Top Law Schools

Hey, have a question on how to handle finances going into 1L and who better to ask than TLS?

I have in the neighborhood of 16k invested in a mutual fund currently (Stupid idea, I did it before I knew better). I'm 95% going to be at WUSTL in the fall with a 3 year COA of roughly 110k. I currently have ~60k in undergraduate debt, just less than half of which was done through private loans.

My question is how should I deal with debt at least for the first year? Between summer earnings and stocks I'll probably have about 20k in "cash" come August. I anticipate having to use a good chunk of the 4 grand I'll make over the summer through some combination of moving expenses, furnishing an apartment, deposit, rent, books, booze, feeding myself for a month until loans come in, etc, etc. My conceivable options are:

1. Liquidate the mutual fund and use it to pay down the private, non-forgiveable UG loans.
2. Liquidate the mutual fund and use it to pay down UG Unsubsidized staffords (presumably because they are currently at a higher interest rate than the private loans)
3. Liquidate the mutual fund and use it to cover COL for 1L (GradPlus are at the highest rate of the 3 currently)
4. Leave the money invested for somewhere between trivial and good growth to be used for incidentals down the road.

My gut feeling is to pay down the private loans given that they don't qualify for IBR, LRAP, PSLF, or any other acronym and to view them as lower interest rate loans is short sided. I can see merits of all 4 options and there might be one I overlooked.

I appreciate the help!

I'd get the money out of the market since you'll be needing it in the near term. Whatever you decide to do keep some cash in reserve for 1L summer.

Pay down loans with highest interest that is currently accruing. Do it now because the interest is probably outpacing inflation.

I'd go for #4 as long as the investment is not risky and is easily liquidated. I would not pay down debt at this point because you are taking on more. Liquidity is the most important, it would be much harder or impossible to come up with 20k above your finaid budget if the need arises.

Tiago Splitter wrote:I'd get the money out of the market since you'll be needing it in the near term. Whatever you decide to do keep some cash in reserve for 1L summer.

You can often get PI stipends for 1L summer so I'm not sure this is necessary. If you need to do like a practicum or something you'll get moar gradplus loans. So you might as well use it now since you might get a PI stipend or worst case scenario you just have to take out gradplus which you would have to do anyway because you were saving money.

Maybe WUSTL is different but I'm pretty sure this is how most schools handle the summer.

WUSTL has a 3k stipend for summer PI with an unlimited number of students qualifying afaik.

And the investment is not particularly risky and is extremely easily liquidated, basically your standard mutual fund with enough risk to vary from an index fund but not enough to fear it going to absolute shit unless literally everything else did. And if relevant all fees were paid up front so it costs nothing to pull the investment except for the tax burden which at this point is basically nothing given that the market is just now getting back to where it was around when I invested.

Make sure you can borrow for the summer because we can't here.

I tend to think 3K isn't very much for an entire summer, and schools have different definitions of what qualifies for the PI stipend. You also have to take classes to get loans, which presents problems depending on what you want to do. If possible I think it's good to keep an extra 2-3K in reserve so you can keep your options open for the summer.

No money in retirement accounts right?

Tiago Splitter wrote:I tend to think 3K isn't very much for an entire summer, and schools have different definitions of what qualifies for the PI stipend. You also have to take classes to get loans, which presents problems depending on what you want to do. If possible I think it's good to keep an extra 2-3K in reserve so you can keep your options open for the summer.

No money in retirement accounts right?

Nope. And fair point about keeping some sort of reserve for the summer regardless of where I get it, I feel like that is reasonable advice.

Side note, just thought of option 5 which involves going to Europe for a few weeks over the summer because why not?

Put some aside for 1L summer, use the rest to decrease your Gradplus borrowing - minimize your debt load by reducing the most expensive debt

Don't bank on LTAP/PSLF, unless you're 100% set on a career that qualifies

Christ $170k is a lot of debt. Save a few bucks for 1l summer/ bar review, and pay down loans with the rest.