I'm planning to attend graduate school (USA), which will cost around 200k over 3 years. I have about 200k in highly appreciated stock (basis average of 100k, long-term gain) in a personal investment account.
I'd have to liquidate a minimum of 66k per year, resulting in 33k of capital gains. That, plus other earned income, will put me in the capital gains bracket of 15% federal and 5% state.
Alternatively, I could keep all my money invested, and take out a student loan. I have good credit and could probably get a 5-6% APR given current low rates. Then at the end of school I have 200k invested +/- 3 years of market fluctuations (hopefully +), but I also have a bunch of historically relatively cheap debt.
Intuitively, I feel like losing 10% of my stock's value to taxes, not to mention a few years of time-value in my portfolio, seems worse than paying 5% APR amortized over 10 years.
My third alternative is to split it somehow--liquidate some stock, but not enough to trigger the 15% federal bracket. Pay the rest with student loans. This would be about 100k each. But I'm not sure how to figure out if that's a better idea.
So, should I liquidate enough stock each semester to pay for school or take out some portion in student loans?