I'm new to college financing since I didn't need any for undergrad, so GMAT Club's fantastic stick-ied post about financing (here: http://gmatclub.com/forum/financing-your-mba-41568.html
) was excellent help. But I'm still struggling to balance financing against cash.
Paying cash is obviously more cost effective than financing, but I'd also like to retain a cushion for unexpected difficulties (e.g. higher costs than anticipated, difficulty landing a position after school ends). So how much cash do you use, and how much do you keep?
Does anyone have a rough heuristic / thoughts about how to balance this?
My thinking goes something like this. I've been saving up cash, but I'm also attending one of the most expensive programs in the world:
Tuition: ~$53k per year
Total CoA: ~$84k per year (living in NYC ain't cheap)
1) Finance all CoA
$168k in student loans
Pay only to prevent capitalized interest (rough ballpark: $14-20k total)
Pro: Plenty of funds during school
2) Finance all tuition only
$106k in student loans
Paying interest to prevent interest capitalization would be less costly (rough ballpark: $8-12k)
Con: Would finish school with little cash left over
3) Something inbetween
I am also considering hedging my loan rates with some private loans -- and if we turn into deflating Japan, I'll keep them, and if conventional wisdom holds and we inflate like Brazil in the 80s, then I can just pay off the private loans immediately with cash. (Remember, most good private loans out there don't compound while you're in school.)
1) No prepayment penalties on (both gov't and private) loans. I'm fairly certain there are none, but I haven't seen it confirmed anywhere yet.
2) Gov't and private lenders will still allow me to finance so much $$$ despite my cash reserves. Will they try to deplete me first before lending me too much money?
A lot in this post... sorry