savings distribution question Forum

[kathj06]

Hey all,

Have never dealt with student loans before, so this might be a criminally dumb question/something I should talk about with my future school's financial aid office instead of on TLS, but I'm trying to plan ahead.

I have money in savings that I'll be using to pay for part of my legal education. Should I a) divide that money by 3 and apply a third of my savings to the COA each year, or

b) would you apply all savings to the first year COA and then rely on loans for the other two years?

Since loans start accruing interest the moment they are dispersed, I was thinking it made sense to take out as little as possible for 1L, so thought option b seems to make more sense. Or is this such a personal financial decision that can't really be settled on an online forum? Just wondering if anyone had dealt with this before and had general wisdom to share. Thanks!

[SnakySalmon]

Hey all,

Have never dealt with student loans before, so this might be a criminally dumb question/something I should talk about with my future school's financial aid office instead of on TLS, but I'm trying to plan ahead.

I have money in savings that I'll be using to pay for part of my legal education. Should I a) divide that money by 3 and apply a third of my savings to the COA each year, or

b) would you apply all savings to the first year COA and then rely on loans for the other two years?

Since loans start accruing interest the moment they are dispersed, I was thinking it made sense to take out as little as possible for 1L, so thought option b seems to make more sense. Or is this such a personal financial decision that can't really be settled on an online forum? Just wondering if anyone had dealt with this before and had general wisdom to share. Thanks!

It really depends on your specific situation, and the type of loans. Schools that provide need based aid usually have a minimum loan you need to take out before you get any grants, so if there's a chance of you getting any grants you really need to talk to the school.

[juanlove]

Hey all,

Have never dealt with student loans before, so this might be a criminally dumb question/something I should talk about with my future school's financial aid office instead of on TLS, but I'm trying to plan ahead.

I have money in savings that I'll be using to pay for part of my legal education. Should I a) divide that money by 3 and apply a third of my savings to the COA each year, or

b) would you apply all savings to the first year COA and then rely on loans for the other two years?

Since loans start accruing interest the moment they are dispersed, I was thinking it made sense to take out as little as possible for 1L, so thought option b seems to make more sense. Or is this such a personal financial decision that can't really be settled on an online forum? Just wondering if anyone had dealt with this before and had general wisdom to share. Thanks!

The right answer for you would require more information about your tax/financial situation and post law school employment prospects. Be sure to take tax credits and deductions into account if you qualify:

• Student Loan interest deduction - Up to $2500/year for interest paid on qualified education loans. Deduction phases out for taxpayers w/income between $60,000 - $75,000.
• Lifetime learning credit - (Non-refundable) Credit of 20% Qualified Education Expenses - Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment). Max credit of $2,000. Credit phases out for taxpayers w/income between $53,000 - $63,000.

Source: IRS Pub 970 (2013) - http://www.irs.gov/publications/p970/ar ... 1000254251

I am going to borrow a higher amount my 1L year, using my savings in 2L and 3L years to pay down loan principal. This reduces my tax payment and gives me flexibility to apply savings where it makes sense. For now I've invested my savings in I Bonds. I Bonds accrue interest, adjust for inflation, and the interest earned is tax free if the bond is used to pay qualified education expenses (subject to income phase out). There is a good article about using I Bonds for college here - http://www.forbes.com/2010/02/11/i-bond ... dauer.html.

The approaches you listed are both good as well, it just depends on your specific goals. Good luck!

[kathj06]

Thanks everyone!

[englawyer]

If your school offers need-based grants, you may want to pay everything 1L. That way you will look poor for 2L and 3L, getting more grants.