Would I save money paying off interest before it capitalizes? Forum

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AlbertParsons

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Would I save money paying off interest before it capitalizes?

Post by AlbertParsons » Tue Jul 16, 2019 12:17 pm

Currently I'm slated to have a loan balance of $201.5k leaving law school. Of that, $27,997 will be from interest that has been accruing in law school. I have been fortunate to land a 1L SA and will be returning for 2L and am wondering if it is worthwhile to pay off the interest as it accrues. This number already reflects me taking out less loans because I'm covering cost of living with summer earnings. Thanks! (Sorry, bad at the maths.)

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cavalier1138

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Re: Would I save money paying off interest before it capitalizes?

Post by cavalier1138 » Tue Jul 16, 2019 12:33 pm

I think it likely makes more sense to apply the money to the higher-interest PLUS loans if you're taking any of those out. Your goal should be to minimize your total debt on graduation, so you should always put priority on reducing the amount of money taken out under the loans with the highest interest rate.

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AlbertParsons

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Re: Would I save money paying off interest before it capitalizes?

Post by AlbertParsons » Tue Jul 16, 2019 2:13 pm

cavalier1138 wrote:I think it likely makes more sense to apply the money to the higher-interest PLUS loans if you're taking any of those out. Your goal should be to minimize your total debt on graduation, so you should always put priority on reducing the amount of money taken out under the loans with the highest interest rate.
Just to make sure I'm understanding, your recommendation is to just pay off the loans? And yes, I have about 90k+ in grad plus loans.

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cavalier1138

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Re: Would I save money paying off interest before it capitalizes?

Post by cavalier1138 » Tue Jul 16, 2019 2:57 pm

AlbertParsons wrote:
cavalier1138 wrote:I think it likely makes more sense to apply the money to the higher-interest PLUS loans if you're taking any of those out. Your goal should be to minimize your total debt on graduation, so you should always put priority on reducing the amount of money taken out under the loans with the highest interest rate.
Just to make sure I'm understanding, your recommendation is to just pay off the loans? And yes, I have about 90k+ in grad plus loans.
Pay COL and tuition for the next year until you'll only be taking out Stafford loans. If there's still money left, then pay your existing PLUS loans.

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totesTheGoat

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Re: Would I save money paying off interest before it capitalizes?

Post by totesTheGoat » Wed Jul 17, 2019 11:04 am

Just a quick point before I answer your question. $201k is an insanely large amount of money, and you have plenty of time to try to turn the ship before it hits that iceberg. In hindsight (as somebody who graduated with $180k in loans) I'd be pursuing any and every means of getting that number down, including using the financial aid office, the career office (to find school year paid work), and possible transfers (you're probably too late at this point) to try to take $75k - $100k off that total.

Now, regarding your actual question:
Priority 1 is avoiding taking on more high-interest debt. Some of that is by doing the things I mentioned above. Some is by scrimping and saving as much as possible from your 1LSA to pay for tuition and room and board.
Priority 2 is paying off the high-interest debt. If you have money left over (you won't) after taking care of future costs, you apply the money to the PLUS loans.
Priority 3 is paying off the low-interest debt. You won't get here during law school.

Good luck avoiding the freight train at the other end of the tunnel. I didn't, and it hit me good and hard.

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AlbertParsons

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Re: Would I save money paying off interest before it capitalizes?

Post by AlbertParsons » Wed Jul 17, 2019 2:45 pm

totesTheGoat wrote:Just a quick point before I answer your question. $201k is an insanely large amount of money, and you have plenty of time to try to turn the ship before it hits that iceberg. In hindsight (as somebody who graduated with $180k in loans) I'd be pursuing any and every means of getting that number down, including using the financial aid office, the career office (to find school year paid work), and possible transfers (you're probably too late at this point) to try to take $75k - $100k off that total.

Now, regarding your actual question:
Priority 1 is avoiding taking on more high-interest debt. Some of that is by doing the things I mentioned above. Some is by scrimping and saving as much as possible from your 1LSA to pay for tuition and room and board.
Priority 2 is paying off the high-interest debt. If you have money left over (you won't) after taking care of future costs, you apply the money to the PLUS loans.
Priority 3 is paying off the low-interest debt. You won't get here during law school.

Good luck avoiding the freight train at the other end of the tunnel. I didn't, and it hit me good and hard.
I'm at T10 and I don't think they renegotiate scholarship after the initial offer of aid after you're admitted (I went from no money to 1/3). Or, are there other ways to go about this?

I was thinking of getting a library job but I worry about extending myself too much because of law review and another club leadership position +classes/clinic.

I hear you on being cost conscious and I'm working on that as much as I can. Originally I was going to graduate with $235 but I've cut down via cost of living savings.

How would transferring save money? I could maybe have transferred to CCN but then I would lose the little scholarship I have.

I guess best route is just to not take out the loans in the first place. Rip law school cost sucks. I really feel for sticker people. My goal right now is to get down to around $180 and real success around $150

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totesTheGoat

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Re: Would I save money paying off interest before it capitalizes?

Post by totesTheGoat » Wed Jul 17, 2019 3:15 pm

At a T10 it's not as important to get the costs so far down, because you're very likely to be making good money coming out. However, to the extent that you can trade out unpaid extracurriculars (minus law reviews and other prestigious posts) and swap in paid work, I'd do it. $180k is better than $200k is better than $235k. The last thing you want is to be stuck in a job you don't like because of golden handcuffs. Every month that you can shave off of your repayment is a little bit more flexibility in case you decide that biglaw sucks and you'd rather trade salary for QoL improvement.

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