quakeroats wrote:Bronte wrote:1) I don't know anything about the reason why most people worry about paying back loans. What we're talking about here is that, given that you do have to pay back your loans, investing in paying down your loans is likely the best investment opportunity available to you in the market. When you don't pay them, you forgo that investment opportunity. This has the real effect of increasing your loan balance by 8% per year. This is money you have to pay back.
Over the long term, you can get more than 8%--a very favorable interest rate--in other investments. If we're just talking about getting the best return on average, you shouldn't go out of your way to pay off your loan quickly. This also has the advantage of providing liquidity in case of emergency, but even without that, you should pay your loans slowly.2) Assuming you'll be in big law long term is not the same as assuming you'll get a high LSAT score. That analogy is bad because you don't make any important financial decisions in reliance on your LSAT score. A better analogy would be assuming you'll be top 10% at your law school.
It's not in strict reliance--that is, things falls apart financially if the condition fails. I'd argue that most people graduating from top schools should take my approach, but I'd also argue that the super majority of people who plan to stay in biglaw should too.
On what investment (besides, of course, paying down your student loans) can you get a risk and tax adjusted rate of 8% per year? Your whole argument rests on this premise, and the answer is "nowhere." The highest the 10-year Treasury rate has been in that past century is 14.00%, which is about 10.00% after taxes. That was in 1981. http://www.federalreserve.gov/releases/h15/data.htm. Today, the 10-year Treasury rate is 2.21% before taxes. http://finance.yahoo.com/bonds/composite_bond_rates. The 10-year AAA municipal rate is 2.20% and is not taxed. The stock market is risky as hell and has earned shit over the last decade. Where is this investment you're talking about?