Wipfelder wrote:I think holding on to the cash until you start your real, post law school job is the way to go. Treat it like a giant emergency fund. Who knows what bullshit may come up in the next year or so. You'll take a hit on interest accumulation, because that money would have paid down your principle, but think of it as "paying for flexibility".
Really depends what your current vs. prospective interest rates are, as well as your future cash flows until you start working.
To illustrate, if the interest rates for your 2L and 3L loans are the same, then you're indifferent between paying off old loans vs. avoiding loans. However, if now that you have SA income and a good prospect for high earnings post-grad, you qualify for private loans with lower interest rates, it would be preferable to pay off old loans and then take out private loans for 3L at the lower rate. Likewise, I found my bar loans had lower rates than my school loans, so I maxed those out to ensure flexibility over the summer and used the excess to pay off the higher rate loans.
The other piece is your future cash flows. Does your firm bring any SAs back to work part-time during the year (rare, but not unheard of)? Do they offer an advance? If so, when, how much, interest free? How time-constrained are your student loan disbursements (i.e., if you find yourself short on cash in March, can you take out an extra G from the Fed?)? The ability to take out bar loans (I believe the max is typically around 15k) definitely also mitigates cash flow concerns. My lean would be to check around to see what kind of rates you're going to qualify for, and if you save a couple points by going private, pay down as much as you can, live a student lifestyle, and supplement with additional loans as needed.