Hi all,
I'm heading to grad school for a Master's in Computer Science (AI focus) this September and wanted to get some advice on the best way to fund it given my particular situation. To give some background, I graduated with my BS in Mechanical Engineering in 2013 and have been working at a small engineering consulting firm since then. I didn't discover MMM and FI in general until just over a year ago, but being naturally frugal and debt averse led me to pay off all of my undergraduate student loans and save a fair amount regardless. In the past year I've dramatically increased my savings rate and 401k/IRA contributions. That being said, I have also been anticipating a transition to graduate school and have avoided contributing to taxable investment accounts because of the higher short-term risk. I figured that because I may need to access that money in a 1-2 year time horizon this seemed like a better choice.
As it stands now, my portfolio will look like this before I start in September.
30k Cash
6k Roth IRA (5.5k principle) - VTSMX
34k 401k and Traditional IRA - VTSMX, VFIAX, VIMAX, VSIAX
As I'll be attending a public university with in-state tuition the total cost of the degree is relatively inexpensive at just over 20k for the MS. My COL is also going to be around 15-20k per year over the 2 years I'm expecting the degree to take. I was not offered, and do not expect to get a RA or TA position to fund my education as these are generally reserved for PhD students.
The dilemma I'm facing is that there are quite a few distinct financial options in front of me, each with their own pros and cons.
1. Take out private or public student loans (private seem to have lower interest rates)
2. Withdraw money first from my Roth to avoid the penalty and then from my 401k and traditional IRA as necessary
3. Work from home part-time at my current job while in school (45k gross salary at 24hrs/wk).
#1 makes me a little uncomfortable just because I don't like debt.
The benefit of #2 is that while I'll be taking a 10% penalty for early withdrawal, my income will be so low that I can probably avoid income taxes for the "income". The obvious disadvantage is the penalty as well as losing out on the long-term benefit of tax advantaged gains.
The interesting thing about #3 is that my employer has also offered to pay 50% of the cost of tuition if I keep working part-time (24 hrs/wk) through school as well as 1 year of full time afterwards. This offer involves partial reimbursement periodically throughout the degree, meaning that it's not an all-or-nothing sort of arrangement. While this is definitely the most lucrative choice, I'm concerned about being able to balance an intensive course load with working even part-time. I'm also considering getting involved with research once I'm there, which would make it almost impossible to work. My work would also adjust slightly to match the new skills I'll be developing, which adds a bit of appeal.
Does anyone have thoughts on which option seems to make the most sense? I really like the idea of focusing entirely on school-work, but working would put me in a much better position financially. The other side of me is thinking that my income is going to increase significantly once I finish the degree, and that dedicating more time on developing skills now will pay off significantly once I want to fully reenter the work-force.
Thanks in advance.