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:
https://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)
I could...
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
Con: Costly
2) Finance all tuition only
$106k in student loans
Paying interest to prevent interest capitalization would be less costly (rough ballpark: $8-12k)
Pro: Cheaper
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.)
Some assumptions:
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