How much debt will you be in after 3 years of law school?

[DCLabor25]

On the whole paying debt slowly versus investing, I think you are far, far better off paying that debt as quickly as you can.  If you are going to invest, you have to take into so many variables working in your favor --- namely that the stock market will do well, that you will have the same job making the same or even better money, and that you will have the discipline to keep investing the money instead of spending it.  None of those variables are even close to being guaranteed.  Yes, the market does well historically, but there is simply no definite formula that what you are investing in is going to produce the returns you need.  And what if you lose your job or some unforeseen circumstance comes up?  Just paying your debt off and being done with it is the safer choice.

As for the post about just living a frugal lifestyle, I completely agree.  Too many people live beyond their means.  But there is a major difference between $50K in student loan debt and $150K in student loan debt.  And some people taking out the $150K might be doing so foolishly, or without thinking through all of the financial implications. 

[christianlawyer09]

DCLabor is spot on.  It's hard to take that advice in this culture, but it is absolutely true.  In the past decade people have been operating in their personal finances as if they had the risk management expertise of investment banks.  Turns out even investment banks can't manage risk very well.  Why? Because risk management is hard.  It's sophistry to think that you're going to come out ahead by borrowing all that money and "investing" it.  All the variables that DCLabor pointed out are real.  Can it work? Yes.  Does it work for most people?  Nope. 

For the record, I'm a bit older, so I've learned from experience.  Listen to experience - that will make you truly wealthy. Also, for the record, I will graduate next year from GW with only $12k in debt.  It's great to be a mostly cash buyer.

[newjaytdot]

Obviously there are no guarantees concerning our decisions in life.  However, statistics are incredibly useful in helping us make fairly accurate predictions about the future.  We can use statistics to help us shape our decisions with a reasonable amount of accuracy, while also gleaning a very good sense of how inaccurate those predictions are.

If you don't agree that you can make sound financial decisions based on statistics and financial theory, I can not fathom how you make your financial decisions.  The use of financial leverage and portfolio diversification is part of what makes the economy go 'round.  Accepting those premises does not entail the endorsement of imprudent/lavish spending or poor debt managment. 

I certainly do NOT agree that it is 'sophistry' to believe that you can use the tools of statistics, investment theory, prudent budgeting, and wise debt management to justify forgoing immediate debt retirement in lieu of greater growth of personal wealth. 

[road]

On the whole paying debt slowly versus investing, I think you are far, far better off paying that debt as quickly as you can.  If you are going to invest, you have to take into so many variables working in your favor --- namely that the stock market will do well, that you will have the same job making the same or even better money, and that you will have the discipline to keep investing the money instead of spending it.  None of those variables are even close to being guaranteed.  Yes, the market does well historically, but there is simply no definite formula that what you are investing in is going to produce the returns you need.  And what if you lose your job or some unforeseen circumstance comes up?  Just paying your debt off and being done with it is the safer choice.

As for the post about just living a frugal lifestyle, I completely agree.  Too many people live beyond their means.  But there is a major difference between $50K in student loan debt and $150K in student loan debt.  And some people taking out the $150K might be doing so foolishly, or without thinking through all of the financial implications. 

People keep bringing up the what if you lose your job argument but I think it's actually an argument against your position. Suppose we have two graduates with 100k in debt. A goes after the debt while B pays the debt more slowly and invests the excess. Suppose after 5 years A has paid off his debt completely, B has paid his debt down to 50k and has 50k invested. Both get fired. Who would you rather be? I'll pick B--get a forbearance on the student loans and have some cash to support myself while I look for new work. A is in a pretty tight spot.

I think your other points are good. Risk tolerance is an important consideration. I think discipline is a real issue but if you can make yourself pay off the debt faster you can make yourself invest. I think discipline is a good argument for not refinancing  your debt over a longer term--you'll keep the higher minimum monthly payments and force yourself to pay it off faster rather than spend more.

Again, if you want to pay off your debt as fast as possible that's great. But I think there are at least 3 areas that should clearly be prioritized over student loans payments. They are: paying off credit card debt, paying the maximum that your employer will match in a 401K, and setting aside a 3 month safety net in an  easily accessible account (high interest saving or money market fund).

[DCLabor25]

In response....I guess I take it as a given that you should have at least 3 and more likely 6 months of emergency savings.  I suppose some people don't have that, but you are truly one moment away from a financial disaster.  And having that emergency savings would work in the hypothetical you bring up -- I'd much rather have all of my loans paid off and 6 months in emergency savings than have $50K left, no job, some money invested, and emergency savings.  If you have a hard time finding a new job, not having $1500K a month in loan payments is going to make a major difference in your monthly budget.  You will be able to survive a lot longer.  But I guess you have to put away enough for the emergency savings first.   

I agree too about the points on having zero consumer credit card and contributing to a 401 (K).  These are all very important things that we should all be doing. 

[road]

In response....I guess I take it as a given that you should have at least 3 and more likely 6 months of emergency savings.  I suppose some people don't have that, but you are truly one moment away from a financial disaster.  And having that emergency savings would work in the hypothetical you bring up -- I'd much rather have all of my loans paid off and 6 months in emergency savings than have $50K left, no job, some money invested, and emergency savings.  If you have a hard time finding a new job, not having $1500K a month in loan payments is going to make a major difference in your monthly budget.  You will be able to survive a lot longer.  But I guess you have to put away enough for the emergency savings first.   

I agree too about the points on having zero consumer credit card and contributing to a 401 (K).  These are all very important things that we should all be doing. 

That of course depends on how much "some money invested" is.

In any case it seems like we are basically on the same page.

[montanawildhack]

Again, if you want to pay off your debt as fast as possible that's great. But I think there are at least 3 areas that should clearly be prioritized over student loans payments. They are: paying off credit card debt, paying the maximum that your employer will match in a 401K, and setting aside a 3 month safety net in an  easily accessible account (high interest saving or money market fund).

QFT. I would also add IRA contribution to your list.

To reply to the OP's question, I plan on being 0 dollars in the hole, between my parents and my savings.

[christianlawyer09]

Obviously there are no guarantees concerning our decisions in life.  However, statistics are incredibly useful in helping us make fairly accurate predictions about the future.  We can use statistics to help us shape our decisions with a reasonable amount of accuracy, while also gleaning a very good sense of how inaccurate those predictions are.

If you don't agree that you can make sound financial decisions based on statistics and financial theory, I can not fathom how you make your financial decisions.  The use of financial leverage and portfolio diversification is part of what makes the economy go 'round.  Accepting those premises does not entail the endorsement of imprudent/lavish spending or poor debt managment. 

I certainly do NOT agree that it is 'sophistry' to believe that you can use the tools of statistics, investment theory, prudent budgeting, and wise debt management to justify forgoing immediate debt retirement in lieu of greater growth of personal wealth. 

I never said a word on statistics, investment theory, etc.  You're creating a strawman.  What I said was essentially that risk management (what you call debt management) is very hard and most people suck at it.  Including sophisticated investment banks.  Most people overspend, do not plan for every variable, do not know how to react when things don't go as planned, etc.  I can read into your words that you think you are so sophisticated and intelligent that you've got it figured out.  I bet you don't, and i bet in 20 years you'll regret it.  Sorry man, I've been around the block a few times.  True wisdom comes from knowing this: if the smartest people in the country at Bear Stearns, Goldman Sachs, etc. can't manage risk well, what makes you think you can?  And as a subpoint, I'd like to remind you that debt in personal finance is inherently more risky than corporate debt because individuals don't have the ability to absorb losses and seek bailouts like corporations do. 

Good luck to you though....

[newjaytdot]

I most certainly did not use the 'strawman' fallacy.  You stated that 't's sophistry to think that you're going to come out ahead by borrowing all that money and "investing" it.'  Any technique that is directly related to borrowing and investing is included in your argument.  I addressed such techniques explicitly.  A strawman would be if your argument did not imply the techniques I addressed and I attacked your argument solely on those irrelevant premises.  These are certainly not irrelevant, nor are they not assumed by your argument, however implicitly. 

As for the financial institutions that you cited, practically all of them use far more sophisticated investment techniques than the ones I plan on using.  Most active traders don't beat the market, so you're correct there.  Using financial leverage is not necessarily a losing prospect.

[christianlawyer09]

Again, you're not actually responding to my argument, you're trying to define the argument on your terms.  Since I'm actually in law school now, I don't have time to get into it with you.  Good to luck to you.  Hope it works out for you.