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I attend a regional T2 in a secondary market that it dominates. While I would like to move to a bigger market, I dont hate the area I am at right now and can see myself living here after graduation. If I have virtually the same type of internship lined up in both locations, which should I take? Am I screwing myself over in my current area by taking an internship in NY being as if I dont get an offer from the NY place I wont have as many ties to my current region?

School in itself is a very strong tie to your current region. If you do the internship in NY over the summer, you can always do externships during the school year to establish even more ties to the legal scene. In other words, you won't be screwed.

How familiar are you with NY? What makes you think that you'd like living there after graduation? I'm thinking that you should take advantage of this opportunity to explore the scene (both legal and otherwise) in NY. Also, if you think that you might get an offer and really want to be NY, jump on that now.

Depends on what your other ties to the market your school is in are, and how xenophobic the market is. If it's a very xenophobic market, you may have a hard time convincing firms that you are willing to stick around.