How the Heck Do You Pay Back Sticker?

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sinfiery
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Re: How the Heck Do You Pay Back Sticker?

Postby sinfiery » Thu May 16, 2013 8:45 am

Most people may leave their first firm job by 2-4 years but most definitely do not leave biglaw in that time frame.

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Re: How the Heck Do You Pay Back Sticker?

Postby 20141023 » Thu May 16, 2013 8:48 am

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loomstate
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Re: How the Heck Do You Pay Back Sticker?

Postby loomstate » Thu May 16, 2013 9:07 am

for most people going to top schools, law school at sticker is a great good investment over the longrun.

you shouldnt assume that not getting biglaw or PI at graduation means unemployed indefinitely. there are definitely horror stories out there, and i dont want to be misunderstood as arguing that no one gets screwed. but you dont have a large chance of being screwed if you attend a top school. you might not have the best job in the best location, but if you put in good work, chances are you'll do ok.

a lot of lawyers got undergrad degrees in the social sciences, to which the options at basically three-fold if you want to make good money: 1. try to excel in said social science and become a professor, 2. create your own business, or 3. become a lawyer. For most social science grads, if they attend a top law school, option 3 is the best option.

this is why when new posters ask about which school they have a shot at with their 3.9 GPA in engineering, TCR should always be "gain work experience in specialized field."

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bananasplit19
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Re: How the Heck Do You Pay Back Sticker?

Postby bananasplit19 » Thu May 16, 2013 12:06 pm

Thanks for the opinions, everyone. As I noted in the OP, I've been trying to quantify how digging out of sticker debt via BigLaw or partial-BigLaw would work. I've created two spreadsheets that track it on a year-by-year basis: tab 1 is if you stay in BigLaw and don't burn out/get booted out/willingly move out, and tab 2 is if you lateral to a $100K/yr job after Year 3. I'd love to hear your thoughts as to its conclusion, and to any assumption mistakes: https://docs.google.com/spreadsheet/ccc?key=0AuZs48FxZA2CdEU3WDB0VUs4MGNjeDNRWU9nZHpJM2c&usp=sharing NOTE I've made it view-only, but I can adjust the debt level to get new projections.

The tl;dr of the spreadsheet is that to fully pay off sticker debt, it requires 7 years of aggressive frugality (42% of your take-home salary, or $3,500/month in your first year) in BigLaw. If you burn out or lateral out after year 3, then it doesn't look great, even if you lateral to a $100K/yr job. Seems like an unacceptable risk, and this is on top of the risk of not getting BigLaw coming out of school. :|

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Re: How the Heck Do You Pay Back Sticker?

Postby dixiecupdrinking » Thu May 16, 2013 12:07 pm

Paul Campos wrote:Sticker is now for

(1) Rich kids. Huge numbers of people from big money backgrounds go to law school. 20% to 30% of the class at lots of fancy schools graduate with no law school debt, and another significant percentage graduate with relatively minimal debt.

(2) Suckers

(3) People with low opportunity costs, a high tolerance for risk, and a spot at one of N law schools (N is very small and shrinking).

This, especially number 1. And even many students at top schools who go at sticker and finance it with loans still have a family safety net. Their parents may not have $200k in cash lying around to pay their tuition upfront, but if they flame out of biglaw, or can't get a job, their parents have home equity, savings, retirement accounts, and other sources to help their kids out in a rainy day. If this doesn't describe your circumstance and you're borrowing to pay for law school, you're behind the 8 ball relative to your peers. Not all debt burdens are created equal.

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Re: How the Heck Do You Pay Back Sticker?

Postby dixiecupdrinking » Thu May 16, 2013 12:15 pm

bananasplit19 wrote:Thanks for the opinions, everyone. As I noted in the OP, I've been trying to quantify how digging out of sticker debt via BigLaw or partial-BigLaw would work. I've created two spreadsheets that track it on a year-by-year basis: tab 1 is if you stay in BigLaw and don't burn out/get booted out/willingly move out, and tab 2 is if you lateral to a $100K/yr job after Year 3. I'd love to hear your thoughts as to its conclusion, and to any assumption mistakes: https://docs.google.com/spreadsheet/ccc?key=0AuZs48FxZA2CdEU3WDB0VUs4MGNjeDNRWU9nZHpJM2c&usp=sharing NOTE I've made it view-only, but I can adjust the debt level to get new projections.

The tl;dr of the spreadsheet is that to fully pay off sticker debt, it requires 7 years of aggressive frugality (42% of your take-home salary, or $3,500/month in your first year) in BigLaw. If you burn out or lateral out after year 3, then it doesn't look great, even if you lateral to a $100K/yr job. Seems like an unacceptable risk, and this is on top of the risk of not getting BigLaw coming out of school. :|

Frankly I would recalibrate your thinking on what constitutes "aggressive frugality." My plan is to go to biglaw and live like I'm working for the government for at least the first year or two. $50,000 a year to loans is more like it. It helps to have lived in NYC without making $160,000 and to understand that it's quite possible to survive on a quarter of that.

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Samara
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Re: How the Heck Do You Pay Back Sticker?

Postby Samara » Thu May 16, 2013 12:20 pm

bananasplit19 wrote:Thanks for the opinions, everyone. As I noted in the OP, I've been trying to quantify how digging out of sticker debt via BigLaw or partial-BigLaw would work. I've created two spreadsheets that track it on a year-by-year basis: tab 1 is if you stay in BigLaw and don't burn out/get booted out/willingly move out, and tab 2 is if you lateral to a $100K/yr job after Year 3. I'd love to hear your thoughts as to its conclusion, and to any assumption mistakes: https://docs.google.com/spreadsheet/ccc?key=0AuZs48FxZA2CdEU3WDB0VUs4MGNjeDNRWU9nZHpJM2c&usp=sharing NOTE I've made it view-only, but I can adjust the debt level to get new projections.

The tl;dr of the spreadsheet is that to fully pay off sticker debt, it requires 7 years of aggressive frugality (42% of your take-home salary, or $3,500/month in your first year) in BigLaw. If you burn out or lateral out after year 3, then it doesn't look great, even if you lateral to a $100K/yr job. Seems like an unacceptable risk, and this is on top of the risk of not getting BigLaw coming out of school. :|

You forgot bonuses, though it's important to note that you are assuming the top end of the pay scale. Plenty of biglaw firms start below $160k or don't give such large lockstep raises/bonuses.

Exit options are often (usually?) better than $100k though. Exiting biglaw often means going to a smaller, but still well-paying firm.

I'm paying sticker at a T14. I wouldn't say I'm completely comfortable about it, but I think I'll end up okay. I have made peace though with the fact that I will have to grind it out for five years in biglaw even if I hate it. It seems to be fairly rare for people to get pushed out before the five-year mark (absent firm health, poor performance, etc.). That said, I don't think I could do it living in NYC. COL is way too high there.

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Samara
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Re: How the Heck Do You Pay Back Sticker?

Postby Samara » Thu May 16, 2013 12:23 pm

dixiecupdrinking wrote:
Paul Campos wrote:Sticker is now for

(1) Rich kids. Huge numbers of people from big money backgrounds go to law school. 20% to 30% of the class at lots of fancy schools graduate with no law school debt, and another significant percentage graduate with relatively minimal debt.

(2) Suckers

(3) People with low opportunity costs, a high tolerance for risk, and a spot at one of N law schools (N is very small and shrinking).

This, especially number 1. And even many students at top schools who go at sticker and finance it with loans still have a family safety net. Their parents may not have $200k in cash lying around to pay their tuition upfront, but if they flame out of biglaw, or can't get a job, their parents have home equity, savings, retirement accounts, and other sources to help their kids out in a rainy day. If this doesn't describe your circumstance and you're borrowing to pay for law school, you're behind the 8 ball relative to your peers. Not all debt burdens are created equal.

Yeah...I know multiple people at my school who are "paying sticker" either through direct parent subsidization or some sort of parental backstop.

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ph5354a
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Re: How the Heck Do You Pay Back Sticker?

Postby ph5354a » Thu May 16, 2013 12:41 pm

dixiecupdrinking wrote:
bananasplit19 wrote:Thanks for the opinions, everyone. As I noted in the OP, I've been trying to quantify how digging out of sticker debt via BigLaw or partial-BigLaw would work. I've created two spreadsheets that track it on a year-by-year basis: tab 1 is if you stay in BigLaw and don't burn out/get booted out/willingly move out, and tab 2 is if you lateral to a $100K/yr job after Year 3. I'd love to hear your thoughts as to its conclusion, and to any assumption mistakes: https://docs.google.com/spreadsheet/ccc?key=0AuZs48FxZA2CdEU3WDB0VUs4MGNjeDNRWU9nZHpJM2c&usp=sharing NOTE I've made it view-only, but I can adjust the debt level to get new projections.

The tl;dr of the spreadsheet is that to fully pay off sticker debt, it requires 7 years of aggressive frugality (42% of your take-home salary, or $3,500/month in your first year) in BigLaw. If you burn out or lateral out after year 3, then it doesn't look great, even if you lateral to a $100K/yr job. Seems like an unacceptable risk, and this is on top of the risk of not getting BigLaw coming out of school. :|

Frankly I would recalibrate your thinking on what constitutes "aggressive frugality." My plan is to go to biglaw and live like I'm working for the government for at least the first year or two. $50,000 a year to loans is more like it. It helps to have lived in NYC without making $160,000 and to understand that it's quite possible to survive on a quarter of that.


Nice spreadsheet! I'll definitely be using this to do some of my own calculations. I agree with the above. I plan on putting at least $4-5k/month towards loans. Assuming I don't get knocked up in law school, I'm confident in my ability to live much more frugally than this.

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Re: How the Heck Do You Pay Back Sticker?

Postby feralinfant » Thu May 16, 2013 12:48 pm

ph5354a wrote:
dixiecupdrinking wrote:
bananasplit19 wrote:Thanks for the opinions, everyone. As I noted in the OP, I've been trying to quantify how digging out of sticker debt via BigLaw or partial-BigLaw would work. I've created two spreadsheets that track it on a year-by-year basis: tab 1 is if you stay in BigLaw and don't burn out/get booted out/willingly move out, and tab 2 is if you lateral to a $100K/yr job after Year 3. I'd love to hear your thoughts as to its conclusion, and to any assumption mistakes: https://docs.google.com/spreadsheet/ccc?key=0AuZs48FxZA2CdEU3WDB0VUs4MGNjeDNRWU9nZHpJM2c&usp=sharing NOTE I've made it view-only, but I can adjust the debt level to get new projections.

The tl;dr of the spreadsheet is that to fully pay off sticker debt, it requires 7 years of aggressive frugality (42% of your take-home salary, or $3,500/month in your first year) in BigLaw. If you burn out or lateral out after year 3, then it doesn't look great, even if you lateral to a $100K/yr job. Seems like an unacceptable risk, and this is on top of the risk of not getting BigLaw coming out of school. :|

Frankly I would recalibrate your thinking on what constitutes "aggressive frugality." My plan is to go to biglaw and live like I'm working for the government for at least the first year or two. $50,000 a year to loans is more like it. It helps to have lived in NYC without making $160,000 and to understand that it's quite possible to survive on a quarter of that.


Nice spreadsheet! I'll definitely be using this to do some of my own calculations. I agree with the above. I plan on putting at least $4-5k/month towards loans. Assuming I don't get knocked up in law school, I'm confident in my ability to live much more frugally than this.


Yay spreadsheets. If you look at even the first year, you've got almost 60,000 dollars left over post tax and loan repayment. This is substantially more money than I make pre-tax right now. This is why people conclude that sticker is worth it, even with the risk of striking out/getting pushed out. It's not all models and bottles fantasies. It's that depending on your law school you have a very realistic chance at getting a better/respectable income. Plus looking at it over a five year window is really too short, hell probably a ten year time frame is probably too short when you're talking about a career you'll have for the next 30-40 years, as DF alluded to.

People do have bad outcomes and that's a risk everyone weighs for themselves but its not totally irrational to think that having 50k a year post tax and loan repayment and then being debt free after the next 6-10 years would be a good option.

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Re: How the Heck Do You Pay Back Sticker?

Postby qwertyboard » Thu May 16, 2013 12:52 pm

Like most of you I'm in the middle of the pack. I come from a family that doesn't make 200k a year but it's not poor either. I'll have around 70k in debt after graduation and I'm freaking out a bit. If I do get biglaw that 70k is going down the first year even if that means living in a trailer house.

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sinfiery
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Re: How the Heck Do You Pay Back Sticker?

Postby sinfiery » Thu May 16, 2013 12:56 pm

qwertyboard wrote:Like most of you I'm in the middle of the pack. I come from a family that doesn't make 200k a year but it's not poor either. I'll have around 70k in debt after graduation and I'm freaking out a bit. If I do get biglaw that 70k is going down the first year even if that means living in a trailer house.

Considering the likely interest rate difference, bad idea bro.

Eta: thought you meant UG debt. 70k debt for lawschool equals you lose your right to worry card bro
Last edited by sinfiery on Thu May 16, 2013 12:59 pm, edited 2 times in total.

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Re: How the Heck Do You Pay Back Sticker?

Postby 09042014 » Thu May 16, 2013 12:57 pm

qwertyboard wrote:Like most of you I'm in the middle of the pack. I come from a family that doesn't make 200k a year but it's not poor either. I'll have around 70k in debt after graduation and I'm freaking out a bit. If I do get biglaw that 70k is going down the first year even if that means living in a trailer house.


Why would you do that? The 5k of interest isn't worth living in a total shitstain of a place.

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Re: How the Heck Do You Pay Back Sticker?

Postby seagan823 » Thu May 16, 2013 12:58 pm

This also has to in some way come down to the fact that you may really want to be a lawyer. Law school is a risky expense if you are only motivated by the money. You have to ask yourself if you are willing to possibly struggle a bit and whether or not you believe in yourself enough to get through it. I'm not suggesting you take an unrealistic approach, and pay sticker for a law school where half aren't even getting into legal jobs. But I think that if your heart is set on law, paying sticker at a T6 is probably worth it.

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Re: How the Heck Do You Pay Back Sticker?

Postby toothbrush » Thu May 16, 2013 12:59 pm

sinfiery wrote:
qwertyboard wrote:Like most of you I'm in the middle of the pack. I come from a family that doesn't make 200k a year but it's not poor either. I'll have around 70k in debt after graduation and I'm freaking out a bit. If I do get biglaw that 70k is going down the first year even if that means living in a trailer house.

Considering the likely interest rate difference, bad idea bro.

maybe he's exaggerating a bit. I do agree though that with ~70k debt i'd do crazy things to pay it off quick. Crazy being moving back in with parents and making a helluva commute for a year.

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Re: How the Heck Do You Pay Back Sticker?

Postby ph5354a » Thu May 16, 2013 1:00 pm

I'm wondering if it makes sense to add in a bonus column with a conservative bonus structure, and then assume that you would put maybe 25% of your bonus towards loans every year.

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Re: How the Heck Do You Pay Back Sticker?

Postby 09042014 » Thu May 16, 2013 1:02 pm

seagan823 wrote:This also has to in some way come down to the fact that you may really want to be a lawyer. Law school is a risky expense if you are only motivated by the money. You have to ask yourself if you are willing to possibly struggle a bit and whether or not you believe in yourself enough to get through it. I'm not suggesting you take an unrealistic approach, and pay sticker for a law school where half aren't even getting into legal jobs. But I think that if your heart is set on law, paying sticker at a T6 is probably worth it.


Massively understating the risk that your 0L ass has no idea what people a lawyer actually is. I'd say that is the bigger risk, because when you realize law sucks, you'll be heartbroken.

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Re: How the Heck Do You Pay Back Sticker?

Postby bananasplit19 » Thu May 16, 2013 1:03 pm

ph5354a wrote:I'm wondering if it makes sense to add in a bonus column with a conservative bonus structure, and then assume that you would put maybe 25% of your bonus towards loans every year.

I could, but I dunno, I feel like I was being optimistic with the lockstep salary increases in the first place. Don't want to overestimate income and get skewed numbers. Better to skew pessimistic than optimistic, after all. I figure if unaccounted income does roll in, it will go towards unaccounted costs (getting married, having to buy a new hover-skateboard, etc), so it'll be a wash in this thoroughly unscientific projection.

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Re: How the Heck Do You Pay Back Sticker?

Postby ph5354a » Thu May 16, 2013 1:15 pm

To address the larger scope of this thread, I view law school debt as falling into two categories (0L here):

1) requires big law (more than $120k, maybe, depending on COL)
2) does not require big law

If your debt requires big law, you need to make sure your risk pays off by going to the school with the highest possible chance at big law even if that means paying more, which I would argue is nothing outside of the T14. Just as an example, I don't think someone should pick $175k debt at a lesser school over sticker at a better school (depending on the difference between the two) because they need to maximize their chances at big law.

So if the question we're addressing here is why would you pay sticker, which is what people seem to be talking about, I would argue that if you have significant UG debt or if your other scholarship options don't get you below that $120k/150k debt mark, sticker in order to maximize big law chances would make sense. Of course, I think this only really applies to those choosing between sticker at T14 versus scholarships at lower T14/T20.

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Re: How the Heck Do You Pay Back Sticker?

Postby jbagelboy » Thu May 16, 2013 1:18 pm

At what point is the debt even manageable then? When we are pushing $280K sticker at top schools, would you say $200K is a "Good Decision" at T5? or $150K? When does it become a "great investment"? its such an astronomically huge sum of cash that it's very difficult for an 0L or 1L to conceive. I think a lot of law students who are loaning out this much money and don't have parental support actually just blindly hope the federal government will relieve their loan at some point. Thus, when your in law school and you see your debt pile increasing rapidly into six figures, I bet some kids decide to go on LRAP with the justification that their loans will be covered after 10 yrs.

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Re: How the Heck Do You Pay Back Sticker?

Postby 09042014 » Thu May 16, 2013 1:24 pm

jbagelboy wrote:At what point is the debt even manageable then? When we are pushing $280K sticker at top schools, would you say $200K is a "Good Decision" at T5? or $150K? When does it become a "great investment"? its such an astronomically huge sum of cash that it's very difficult for an 0L or 1L to conceive. I think a lot of law students who are loaning out this much money and don't have parental support actually just blindly hope the federal government will relieve their loan at some point. Thus, when your in law school and you see your debt pile increasing rapidly into six figures, I bet some kids decide to go on LRAP with the justification that their loans will be covered after 10 yrs.


There is no magic number. Different people will have different numbers based on their opprunity cost, willingness to accept risk, and other factors.

And nobody is talking about PAYE. If they fix the tax bomb, your 250k of debt isn't really 250k.

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Re: How the Heck Do You Pay Back Sticker?

Postby Cobretti » Thu May 16, 2013 1:28 pm

Desert Fox wrote:
jbagelboy wrote:At what point is the debt even manageable then? When we are pushing $280K sticker at top schools, would you say $200K is a "Good Decision" at T5? or $150K? When does it become a "great investment"? its such an astronomically huge sum of cash that it's very difficult for an 0L or 1L to conceive. I think a lot of law students who are loaning out this much money and don't have parental support actually just blindly hope the federal government will relieve their loan at some point. Thus, when your in law school and you see your debt pile increasing rapidly into six figures, I bet some kids decide to go on LRAP with the justification that their loans will be covered after 10 yrs.


There is no magic number. Different people will have different numbers based on their opprunity cost, willingness to accept risk, and other factors.

And nobody is talking about PAYE. If they fix the tax bomb, your 250k of debt isn't really 250k.

+1 PAYE should be a bigger topic here. Its an amazing safety net that should be a huge part in any discussion of attending any school for less than a full ride.

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Re: How the Heck Do You Pay Back Sticker?

Postby rickgrimes69 » Thu May 16, 2013 1:30 pm

Desert Fox wrote:
jbagelboy wrote:At what point is the debt even manageable then? When we are pushing $280K sticker at top schools, would you say $200K is a "Good Decision" at T5? or $150K? When does it become a "great investment"? its such an astronomically huge sum of cash that it's very difficult for an 0L or 1L to conceive. I think a lot of law students who are loaning out this much money and don't have parental support actually just blindly hope the federal government will relieve their loan at some point. Thus, when your in law school and you see your debt pile increasing rapidly into six figures, I bet some kids decide to go on LRAP with the justification that their loans will be covered after 10 yrs.


There is no magic number. Different people will have different numbers based on their opprunity cost, willingness to accept risk, and other factors.

And nobody is talking about PAYE. If they fix the tax bomb, your 250k of debt isn't really 250k.


Yeah, if. They haven't fixed it for IBR, why would they for PAYE? Especially in this age of sequester?

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Re: How the Heck Do You Pay Back Sticker?

Postby feralinfant » Thu May 16, 2013 1:32 pm

Cobretti wrote:
Desert Fox wrote:
jbagelboy wrote:At what point is the debt even manageable then? When we are pushing $280K sticker at top schools, would you say $200K is a "Good Decision" at T5? or $150K? When does it become a "great investment"? its such an astronomically huge sum of cash that it's very difficult for an 0L or 1L to conceive. I think a lot of law students who are loaning out this much money and don't have parental support actually just blindly hope the federal government will relieve their loan at some point. Thus, when your in law school and you see your debt pile increasing rapidly into six figures, I bet some kids decide to go on LRAP with the justification that their loans will be covered after 10 yrs.


There is no magic number. Different people will have different numbers based on their opprunity cost, willingness to accept risk, and other factors.

And nobody is talking about PAYE. If they fix the tax bomb, your 250k of debt isn't really 250k.

+1 PAYE should be a bigger topic here. Its an amazing safety net that should be a huge part in any discussion of attending any school for less than a full ride.


+1. PAYE does a lot to mitigate the worst case scenario of striking out/getting pushed out way too early from biglaw.

And as far as manageable, I agree it will vary, but seriously is 50k post-tax/loan payments really just ABJECT poverty? I mean i realize you're making a commitment here to paying down debt for a while and it may impact decisions like buying a house and so on...but still.

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Re: How the Heck Do You Pay Back Sticker?

Postby wisdom » Thu May 16, 2013 1:32 pm

Desert Fox wrote:If your career goes decently you'll be making 150K+ for the rest of your 40 year career. That's 6 million dollars. 300k is 5% of that. 40 years is probably too long to consider, but 10 years is a reasonable pay off time.

Big law isn't the only place lawyers make good money, it's just (mostly) the only place new graduates can make money.

I'm not saying fullride is a good idea. Or that if you get big law you'll make 150k forever. For plenty (maybe even most) sticker price is stupid. But if your career goes well it's definitely worth it.


The gigantic assumption here is that your career will go well or, even if it goes well, that you're guaranteed an income above 150K. Law is a strange profession even at the upper echelons, because the most that any of us is likely to make in our entire career is the 180k or so that we'd get as a 2nd or 3rd year associate in a big law firm (and that is already assuming that you do well in school and land such a gig, and can stomach the work for 3 years or so). After that, the ideal may be to transition in-house or into government, in which case you will probably make a stable salary for a long time. But it's not perfectly linear, and there are stories everywhere about people who were riding high at 180k in their third year and then couldn't even find a job after leaving the big law partner track. The lateral market competition is just as intense as the competition to get that associate spot right out of law school, if not moreso, and it's not even dramatically easier the lower down the Vault rankings you go precisely because there are many people in the same situation (burned out of V10-V25 firm, looking for something slightly more livable, perhaps in a city with lower COA).

Big law isn't the only place lawyers make good money, to be sure, but it is actually the easiest or most accessible way to make 6 figures as a practicing lawyer. Yes, that sounds crazy, and no, in a more big-picture sense, big law is far from easy or accessible. And yet only a fraction of those who get big law can land an in-house job, an AUSA gig, a DOJ gig, etc.

jbagelboy wrote:At what point is the debt even manageable then? When we are pushing $280K sticker at top schools, would you say $200K is a "Good Decision" at T5? or $150K? When does it become a "great investment"? its such an astronomically huge sum of cash that it's very difficult for an 0L or 1L to conceive. I think a lot of law students who are loaning out this much money and don't have parental support actually just blindly hope the federal government will relieve their loan at some point. Thus, when your in law school and you see your debt pile increasing rapidly into six figures, I bet some kids decide to go on LRAP with the justification that their loans will be covered after 10 yrs.


I would only pay sticker at HYS. And even then might not be a "great investment," it may only be a good decision. I don't even know that 200k in debt is worth it at Chicago or Columbia, although obviously the Rubenstein and Hamilton are great investments since you're only out of pocket cost of living and opportunity cost of those three years.

At any other school sticker is a bad idea.
Last edited by wisdom on Thu May 16, 2013 1:33 pm, edited 1 time in total.




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