Should you pay tuition out of pocket instead of taking loans

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SaintsTheMetal
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Should you pay tuition out of pocket instead of taking loans

Postby SaintsTheMetal » Sun Mar 24, 2013 4:03 pm

Assuming you have a good amount of $$ saved up, would it even be advisable to pay down tuition before LS? Also assuming an upper t14 with solid LRAP.

Obviously if you get a firm job, you will have saved yourself a lot of interest and origination fees if you pay down your tuition out of pocket.

BUT if you end up in PI, the school pays your entire balance for you if you stay in for 10 years. In that case, if you paid $100k before LS started, you basically just flushed away $100k...enough for a good down payment on a house and more.

Further, you will probably have a better idea what you will be doing by your 2nd and 3rd years of law school, so maybe you should just pay it down then IF you secured something at OCI? Still, this will be a difference of many thousand $$ still by paying interest on all of that for an extra year...

Anyone care to shed some light on this.. =/

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bk1
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Re: Should you pay tuition out of pocket instead of taking loans

Postby bk1 » Sun Mar 24, 2013 4:05 pm

Most people don't just fall into PI. However, people regularly autopilot into biglaw (at least at top schools). Unless you are seriously gunning for PI I think it's a pretty easy call to pay down to tuition to avoid interest.

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SaintsTheMetal
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Re: Should you pay tuition out of pocket instead of taking loans

Postby SaintsTheMetal » Sun Mar 24, 2013 4:36 pm

bk1 wrote:Most people don't just fall into PI. However, people regularly autopilot into biglaw (at least at top schools). Unless you are seriously gunning for PI I think it's a pretty easy call to pay down to tuition to avoid interest.


But is it exceedingly rare for someone to strike out for BigLaw but manage to get a job at a PD or something?

rad lulz
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Re: Should you pay tuition out of pocket instead of taking loans

Postby rad lulz » Sun Mar 24, 2013 4:46 pm

SaintsTheMetal wrote:
bk1 wrote:Most people don't just fall into PI. However, people regularly autopilot into biglaw (at least at top schools). Unless you are seriously gunning for PI I think it's a pretty easy call to pay down to tuition to avoid interest.


But is it exceedingly rare for someone to strike out for BigLaw but manage to get a job at a PD or something?

It's possible if you have crim experience 1L summer and take all the crim classes just like everyone else who goes that path.

exitoptions
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Re: Should you pay tuition out of pocket instead of taking loans

Postby exitoptions » Sun Mar 24, 2013 4:52 pm

You should at least take the subsidized loans, if they still have these. Otherwise you're giving up free money for 3 years. If you land biglaw you can just pay them off without a premium.

rad lulz
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Re: Should you pay tuition out of pocket instead of taking loans

Postby rad lulz » Sun Mar 24, 2013 4:55 pm

exitoptions wrote:You should at least take the subsidized loans, if they still have these. Otherwise you're giving up free money for 3 years. If you land biglaw you can just pay them off without a premium.

No more subsidized Stafford loans

There may be others though

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UnfrozenCaveman
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Re: Should you pay tuition out of pocket instead of taking loans

Postby UnfrozenCaveman » Sun Mar 24, 2013 9:10 pm

exitoptions wrote:You should at least take the subsidized loans, if they still have these. Otherwise you're giving up free money for 3 years. If you land biglaw you can just pay them off without a premium.

Pretty sure you can't get interest free loans post grad

badaboom61
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Re: Should you pay tuition out of pocket instead of taking loans

Postby badaboom61 » Sun Mar 24, 2013 9:15 pm

UnfrozenCaveman wrote:
exitoptions wrote:You should at least take the subsidized loans, if they still have these. Otherwise you're giving up free money for 3 years. If you land biglaw you can just pay them off without a premium.

Pretty sure you can't get interest free loans post grad


Perkins defers your interest, and you can still get those in some circumstances.

But yes, unless you really want PI, pay down tuition now. It's probably a good investment to take out some stafford and fewer grad plus, even if the stafford accumulates interest in the meantime, since the grad plus have outrageous origination fees. Add up total principle + origination fees + interest at the end of 3 years to see what is best option based on your budget.

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SaintsTheMetal
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Re: Should you pay tuition out of pocket instead of taking loans

Postby SaintsTheMetal » Sun Mar 24, 2013 9:24 pm

I'm really curious if there is anyone who ended up in PI that wasn't planning on it ahead of time. It'd be pretty easy to map a decision theory if I knew if this ever happened... my school has 6% PI and 15% clerking, and I'm sure some of those clerking will go on to PI.. How many of those 6-12% or so went into PI because they struck out for firms? Probably not many, but it sure would suck to waste a shit load of money if the school/govt. is gonna wipe it out for you over the next 10 years

fluffythepenguin
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Re: Should you pay tuition out of pocket instead of taking loans

Postby fluffythepenguin » Sun Mar 24, 2013 9:32 pm

Depends on a few things. How confident are you in taking a high-paying job after graduation? The higher your confidence, the more likely you should pre-pay your education. What interest rates are you looking at? Stafford are 6.9% up to 20.5k with a 1% fee, while GradPLUS are 7.9% with a 4% fee, so those are fairly expensive. Can you obtain private loans at a cheaper rate than federal loans? If so, would they be covered by your school's LRAP in the event you take a low paying job? What is the opportunity cost of the funds you currently have? The risk-free rate is around 1%, although you can probably get a better return if you can stomach some risk in the market. That's a personal decision though.

You could always borrow the loans, and then upon taking your first job, determine then if you should pay them off immediately, or let an LRAP-type program repay them for you.

One more thing: Did you not tell your school about your assets? I thought schools won't let you borrow LRAP-eligible funds to replace a contribution you could make in lieu of loans. If this is the case, then I'd probably pre-pay tuition. I don't think it's worth the risk to try and get a higher return on investment in the market than you would be paying interest on your loans.

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SaintsTheMetal
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Re: Should you pay tuition out of pocket instead of taking loans

Postby SaintsTheMetal » Sun Mar 24, 2013 10:04 pm

fluffythepenguin wrote:Depends on a few things. How confident are you in taking a high-paying job after graduation? The higher your confidence, the more likely you should pre-pay your education. What interest rates are you looking at? Stafford are 6.9% up to 20.5k with a 1% fee, while GradPLUS are 7.9% with a 4% fee, so those are fairly expensive. Can you obtain private loans at a cheaper rate than federal loans? If so, would they be covered by your school's LRAP in the event you take a low paying job? What is the opportunity cost of the funds you currently have? The risk-free rate is around 1%, although you can probably get a better return if you can stomach some risk in the market. That's a personal decision though.


Yea I know all this, which is why I'm really trying to figure out how many people are able to "fall back" into LRAP jobs... sounds like its not many. I definitely think you can count on 4% from smart index funds, but probably better, which I was considering at least maxing out my Roth IRA instead of paying tuition in case I did end up in PI... I think I would enjoy working in the PD, just not my goal.

Still, nothing comes close to the (equated) 9.77% annual ROI I would have made by avoiding taking a GradPlus loan... Even for Stafford, ROI for my approximate tenure at the school would be 7.24% annually, which is not easy to match even in tax protected accounts. Such a difference I imagine most people just bite the bullet and dump all their savings into paying down tuition and just bank on getting good paying non-PI job..

fluffythepenguin wrote:One more thing: Did you not tell your school about your assets? I thought schools won't let you borrow LRAP-eligible funds to replace a contribution you could make in lieu of loans. If this is the case, then I'd probably pre-pay tuition. I don't think it's worth the risk to try and get a higher return on investment in the market than you would be paying interest on your loans.


Hmm I had no idea about this... as a 0L I haven't gotten the official loan "award" yet or whatever it is.... we'll see...

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laxbrah420
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Re: Should you pay tuition out of pocket instead of taking loans

Postby laxbrah420 » Sun Mar 24, 2013 10:10 pm

if you have real nice credit you can get a variable interest loan at like prime + 0-3. i dont know how much you have saved but i wouldnt want to make myself cash poor
Last edited by laxbrah420 on Mon Mar 25, 2013 8:39 am, edited 1 time in total.

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SaintsTheMetal
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Re: Should you pay tuition out of pocket instead of taking loans

Postby SaintsTheMetal » Sun Mar 24, 2013 10:42 pm

laxbrah420 wrote:if you have real nice credit you can get a variable internet loan at like prime + 0-3. i dont know how much you have saved but i wouldnt want to make myself cash poor


true never really put that much thought into it for student loans.. looks like ~4.2% is average right now for variables... but what are the chances the fed funds rate rises in the next 5-7 years or so? Not really that far off of the 6.8 stafford.. the 7.9 gradplus on the other hand... :x

With private loans you also are not eligible for IBR right?


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SaintsTheMetal
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Re: Should you pay tuition out of pocket instead of taking loans

Postby SaintsTheMetal » Sun Mar 24, 2013 11:15 pm

laxbrah420 wrote:http://mortgage-x.com/general/indexes/prime_rate_forecast.asp

not eligible


thanks for that




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