Paying for LS with a Mortgage? Forum

[005618502]

This is actually very interesting.....

Though, I think my parents would laugh at me pretty hard when I asked them to pull a second mortgage and I would pay them back lololol

[20130312]

Why not use standard loans like everyone else? Did you max yours out?

Three words: lower interest rates. Plus, with a fixed interest mortgage you'd never have to worry about this changing (not that you have to worry about it with fed loans either, but just pointing out that doing this with variable interest loans might be a terrible call).

[albusdumbledore]

In my opinion, this is a good idea. Federal graduate loans are some of the worst you can possibly get (which makes sense, they give them to everyone). If you assume the worst case scenario (i.e. you can't make reasonable payments on your loans), then I would much rather have the ability to discharge those loans in bankruptcy instead of a 25 year IBR plan where you're gonna get hit with a huge tax bomb (and you're gonna eek out a meager existence for 25 years). The exception to this might be the 10 year public interest forgiveness, but, even then, there are pretty stringent stipulations on that.

Another thing you've got to think about is whether Congress might reform student loan bankruptcy, which I think will happen eventually whether they want to or not.

[LawperaMan]

That reminds me of case where a guy did that with creditcards. Still had to explain it to the bar and they refused to let him pass C&F.

Then again, if you honestly don't care about practicing but want to do lawschool for all the mad tail and respect us lawstudents get ( ) Then go for it, max it all out on creditcards while your at it. Then enjoy being insolevent for awhile to make it all work. I do hear that Foodstamps and income based apartments are beautiful this time of year.....

If I own a home (or my parents own a home) would it make some sense to take a second mortgage to pay for law school? Rates are exceptionally low right now, and (more to the point) if the whole legal profession path blows up, mortgages can be discharged in bankruptcy. I'm not saying that is the plan, but given the current state of affairs it may be a desirable safety net.

Any thoughts?

So you are saying bankruptcy = disbarment? I had not heard that before.

The PLAN is not to go bankrupt. Hopefully everything works out for the best and the legal career after law school allows a person to pay off all loan debt on or ahead of schedule. Given the state of legal hiring and the cost of law school though, it would be nice to know bankruptcy could possibly be a safety net in a worst case scenario.

Does IBR negatively impact your credit? Do you have to demonstrate financial difficulty (i.e., already have missed payments etc) to qualify? If yes to either question, it may not be a better option than bankruptcy.

[albusdumbledore]

Does IBR negatively impact your credit? Do you have to demonstrate financial difficulty (i.e., already have missed payments etc) to qualify? If yes to either question, it may not be a better option than bankruptcy.

IBR just compares your salary to your loans and let's you pay a smaller minimum using some formula they devised. Your loans will negatively amortize with IBR, which is scary because you are still responsible for that. I've yet to find a scenario where IBR is actually advantageous for the borrower due to the tax consequences and negative amortization.

[LawperaMan]

Does IBR negatively impact your credit? Do you have to demonstrate financial difficulty (i.e., already have missed payments etc) to qualify? If yes to either question, it may not be a better option than bankruptcy.

IBR just compares your salary to your loans and let's you pay a smaller minimum using some formula they devised. Your loans will negatively amortize with IBR, which is scary because you are still responsible for that. I've yet to find a scenario where IBR is actually advantageous for the borrower due to the tax consequences and negative amortization.

Plus I would imagine the debt/credit ratio would keep a person's credit score in the crapper for a long time anyway.

[dudders]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

[furcifer]

not in and of itself no, but there was a case of a lawyer who was not allowed to pass C&F for having "too many student loans" since they thought he abused the system.
The other example was of someone who "unethically" tried to scew the system over by "paying off" their student loans with credit cards and then declaring bankruptcy to discharge it.
Basicly, they didn't want every other jackhole in the universe doing the same thing.

That reminds me of case where a guy did that with creditcards. Still had to explain it to the bar and they refused to let him pass C&F.

Then again, if you honestly don't care about practicing but want to do lawschool for all the mad tail and respect us lawstudents get ( ) Then go for it, max it all out on creditcards while your at it. Then enjoy being insolevent for awhile to make it all work. I do hear that Foodstamps and income based apartments are beautiful this time of year.....

If I own a home (or my parents own a home) would it make some sense to take a second mortgage to pay for law school? Rates are exceptionally low right now, and (more to the point) if the whole legal profession path blows up, mortgages can be discharged in bankruptcy. I'm not saying that is the plan, but given the current state of affairs it may be a desirable safety net.

Any thoughts?

So you are saying bankruptcy = disbarment? I had not heard that before.

The PLAN is not to go bankrupt. Hopefully everything works out for the best and the legal career after law school allows a person to pay off all loan debt on or ahead of schedule. Given the state of legal hiring and the cost of law school though, it would be nice to know bankruptcy could possibly be a safety net in a worst case scenario.

Does IBR negatively impact your credit? Do you have to demonstrate financial difficulty (i.e., already have missed payments etc) to qualify? If yes to either question, it may not be a better option than bankruptcy.

[furcifer]

walk away from it and then squat I guess. Bums doing it in CA right now.

Does IBR negatively impact your credit? Do you have to demonstrate financial difficulty (i.e., already have missed payments etc) to qualify? If yes to either question, it may not be a better option than bankruptcy.

IBR just compares your salary to your loans and let's you pay a smaller minimum using some formula they devised. Your loans will negatively amortize with IBR, which is scary because you are still responsible for that. I've yet to find a scenario where IBR is actually advantageous for the borrower due to the tax consequences and negative amortization.

Plus I would imagine the debt/credit ratio would keep a person's credit score in the crapper for a long time anyway.

[J-e-L-L-o]

If you own a home prior to law school, this is an outstanding idea.

Not only that, but factoring into your credit score the mortgage loan would have more weight (and more advantageous) than your student loan. I don't think that has been mentioned yet.

The only downside is, you have no idea how you will end up in 3 years. BUT, mortgage debt can be written off in a number of different ways unlike a student loan.

Depends on your situation and I am glad this was posted. It would depend on your situation, but def crunch the numbers.

[J-e-L-L-o]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

renters.

[furcifer]

I guess in theory you could get out of paying back the mortgage too if you found someone to "assume the mortgage" in exchange for only paying $1 for it.

Some people who can't get their own home loan approved might go for that idea. Find some crackwhore and "give" it to her when your done with it I guess.

[dudders]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

renters.

then where do YOU live with what money.

[chiro]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

renters.

then where do YOU live with what money.

Same answers as anyone else I guess. It sounds like then you'd just break zero. More than most would have post graduation.

[Extension_Cord]

Why don't you just use the equity in your home to pay of your law school debts if and when you get a job so you know you won't need IBR? That would cut out a lot of the risk.

But increase the cost. IBR doesn't cancel your loans, it just lets you pay less.
IBR should be a last resort, not a planning tool.
Besides, if you take out a student loan, then take out a mortgage, you're paying origination fees twice, instead of once. Also, mortgage rates are freakin' low right now and they may not be as low when you get out.

So, what you're suggesting is, instead of borrowing at 4%, for a fixed duration, you borrow at 7%. Then, when you graduate, if you make enough money, maybe take out a mortgage to pay off the student loan, if mortgage rates are still cheap enough. If you can't get a job, go for IBR, so you have no idea when you might be paid off (depends on many factors).
Now we don't know what the interest rate will be nor what the duration will be.

Are you seriously suggesting that putting your house on the line along with the possibility of destroying your consumer credit via a bankruptcy to pay for a law degree is a sound course of action?

Well, yeah...

Can't discharge student debt.

[J-e-L-L-o]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

renters.

then where do YOU live with what money.

umm..at your law school residence?




The idea is you take out a 2nd mortgage for your entire cost of law school. This is tuition, fees, and living expenses. The mortgage will have a low rate, tax deductible, and will be SECURED debt. This is different from unsecured debt (which student loans are) as they can be dismissed in a bankruptcy.

If you qualify, interest ITE would be about 4% with good credit. Compare that with 7.9% with the PLUS loans.

[dingbat]

The idea is you take out a 2nd mortgage for your entire cost of law school. This is tuition, fees, and living expenses. The mortgage will have a low rate, tax deductible, and will be SECURED debt. This is different from unsecured debt (which student loans are) as they can be dismissed in a bankruptcy.

If you qualify, interest ITE would be about 4% with good credit. Compare that with 7.9% with the PLUS loans.

One thing worth pointing out is that you don't even need to bother with bankrupty to discharge mortgage debt in most states. Sometimes you can give the deed in lieu of payment.
Otherwise, just stop paying and tell them to foreclose on you, or that you are looking for a short-sale.

Foreclosure is not bankruptcy. It is also a lot less serious than bankruptcy.

[LawperaMan]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

CoL already includes rent, so you could just take out enough in the loan to plan for making your mortgage payments. While not ultra-efficient, it is better that forbearance of a student loan watching the interest pile up while you are in school.

Or, in my case, send the wife out to work and pay that sucker down. Maybe get the kids into modeling so they can bring in a few bucks. It's a family effort.

[ben4847]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

CoL already includes rent, so you could just take out enough in the loan to plan for making your mortgage payments. While not ultra-efficient, it is better that forbearance of a student loan watching the interest pile up while you are in school.

Or, in my case, send the wife out to work and pay that sucker down. Maybe get the kids into modeling so they can bring in a few bucks. It's a family effort.

Besides, you can take out enough up front to pay to be mortgage for 3 years. Or refinance every year for it.

[J-e-L-L-o]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

CoL already includes rent, so you could just take out enough in the loan to plan for making your mortgage payments. While not ultra-efficient, it is better that forbearance of a student loan watching the interest pile up while you are in school.

Or, in my case, send the wife out to work and pay that sucker down. Maybe get the kids into modeling so they can bring in a few bucks. It's a family effort.

Besides, you can take out enough up front to pay to be mortgage for 3 years. Or refinance every year for it.

I doubt you could refinance every year. The bank would base it off your income to qualify so doing it before law school would be most beneficial.

[dingbat]

How did this thread get to page 2 without any mention of the fact that your mortgage will not be forbeared while you're on school? How do you plan to make payments until you graduate?

CoL already includes rent, so you could just take out enough in the loan to plan for making your mortgage payments. While not ultra-efficient, it is better that forbearance of a student loan watching the interest pile up while you are in school.

Or, in my case, send the wife out to work and pay that sucker down. Maybe get the kids into modeling so they can bring in a few bucks. It's a family effort.

Besides, you can take out enough up front to pay to be mortgage for 3 years. Or refinance every year for it.

I doubt you could refinance every year. The bank would base it off your income to qualify so doing it before law school would be most beneficial.

Not to mention that you don't want to have to pay refinancing costs every year

[AreJay711]

Actually, if it is in an area where you could get renters relatively easily this idea might be better. My real issue is that law school is more likely to cause short term cash problems than long term ones. Despite what people say on here, going to law school is not going to screw your long term income potential but it can cause some issues right after graduation (and generally might not help it either making it a bad investment). This is why IBR --> mortgage makes more sense to me minus renters. However, if you can be relatively sure that even if you are unemployed, you can still get the mortgage paid then that is obviously a better option since payment per month would be lower.

[dingbat]

Actually, if it is in an area where you could get renters relatively easily this idea might be better. My real issue is that law school is more likely to cause short term cash problems than long term ones. Despite what people say on here, going to law school is not going to screw your long term income potential but it can cause some issues right after graduation (and generally might not help it either making it a bad investment). This is why IBR --> mortgage makes more sense to me minus renters. However, if you can be relatively sure that even if you are unemployed, you can still get the mortgage paid then that is obviously a better option since payment per month would be lower.

if you're worried about cash flow problems, it is far better to have a loan that can be discharged than one that can't.
To me, it comes down to two issues:
1) which has a lower interest rate?
2) if things go horribly wrong, which one would be a worse stone around your neck?

No one goes to law school thinking they'll come out unemployed. Nor do I think the odds of being SOL are as bad as some people predict.
However, in a worst case scenario, at least a mortgage can be discharged.
I consider it akin to owning fire insurance - odds are you'll never have a fire, but in the unlikely event that your house burns down, you'll be damn happy you've got it.