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Author Topic: What to do with a Chunk of Change  (Read 577 times)

Terrible Ivan

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What to do with a Chunk of Change
« on: October 15, 2006, 12:26:10 PM »
What would you do?

You enter law school with significant savings (100-150k) but also have a spouse & a few kids.

1) Drop the whole amount into a home, have a very small mortgage payment, and live on student loans for three years (which would allow you to pay off the student loans with the equity in the house when you sell it).

2) Drop 20% into a home (or rent/lease), have a larger mortgage/rent payment, and live on savings as long as it lasts before turning to loans to finish up.

I'm more interested in the loans/financial aid implications than I am in the strict investment yield (things like taking into account housing markets, investment opps for the money during school, etc., but feel free to address if it suits your fancy).



Reesespbcup

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Re: What to do with a Chunk of Change
« Reply #1 on: October 25, 2006, 09:54:34 AM »
My thought is that student loans are the way to go and you should invest the $. Why? because the rate you pay for the loans, esp if uncle Sam subsidizes some of it, is less than you can earn investing, even safely and even if the earnings are taxable.  Furthermore, student loan int is deductible to a point (over 65k, I think, the deduction is phased out).

However, 100-150k is REALLY going to hurt you in getting loans, esp subsidized ones so if you decide to go the loan route, you are going to need to put everything in your wife's name.

This is just my opinion and it is risky...
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Reesespbcup

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Re: What to do with a Chunk of Change
« Reply #2 on: October 25, 2006, 10:13:04 AM »
Actually, I take this back. Even if you put everything in your wife's name, they are still going to take her income/assets into consideration when determining your EFC. I'm not sure there's anyway around using some of that $ for your education and I'm not sure you'll be eligible for sub loans. Then, it becomes a question of what the unsub rates are vs what you think you can earn and whether you have to go to private loans as well (which have even higher rates). So, if your loan rates are 5% (which is low) you'd need to earn roughly 7% to beat that given that the 7% investment is taxable (also depends on your marginal tax rate).
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SanchoPanzo

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Re: What to do with a Chunk of Change
« Reply #3 on: October 25, 2006, 11:36:12 PM »
Depends on the school.

Some schools will not "see" equity you have in say a home. This is the case as some public schools. Other schools, will ask for and see everything....EVERYTHING. They have their ways.

Regarding sub loans, I think you'll still get it even with 100k+. But then again, perhaps it depends on the school?
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