Once Your COA Reaches 6 Figures

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bk1
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Once Your COA Reaches 6 Figures

Postby bk1 » Wed Nov 17, 2010 6:46 pm

Does it really matter how much it is?

*Side note: if this topic has already been discussed then I'd take a link to that thread and you can ignore this one, but I couldn't really find anything primarily on this.*

My point is that, with law salaries being bimodal, the only way somebody is paying off 6 figures of debt in any sort of reasonable amount of time is either through biglaw or through LRAP(/IBR). 160k or LRAP is going to allow you to pay off sticker price in 10 years or so whereas with a 60k position that seems almost impossible. Even if you pay only half of the full COA, 100k or so, a 60k position doesn't seem to set you up that well for that either. Also, if you don't land a job at all it's going to suck whether your debt is 200k or 50k. I haven't done exact loan repayment calculations but am I wrong that 100k initial debt for someone making 60k is still very oppressive?

This got me thinking that once you hit some number, probably around 6 figures, any extra debt is worthwhile if it increases your chances at biglaw or PI with a good LRAP. Because of the bimodal salary distribution, 200k debt is definitely worth taking on compared to 150k debt or even 100k debt if there is a decent gain in job prospects. To me this means that CCN at sticker is better than a half tuition (20k/year) at MVP. MVP at sticker is better than a half tuition (20k/year) at GULC/Cornell/T20. Heck, one tier of job prospects down, such as CCN down to MVP, might not even be worth 30k/year considering at 30k/year your COA can still be pretty close to 90-100k.

I know that this is glossing over a few things, such as regional preference, but I would like to know what everyone else thinks. Is there something wrong with this logic?

The corollary to this is something that I've seen DF, and maybe a few others, state several times. On the side of the scale, it's better to take a full ride without strings at a school like Chicago-Kent/Chapman/Santa Clara/Brooklyn/etc than even a decent sized scholarship at Illinois/Fordham/Hastings/etc.

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Re: Once Your COA Reaches 6 Figures

Postby r6_philly » Wed Nov 17, 2010 7:06 pm

Even if you can service the debt, you still have to remember you will be wanting to take on additional debt in the future. If you can pay carry the $100-150k in debt with a 60k job, you won't be able to take on new debt, like a mortgage. When they do your income evaluation they take the fix debt payment out of your income then decide how much you can borrow.

$60k = $5000 a month. If you are paying $100k debt at $1140 a month, you are left with $3800/month. 30% of 3800 = $1140. That's barely going to afford you a $120k house with 10-20% down. Think about in any major market, what house can you buy for $120k? So you will not be able to afford a mortgage (nor would they give you one) beyond that amount until 10 years later after you pay off your loans.

So if you are entertaining any debt approaching $100k, you better be thinking 80k and up for income or rely on a good LRAP. I know most kids going to LS don't think about buying a house, but it would suck to not able to get a mortage until you are 1)married so more income or 2) when you are close to $35-40.

Just a different perspective.

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bk1
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Re: Once Your COA Reaches 6 Figures

Postby bk1 » Wed Nov 17, 2010 7:14 pm

If I'm reading you correctly, what you are saying lends credence to my argument above.

At 60k/year, 100k debt is already screwing you so the benefit of reducing your LS cost from 200k to 100k is not really worth it if it increases your chances of ending up at 60k.

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FlightoftheEarls
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Re: Once Your COA Reaches 6 Figures

Postby FlightoftheEarls » Wed Nov 17, 2010 7:22 pm

It also matters significantly if you do land biglaw. For example, somebody taking CCN at sticker (especially CN, in NYC) may be looking at up to $210,000 in total loans by the time they're out of school. Repaid over 10 years on 6.8% interest, that's a payment of $2416 per month. By choosing Michigan over NYU, I'm only going to be paying back about $135,000 in loans, yet I'll still be receiving the market biglaw salary. That's a monthly loan payment of $1553 per month. While that $863 difference may not seem enormous, that's still over $10,300 per year in my pocket as compared to what I would retain had I gone to NYU. That's also $10,300 more per year that I can use to pay down the loans more quickly. In addition, I have about $75,000 less in loans to repay at this significantly faster rate. On the whole, that's not a terrible deal. Of course, I'm writing this from the perspective of having attained a market-paying job, and the chances of that are admittedly better at CCN. But for somebody who lands biglaw and is worried only about the long-term financial perspective, this is something to consider.

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bk1
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Re: Once Your COA Reaches 6 Figures

Postby bk1 » Wed Nov 17, 2010 7:25 pm

That part I understand. At the T10 or so and up you have a roughly greater than 50/50 chance at landing a biglaw SA. Yes it would be nice to pay less once you land this but I feel like covering your bases first is the better call. Others can disagree, but my point is that after 6 figures taking on more debt for a better school is the safer choice.

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Re: Once Your COA Reaches 6 Figures

Postby r6_philly » Wed Nov 17, 2010 8:35 pm

bk1 wrote:That part I understand. At the T10 or so and up you have a roughly greater than 50/50 chance at landing a biglaw SA. Yes it would be nice to pay less once you land this but I feel like covering your bases first is the better call. Others can disagree, but my point is that after 6 figures taking on more debt for a better school is the safer choice.


I do agree with your assessment. The thing is, many people are graduating from UG with a bunch of debt already. So even if they get a full scholly to a non-T14, but still have to take out loans to cover living expenses - well, it may end up being 100k+ debt you will be servicing even with a full scholarship.

So then, you have to shoot for big law (and therefore T14), or law school may not be worth it at all.

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Re: Once Your COA Reaches 6 Figures

Postby Aberzombie1892 » Wed Nov 17, 2010 8:53 pm

r6_philly wrote:
bk1 wrote:That part I understand. At the T10 or so and up you have a roughly greater than 50/50 chance at landing a biglaw SA. Yes it would be nice to pay less once you land this but I feel like covering your bases first is the better call. Others can disagree, but my point is that after 6 figures taking on more debt for a better school is the safer choice.


I do agree with your assessment. The thing is, many people are graduating from UG with a bunch of debt already. So even if they get a full scholly to a non-T14, but still have to take out loans to cover living expenses - well, it may end up being 100k+ debt you will be servicing even with a full scholarship.

So then, you have to shoot for big law (and therefore T14), or law school may not be worth it at all.


True, but about half of the T14 students don't get Biglaw.

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Re: Once Your COA Reaches 6 Figures

Postby r6_philly » Wed Nov 17, 2010 9:30 pm

Aberzombie1892 wrote:True, but about half of the T14 students don't get Biglaw.


Not everybody wins unfortunately. At least you have a fair shot. 50/50 is about as fair as you can get. And for the rest, good LRAP can pick it up some. And yet more people would have scholarship money to deflect some of the cost.

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beachbum
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Re: Once Your COA Reaches 6 Figures

Postby beachbum » Wed Nov 17, 2010 9:58 pm

This certainly seems to be the rationale of many T14 EDers, myself included.

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BarbellDreams
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Re: Once Your COA Reaches 6 Figures

Postby BarbellDreams » Wed Nov 17, 2010 11:16 pm

Some TLSers will say different, but I am thoroughly convinced that in 6 figures it really doesnt matter. You're relying on LRAP/IBR/forgiveness any way you slice it. I had a choice going to a worse school and coming out 120K in debt versus going to a better school and coming out 160K in debt. Only time will tell whether I made the right choice or not, but at this point I didnt see a big difference between the two numbers.

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Re: Once Your COA Reaches 6 Figures

Postby rundoxierun » Wed Nov 17, 2010 11:28 pm

Assuming ~8-10% diff in chance of biglaw, 10-15k/yr. price difference then its def not a bad decision to take the higher priced school. 25-35k/yr price difference then it gets real questionable. Even when you get to 6 figures the difference between 100k debt and 160k+ is definitely significant. Even assuming 30 yr payment plan, that extra 60k is something like an extra ~$500-600/month or ~$6000-7200/yr for a total of $180k+ in extra payoff over the loan period.

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JG Hall
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Re: Once Your COA Reaches 6 Figures

Postby JG Hall » Thu Nov 18, 2010 1:56 am

So, for those of you already over 100K, who wants my debt?

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Re: Once Your COA Reaches 6 Figures

Postby r6_philly » Thu Nov 18, 2010 1:59 am

JG Hall wrote:So, for those of you already over 100K, who wants my debt?


If you go to a T14, I would buy your debt from your servicer.

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Unemployed
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Re: Once Your COA Reaches 6 Figures

Postby Unemployed » Thu Nov 18, 2010 2:02 am

JG Hall wrote:So, for those of you already over 100K, who wants my debt?


Well done, sir.

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IAFG
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Re: Once Your COA Reaches 6 Figures

Postby IAFG » Thu Nov 18, 2010 2:08 am

The sad thing is how few applicants consider this.

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Re: Once Your COA Reaches 6 Figures

Postby thegor1987 » Thu Nov 18, 2010 2:18 am

r6_philly wrote:
Aberzombie1892 wrote:True, but about half of the T14 students don't get Biglaw.


Not everybody wins unfortunately. At least you have a fair shot. 50/50 is about as fair as you can get. And for the rest, good LRAP can pick it up some. And yet more people would have scholarship money to deflect some of the cost.


Those are odds are dope.

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2014
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Re: Once Your COA Reaches 6 Figures

Postby 2014 » Thu Nov 18, 2010 3:10 am

This has me intrigued actually.

The thing is, based on chances of a given salary, debt and potentially other related quantifiable figures, you can numerically rationalize what the optimal choice is, and I imagine that you are correct Bk in saying that at a certain point optimal jumps from say ~80k to ~150k. It is almost a necessary correspondence with the bimodal salary distribution.

Someone with a good mind for Calculus or whatnot should figure it out and throw it up as a website :P

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Re: Once Your COA Reaches 6 Figures

Postby r6_philly » Thu Nov 18, 2010 11:42 am

2014 wrote:This has me intrigued actually.

The thing is, based on chances of a given salary, debt and potentially other related quantifiable figures, you can numerically rationalize what the optimal choice is, and I imagine that you are correct Bk in saying that at a certain point optimal jumps from say ~80k to ~150k. It is almost a necessary correspondence with the bimodal salary distribution.

Someone with a good mind for Calculus or whatnot should figure it out and throw it up as a website :P


You can give numerical odds, but people will also first rationalize what part of the distribution they are in. No one is going to figure they are in the left tail. Everyone think they can do better than the masses and be in the right tail. In other words, no cocky 0L's are going to decide rationally?

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homestyle28
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Re: Once Your COA Reaches 6 Figures

Postby homestyle28 » Thu Nov 18, 2010 11:56 am

Solid thread OP. As TLS caters to the BigLaw folks, I think the importance of LRAP is often overlooked. It really strengthens the case for t-14 or bust. The difference in 150k debt from a state school T1 w/ crappy LRAP vs. 250k from t-14 with solid LRAP is astounding for us PI hopefuls.

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Borhas
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Re: Once Your COA Reaches 6 Figures

Postby Borhas » Thu Nov 18, 2010 12:23 pm

homestyle28 wrote:Solid thread OP. As TLS caters to the BigLaw folks, I think the importance of LRAP is often overlooked. It really strengthens the case for t-14 or bust. The difference in 150k debt from a state school T1 w/ crappy LRAP vs. 250k from t-14 with solid LRAP is astounding for us PI hopefuls.


IBR is the biggest thing, though LRAP help... I'd largely agree with the minor exception that some of the other schools have excellent LRAPs. UC Hastings' is about on par with Chicago, UVa, Penn, and NU's LRAPs for example. (though those schools have the worst LRAPs in the t14... nothing can really compare with Yale or Stanfords programs. )

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Re: Once Your COA Reaches 6 Figures

Postby rundoxierun » Thu Nov 18, 2010 1:10 pm

2014 wrote:This has me intrigued actually.

The thing is, based on chances of a given salary, debt and potentially other related quantifiable figures, you can numerically rationalize what the optimal choice is, and I imagine that you are correct Bk in saying that at a certain point optimal jumps from say ~80k to ~150k. It is almost a necessary correspondence with the bimodal salary distribution.

Someone with a good mind for Calculus or whatnot should figure it out and throw it up as a website :P

Dont even need calculus this is more like intro stat/econometrics. Simply weigh expected possible outcomes (160k and 60k for instance) by difference in chance of those outcomes occuring. If you want to get fancier come up with a factor representing risk aversion and weigh by that too. Unless you have a large value on every 1% drop in uncertainty you guys would be overstating the extent to which its a good idea to take on more debt.

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bk1
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Re: Once Your COA Reaches 6 Figures

Postby bk1 » Thu Nov 18, 2010 2:11 pm

Of course LRAP combines with IBR but without LRAP doesn't IBR take 25 years? To me that is way too long to be paying off law school debt. My point about LRAP is not that the T14's are necessarily better (in some cases they are, in some cases they arent't) but that PI positions are very competitive, like biglaw, and that to get something that will allow you to use LRAP a better school is going to put you in a better position to get one.

Let's take a pretty big difference in sticker price for example, NYU ($70k/year = 210k) and Michigan ($61k/year = 183k). To get Michigan under 6 figures of debt you still need a almost 30k/year or basically a 2/3 tuition scholarship even with it's already cheaper total COA. Most schools don't offer scholarships in this range though some do offer full rides, i.e. Michigan's Darrow, but those are very rare and I don't have numbers but aren't people who get these competitive at HYS?

So to me, a 2/3 would be the starting point at which to consider taking something like MVP over CCN. I really don't think 20k/year should entice people to drop down a minitier.

tkgrrett wrote:Unless you have a large value on every 1% drop in uncertainty you guys would be overstating the extent to which its a good idea to take on more debt.


Are you saying that the benefit of the extra debt past the first 100k is being overstated?

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Re: Once Your COA Reaches 6 Figures

Postby rundoxierun » Thu Nov 18, 2010 3:24 pm

bk1 wrote:
tkgrrett wrote:Unless you have a large value on every 1% drop in uncertainty you guys would be overstating the extent to which its a good idea to take on more debt.


Are you saying that the benefit of the extra debt past the first 100k is being overstated?


What Im saying is that it isnt the slam dunk great idea to take on an extra 25-35k/yr to attend CCN over MVP even if both are over 100k COA. I dont know about you guys but I look at my salary in terms of income(ability to consume) not just ability to pay off student loans. There is a significant difference in having 160k debt vs 100k debt despite having a job capable of paying the debts off.

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bk1
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Re: Once Your COA Reaches 6 Figures

Postby bk1 » Thu Nov 18, 2010 3:27 pm

tkgrrett wrote:What Im saying is that it isnt the slam dunk great idea to take on an extra 25-35k/yr to attend CCN over MVP even if both are over 100k COA. I dont know about you guys but I look at my salary in terms of income(ability to consume) not just ability to pay off student loans. There is a significant difference in having 160k debt vs 100k debt despite having a job capable of paying the debts off.


I feel that the extra debt of CCN is the risk-averse option. Yes having 100k debt from MVP would be nice but if you strike out biglaw at MVP you are pretty fucked with 100k debt or with 160k debt. I'd rather take the extra debt (even going from 100k to 200k) and tack on a good 20% extra chance at biglaw. My point is not that the extra debt is irrelevant, but that when taking risk into account the extra debt entails less risk.

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Re: Once Your COA Reaches 6 Figures

Postby homestyle28 » Thu Nov 18, 2010 3:30 pm

bk1 wrote:Of course LRAP combines with IBR but without LRAP doesn't IBR take 25 years?


Not for PI or non-profit work. Then you're looking at 10 years. And there are a lot of qualifying PI jobs out there, you can be a PD for some small rural county and still qualify. In which case, your 6 figures of debt is still gone after a decade.




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