005618502
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Re: What to do with saved $$

Postby 005618502 » Mon Feb 13, 2012 1:01 pm

Elston Gunn wrote:OL, and am in a similar position as you, but thought I'd add: at least at the school I'm going to, I'm pretty sure you're required to burn through all your liquid-ish assets in the first two years--i.e. they will reduce the loans you're offered by 50% of what you have saved up for your first two years. So unless you spend it on paying down debt before applying for loans, I don't think you'll have much choice of what to use it on.


Dude..... 4.0 180 you need to go to Yale or School for free. Either way your not allowed into this worry about finances discussion

Congrats on your success though!

abl
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Re: What to do with saved $$

Postby abl » Mon Feb 13, 2012 1:11 pm

Isn't there an advantage for having some extra cash to use as a down-payment for a house down the road?

005618502
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Re: What to do with saved $$

Postby 005618502 » Mon Feb 13, 2012 1:14 pm

abl wrote:Isn't there an advantage for having some extra cash to use as a down-payment for a house down the road?


I am not going to be worrying about a house until my loans are gone either way

landla
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Re: What to do with saved $$

Postby landla » Mon Feb 13, 2012 10:18 pm

dingbat wrote:
bernaldiaz wrote:
InGoodFaith wrote:I'm interested in this as well. Even though I have UG debt, I'm just sitting on cash because I'm afraid I might need it. As a finance guy, I kick myself every time I look at the interest accruing, but what can you do?


For me, there's also a psychological aspect. I'd rather lose my money gradually and pay a bit of interest than just see all my savings disappear writing one check.

Also, shit, half the payment is in interest? Is it like a morgtage where you pay off more of the interest up front?


That's how most consumer loans work. Basic finance 101: interest is charged on your loan balance.
Let's say you have a loan at 10% interest.
When the loan balance is $10,000, your interest is $1000
If your payment is $1,000, you're only paying interest and the loan is not shrinking at all.
If you pay, say, $1,500, then the first $1,000 is for interest, and the remaing $500 is for principal.

Next, you owe $9,500. Your interest is $950.
If you again pay $1,500, the first $950 is interest, and $550 goes to principal, reducing your debt to $8,950
Let's say after a few years your loan is loan down to $1,364. The interest is $136.
Your final payment of $1500 is $136 for interest and $1,364 principal.


Just had to say props for the clear description. I had peers in business school who couldn't explain (or understand) that concept half as well. (I also grew up around concepts like this, so I suppose I was at an advantage.)

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dingbat
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Re: What to do with saved $$

Postby dingbat » Tue Feb 14, 2012 9:18 am

landla wrote:
dingbat wrote:
That's how most consumer loans work. Basic finance 101: interest is charged on your loan balance.
Let's say you have a loan at 10% interest.
When the loan balance is $10,000, your interest is $1000
If your payment is $1,000, you're only paying interest and the loan is not shrinking at all.
If you pay, say, $1,500, then the first $1,000 is for interest, and the remaing $500 is for principal.

Next, you owe $9,500. Your interest is $950.
If you again pay $1,500, the first $950 is interest, and $550 goes to principal, reducing your debt to $8,950
Let's say after a few years your loan is loan down to $1,364. The interest is $136.
Your final payment of $1500 is $136 for interest and $1,364 principal.


Just had to say props for the clear description. I had peers in business school who couldn't explain (or understand) that concept half as well. (I also grew up around concepts like this, so I suppose I was at an advantage.)


I'd be tempted to say "which business school", but really just want to point out that an MBA doesn't mean finance.
I knew many people who went to b-school, took the one obligatory finance class and then focussed on management or marketing. Kind of how law school doesn't always mean litigator.

If you got any other finance questions, feel free to ask.

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vanwinkle
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Re: What to do with saved $$

Postby vanwinkle » Tue Feb 14, 2012 10:34 am

I'd save a chunk at least until 1L year is over. The summer after 1L you'll need to do some kind of unpaid internship (since odds are you won't find paying work as a 1L, practically nobody does these days), public-interest stipends aren't large and aren't guaranteed at this tier of schools, and you might want flexibility to hunt for bigger opportunities.

My 1L summer, I got a great internship in NY. My public interest stipend barely covered rent, and that was after finding a damn sweet deal in Brooklyn through friends. I had to pay out-of-pocket for food and other expenses. And let's be honest; the best things for your resume are not likely to be found in C-ville or Ann Arbor, so if you're going to one of those you'll really want financial flexibility to go elsewhere that summer.

Law school is an investment in your future, but so are internships that bolster your resume and help you start networking early. You can use some to pay accruing interest during 1L, if you want to, but try to save as much as you can until your 1L summer plans are set.

005618502
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Re: What to do with saved $$

Postby 005618502 » Tue Feb 14, 2012 12:18 pm

vanwinkle wrote:I'd save a chunk at least until 1L year is over. The summer after 1L you'll need to do some kind of unpaid internship (since odds are you won't find paying work as a 1L, practically nobody does these days), public-interest stipends aren't large and aren't guaranteed at this tier of schools, and you might want flexibility to hunt for bigger opportunities.

My 1L summer, I got a great internship in NY. My public interest stipend barely covered rent, and that was after finding a damn sweet deal in Brooklyn through friends. I had to pay out-of-pocket for food and other expenses. And let's be honest; the best things for your resume are not likely to be found in C-ville or Ann Arbor, so if you're going to one of those you'll really want financial flexibility to go elsewhere that summer.

Law school is an investment in your future, but so are internships that bolster your resume and help you start networking early. You can use some to pay accruing interest during 1L, if you want to, but try to save as much as you can until your 1L summer plans are set.


Thank you for the advice, I didnt think about 1L summer. Ill keep that in mind

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skers
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Re: What to do with saved $$

Postby skers » Tue Feb 14, 2012 12:39 pm

I'm in a similar boat here. I have 30k saved up right now and depending on how frivolous I am in the next 7 months or so I'll be sitting at 35-40k. No UG debt, so that's helpful. I'm considering only taking out enough loans to cover tuition and using what I have in my pocket to cover COL.




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