How long to pay back 150G? Forum

[2011Law]

This may be a bad question, but I'm wondering how long it would take to pay back $150,000 in loans. With biglaw or midlaw job.

I'm just wondering about the rough estimates.

[r6_philly]

This may be a bad question, but I'm wondering how long it would take to pay back $150,000 in loans. With biglaw or midlaw job.

I'm just wondering about the rough estimates.

You can probably live on 50k pre-tax per year just fine.

[2011Law]

This may be a bad question, but I'm wondering how long it would take to pay back $150,000 in loans. With biglaw or midlaw job.

I'm just wondering about the rough estimates.

You can probably live on 50k pre-tax per year just fine.

You mean after paying the loans for the year? For biglaw or midlaw? For how long? Were you just messing with me?

[AreJay711]

http://www.finaid.org/calculators/loanpayments.phtml

[r6_philly]

This may be a bad question, but I'm wondering how long it would take to pay back $150,000 in loans. With biglaw or midlaw job.

I'm just wondering about the rough estimates.

You can probably live on 50k pre-tax per year just fine.

You mean after paying the loans for the year? For biglaw or midlaw? For how long? Were you just messing with me?

Well I was just giving a simple idea that if you make 160k and can live off 50k, you can probably spare 100k pre-tax, or about 50-60k after tax to pay your loan off. That will make it 3-4 years until it's completely paid off. If you are going to make 80-100k mid-law (although TLS argue this doesn't really exist) you can probably save 30-40k a year to pay back. If you are making 60-75k, you can probably live off 40k, leaving 30k pretax, or 20k after tax a year to pay back loans. Obviously living off 40 is going to not as good as 50k. So if you live modestly, you can probably pay it off in 5-7 years with lower salary but 3-5 years in higher salary.

It will be hard not to spend the money though.

[r6_philly]

http://www.finaid.org/calculators/loanpayments.phtml

Calculators are helpful but most kids don't really know how much income they will have to devote to living expenses.

[AreJay711]

http://www.finaid.org/calculators/loanpayments.phtml

Calculators are helpful but most kids don't really know how much income they will have to devote to living expenses.

That's fair but in my experience, not with law students in biglaw obviously, people who have great intentions of paying down their debt and living modestly usually don't. I like that calculator though because it can break it down into monthly payments for any year amount you want and it gives you common interest rate amounts.

[Aqualibrium]

If you are going to make 80-100k mid-law (although TLS argue this doesn't really exist) you can probably save 30-40k a year to pay back.

It's not that jobs like that don't exist, it's just that they exist in such limited numbers compared to true biglaw jobs. Where a biglaw firm might hire anywhere from 10-200 first years, most midlaw firms are hiring, 1-5 if that.

[r6_philly]

http://www.finaid.org/calculators/loanpayments.phtml

Calculators are helpful but most kids don't really know how much income they will have to devote to living expenses.

That's fair but in my experience, not with law students in biglaw obviously, people who have great intentions of paying down their debt and living modestly usually don't. I like that calculator though because it can break it down into monthly payments for any year amount you want and it gives you common interest rate amounts.

That's why I did in salary mode so they know how much they could pay back, and they know they are being lavish when they pay back half that amount per year

I know I will be paying it back slowly, I will be spending the money haha

[rose711]

The amount of time it will take will depend on how much you can afford to pay each month. If you can pay more each month, you will pay it off sooner.

You need to figure out what the monthly payment will be on that amount of debt.

1 .I would go to my local bank (or my parent's bank) and ask a loan officer to sit down with me and go through the figures. Even if you aren't borrowing your student loan from them, they should be willing to take a few minutes and go over it with you. That is their job.

2. Here is a result from an online calculator which should go to show just how much money $150,000 of debt is - they use a model of a debt payment of no more than 10% of your income:
I used a random calculator I found at Finaid.com It comes up with a monthly payment and what salary you need to make that payment.
For $150,0000...paid off in 10 years...if you pay interest currently:

Loan Calculator

Loan Balance: $150,000.00
Adjusted Loan Balance: $150,000.00
Loan Interest Rate: 6.80%
Loan Fees: 0.00%
Loan Term: 10 years
Minimum Payment: $50.00

Monthly Loan Payment: $1,726.20
Number of Payments: 120

Cumulative Payments: $207,144.85
Total Interest Paid: $57,144.85

Note: The monthly loan payment was calculated at 119 payments of $1,726.20 plus a final payment of $1,727.05.

It is estimated that you will need an annual salary of at least $207,144.00 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.7. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $138,096.00, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 1.1.

The following table lists the minimum income necessary to repay the debt without encountering a partial economic hardship. Partial economic hardship is defined as having annual education loan payments in excess of 15 percent of discretionary income, where discretionary income is the amount by which Adjusted Gross Income (AGI) exceeds 150 percent of the poverty line. This figure is shown in the Minimum AGI (IBR) column. The Minimum AGI (ICR) column uses an alternate definition of economic hardship, based on 20 percent of discretionary income which is defined as the excess of AGI over 100 percent of the poverty line.

Household Size Minimum AGI (IBR) Minimum AGI (ICR)
1 $154,341.00 $114,402.00
2 $159,951.00 $118,142.00
3 $165,561.00 $121,882.00
4 $171,171.00 $125,622.00
5 $176,781.00 $129,362.00
6 $182,391.00 $133,102.00

These results assume that the student is paying the interest charges on any unsubsidized loans and is not capitalizing the interest while in school. If the student is capitalizing the interest, the cumulative payments and total interest charges will be higher than shown here.

***
http://www.finaid.org/calculators/loanpayments.phtml

Edit: I see someone above posted this link already - somehow I missed that post when I was reading the thread

[Bumi]

If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $138,096.00, but you may experience some financial difficulty.

I was playing around with that calculator last night. Does this sentence strike anyone else as nuts?

[rose711]

If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $138,096.00, but you may experience some financial difficulty.

I was playing around with that calculator last night. Does this sentence strike anyone else as nuts?

I think they are not showing the amount of taxes that will be deducted and then they are using standard percentages for housing costs, food, etc. Or maybe the model isn't that complex and they just figure out what it would be if you used 10% or 15% of your income to repay debt.

It may not be a terrible model to follow. This model seems to be built to allow borrowers to have the stuff everyone else has: savings, mortgages, cars, families. It is very conservative, but it might be difficult to be putting 20% or 25% of your income to pay off loans. I think that is what they mean by financial difficulty

[DeeCee]

If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $138,096.00, but you may experience some financial difficulty.

I was playing around with that calculator last night. Does this sentence strike anyone else as nuts?

Yes. I was devastated when I did a combination of this and reading Planet Law School II over winter break. Solution: I did some soul-searching about what kind of job I really wanted, what I could afford, and I threw away the Planet Law School book.

[rose711]

I do find it interesting that economic hardship is defined as having educational loans of either 15% or 20% of your gross monthly income.
Seriously, it may not be a crazy number - though it seems that way because the debt is so high that the monthly amount to service that debt is also very high. A person may get very frustrated at earning a high salary (if they can get it) and then having to pay a huge percentage of that in school loans, instead of being able to buy something else.

I'm not saying this calculator is right - I just wonder how they decided that if you have to pay more than 15% or 20% of your monthly income for educational loans, you are in financial hardship.

I also don't believe that people working in a big lawfirm in NYC can expect to not spend money on clothes, eating out, entertainment. I think it would be depressing to earn a lot of money but not have much to spend.

Just my opinion, I lived in NYC for 20+ years and am moving back in a year or two after my husband finishes some work upstate. New York is indecently expensive.

Also the amount shown is to pay it off in 10 years, presumably the amount of the monthly payment goes down if you take 15 or 20 years to pay it off - but do you want to be paying school loans when you are 40?

[rundoxierun]

I do find it interesting that economic hardship is defined as having educational loans of either 15% or 20% of your gross monthly income.
Seriously, it may not be a crazy number - though it seems that way because the debt is so high that the monthly amount to service that debt is also very high. A person may get very frustrated at earning a high salary (if they can get it) and then having to pay a huge percentage of that in school loans, instead of being able to buy something else.

I'm not saying this calculator is right - I just wonder how they decided that if you have to pay more than 15% or 20% of your monthly income for educational loans, you are in financial hardship.

I also don't believe that people working in a big lawfirm in NYC can expect to not spend money on clothes, eating out, entertainment. I think it would be depressing to earn a lot of money but not have much to spend.

Just my opinion, I lived in NYC for 20+ years and am moving back in a year or two after my husband finishes some work upstate. New York is indecently expensive.

That interest rate you entered is a bit low.. It should be closer to 7.5%. The 6.8% is for subsidized stafford loans which top out at like 60k over 3 yrs. I calculated it by hand once and I think with 180k debt and paying 3,000/month instead of the ~1,900 called for on the 10 year payment plan it came out to like 4.5 years to pay back with a 7.5% avg. interest rate.

[rose711]

To be thorough..$150,000 at 7.5% to repay in 4 years:

Loan Calculator

Loan Balance: $150,000.00
Adjusted Loan Balance: $150,000.00
Loan Interest Rate: 7.50%
Loan Fees: 0.00%
Loan Term: 4 years
Minimum Payment: $50.00
Degree Program: Lawyer (LLB or JD)

Monthly Loan Payment: $3,626.84
Number of Payments: 48

Cumulative Payments: $174,088.06
Total Interest Paid: $24,088.06

Note: The monthly loan payment was calculated at 47 payments of $3,626.84 plus a final payment of $3,626.58.

It is estimated that you will need an annual salary of at least $435,220.80 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.3. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $290,147.20, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 0.5.

And in 10 years:


Loan Calculator

Loan Balance: $150,000.00
Adjusted Loan Balance: $150,000.00
Loan Interest Rate: 7.50%
Loan Fees: 0.00%
Loan Term: 10 years
Minimum Payment: $50.00
Degree Program: Lawyer (LLB or JD)

Monthly Loan Payment: $1,780.53
Number of Payments: 120

Cumulative Payments: $213,662.98
Total Interest Paid: $63,662.98

Note: The monthly loan payment was calculated at 119 payments of $1,780.53 plus a final payment of $1,779.91.

It is estimated that you will need an annual salary of at least $213,663.60 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.7. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $142,442.40, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 1.1.

***
Note: I left off the tables of income with family size and economic hardship as it was getting absurd.

[Stanford4Me]

Also, if you're doing BigLaw there are year-end bonuses and what-not that come into play.

[r6_philly]

Learn to do a monthly budget and use a payroll calculator to figure out how much income (10% is too low) you can devote to repaying the loan, then you can decide how much you can pay back. Then you can use the calculators to figure out how long it will take.

OP asked how long it will take, not how much per month based on standard repayment plans. Or maybe he meant to ask that, I am not sure. You can pay it back much faster than 10 years.

These calculators err on the side of caution and underestimate possible contributions.

[birdlaw117]

If you can put $4,000 per month toward paying off your loan, you can pay off a 150K loan in about 3.5 years at 7.5%. So... almost $50k per year. I won't be taking this route, but just saying that 3.5 years seems like it would be about the fastest possible IMO.

[rose711]

Just note that lawyers need a plan to pay back their debt because debt repayment is a factor in the character and fitness review. I am not commenting on the recent Ohio case and its merits, but I think people should at least be aware of this issue.

https://www.supremecourt.ohio.gov/rod/d ... hio-20.pdf

[AreJay711]

Just note that lawyers need a plan to pay back their debt because debt repayment is a factor in the character and fitness review. I am not commenting on the recent Ohio case and its merits, but I think people should at least be aware of this issue.

https://www.supremecourt.ohio.gov/rod/d ... hio-20.pdf

Answer: Get a job that pays enough to pay back the loans.

[BruceWayne]

When you crunch the numbers it's really better to do PI at the schools with strong LRAP programs than go biglaw if you have big debt. I know it isn't everyone's cup of tea but I really think that more of us should consider going a PI route that doesn't close off working at a firm somewhere down the line (assuming you want to work at a firm someday). I would further encourage being open to working PI in an area other than NYC, DC, or SF--that makes it much easier to live on the PI salary; combine that with a lot of LRAPs that have you paying next to nothing if you work PI (and the 10 year complete forgiveness from PLSF) and you have a very appealing option for getting out of debt.

[r6_philly]

Just note that lawyers need a plan to pay back their debt because debt repayment is a factor in the character and fitness review. I am not commenting on the recent Ohio case and its merits, but I think people should at least be aware of this issue.

https://www.supremecourt.ohio.gov/rod/d ... hio-20.pdf

It's been debated, there is more to it than the debt at play there. It's his character and fitness that is in question.

[nealric]

If you can put $4,000 per month toward paying off your loan, you can pay off a 150K loan in about 3.5 years at 7.5%. So... almost $50k per year. I won't be taking this route, but just saying that 3.5 years seems like it would be about the fastest possible IMO.

Yeah, that would require some serious discipline.

That biglaw paycheck only works out to about 6.8k a month after taxes/health insurance/401k (not even maxed out). But wait, you probably took the 10k salary advance. How else are you going to pay living expenses for 4 months before you start? That's almost a grand out of your paycheck per pay period. So it's really only 6k a month for a first year. If you were paying 4k a month, that would leave only 2k for living expenses. My rent is 2k by itself.

[Stanford4Me]

My rent is 2k by itself.

Glad I'm moving back to Texas.