Downpayment on House or Pay for School
 

I'll have to make a decision in a few years about whether I should take the $60,000 or so I'll have in savings by that time and either pay for law school outright or take out loans for law school and put the $60,000 towards a down payment on a house when I'm finished with school.

On one hand, I could graduate law school pretty much debt free, or I could graduate with some debt but be able to afford a decent house.

I know the easy answer is staring me in the face, but I just can't see the best option right now.

While in law school, I will make enough to support myself without hardship, i.e. no car payments, low rent, etc.

Any thoughts?

It's suggested that a house downpayment be about 20 percent of the cost of the house - depending on what part of the country you live in - that could be 30K, 60K or well over that....

You'd need a place to live, so I'd probably take part of it and use it for a downpayment on a house - and live in it while in law school - maybe get a roommate or two to help with the mortgage...

I'd imagine that the interest on school loans would be a lot less than the interest on a house...

What about investing the money now - when you are ready you'll have more...

Debt isn't really such a bad thing..

It depends on where you live. If the housing market is expensive, a la Honk Kong, NYC, SF Bay area, Hawaii, etc, then you might want to pay off school later. Otherwise, I would pay off the school stuff first.

I found myself in a similar situation a few years back and I decided that school was the better option.
I doubt it is the same exact argument for anyone. There are always a million little differences between everyone's situation, however the only thing that helped me was deciding on a goal.
I could find pro's and con's for each decision daily, and would spend all night debating with myself on each. But I think you need to settle on what your end goal is and try to make things fit into that. Not the other way around.
For me, there was enough uncertainty in both options that I couldn't say exactly what will happen ("It's not like a car crash with immediate results.", my friend said).
So I decided on what I wanted out of school, job, owning a home, finance and career, and what situation I felt would be a good use of my time ( which is the resource here, everything else are just tools.) School, if I used it correctly, would get me closer to that sooner than owning a home, or living abroad or teaching or a bazillion other things....

Unfortunately, the hard part is trying to stick to that decision. Ug, welcome to life.

There's nothing for sure in life, except that it's usually better to have no debt when you graduate college. Being debt-free increases your options, because you're freer to go with the more interesting opportunities, rather than simply the ones that pay the most.

By buying a house right now, you're betting the the housing market will continue to appreciate at a good clip over the next several, and there's no guarantee that it will. As interest rates rise, in fact, I would bet the opposite.

Duplicate post. Please ignore.

Personally, I'd pay for school. Unless you know for a fact you plan to stay in that community and have a job lined up, you are truly binding yourself.

When you graduate you'll have a house payment AND school loans to pay for in an area or job that may not be able to support that.

And what if as you graduate you get offered a decent job in another city but can't find a buyer?

Not to mention, again, unless you have a guaranteed job most attorneys don't really start making money until they get established and have found their field. I watched people I graduated with become lawyers and they had to clerk first and work their way up into the firms. They don't just all of a sudden make $$$$$, it takes hard work and desire to move up, just as any job.

I think it would be very foolish, especially in this market where inflation and the rates are about to go up, to even consider buying a home over paying for school.

I'd much rather come out of school debt-free and able to relocate to where the money is then to have a house and school loans to pay off while trying to find a job that can afford me.

BTW just because you make the down payment, doesn't mean you can afford the payments, taxes, utilities, upkeep, and so on, plus have time to go to school, work a job and study.

Depends if the loans you can get from school are private or government loans. Basically what will the % rate for each be. If the school loans will be a lower rate I would buy the house. Consider also how much will your rent will be a month where you are. There are a ton of variables here, including how much the real estate market is where you are as well.

Another point of consideration; what would your living expense (rent) be while in college ?

The way I see it, money paid to a landlord is money sent into oblivion, never to return. Money put into a house, even with a high interest rate, still has SOME going toward equity. You still KEEP the money, just in a less liquid form. If you pay off school, renting your living quarters the whole time, that is 4-8 years worth of rent money down the drain, you STILL spent the money on school, and you STILL have to put the same money into the house later. That is all assuming you get a house right out of school, which, likely won't happen since you no longer have money for a down payment. So you will still be paying rent WHILE saving for a downpayment in the future.

If you use the money for a down payment, and get college loans for the degree, you will live, essentially, rent-free the entire time. Also, college loans are notoriously lower interest rate than home loans if you get a Stafford loan, or something like a Sallie Mae loan (Unless you qualify for a HUD loan, which I doubt since you have a $60,000 down payment).

All-in-all, the house, and college will cost the same amount no matter when you apply the money to them. You buy the house for $250,000 after interest or whatever... it'll cost the same now or later. Same with the college loan. The difference isn't as much in which has higher interest, it's in how much cash you are paying during the time you have no house.

With all due respect to our benevolent mother, I couldn't disagree more. Paying for school outright has huge advantages:

1) The expense is real and immediate. It will instantly set your mindframe to get the most out of your expense. You will work hard because you understand the money. Student loans are mythical - you don't really understand them until you get your first bill (6 mos after graduation).

2) Being debt free with a post grad degree means that the money you would have been paying towards debt each month, you can immediately pay into a retirement fund. This is your best option for gaining wealth.

3) There is no guarantee you will stay in school, life happens. And if it does, you are stuck with a house you need to dump (assuming you attend school away from your desired home) AND now you have a student loan.

4) Debt sucks. Saying it isn't bad is like saying "root canals aren't that bad".