moshei24 wrote:guano wrote:moshei24 wrote:And another issue with a fallback is that it's always in the back of your head as a way out, so you don't end up putting in 100%. Even subconsciously it could affect you.
Actually, I look at it as a business arrangement - you want to succeed, and will put full effort into succeeding, but you should still limit the downside risk.
As for the classic hedge analogy, it's not a classic investment either. It's more like an alternative investment. These are the rules of the game and the tools available. It is up to you to determine the optimum balance of risk, reward, and cost.
By choosing a T6 at high cost, you're upping the potential reward by upping the risk (cost), compared to a free ride at a lower ranked school. By increasing the cost you can decrease the risk.
Remember, if you succeed, and end up in biglaw, the cost is minimal considering your salary (do the math. The increased cost is no more than a few months' salary, especially at the backend when you're at a 3rd/4th year pay scale)
But if you fail, which is always a possibility, then the difference can be immense
The 3rd/4th year pay scale is a good point. I wasn't even thinking in those terms. By those years, I'd probably accrued about $15,000 more of loans/interest by going federal. Am I underestimating that?
As a 4th year, your salary will be $17,500 per month.
So it's just one month's salary that you're talking about, or two extra payments (assuming half your salary)
Like I said, if things go well (biglaw) the cost of the hedge is minimal
If you fail (and need IBR, PAYE, etc.) the benefit is huge.
Assuming even a 3/4 chance of success, the difference between upside cost and downside benefit is a good proposition