Does debt really matter with IBR? Forum

[cavebat2000]

I have heard many people talk about law school debt as crushing, or an unforgiving ball and chain that ties you to do biglaw, else you'd go bankrupt. But I get the impression many of these people who claim this are not considering the benefits of IBR.

If, under income based repayment, I am paying only 15% of my income, with the debt forgivable after 25 years or 10 years if you are in public interest, does debt really even matter? So what if I go into $200,000 in debt and only get a job that pays $60,000 per year? I'd only be paying 15% of my income? Hell, it would be 10% if Obama passes the bill.

I have a free ride offer to a t25 versus a 50% tuition (33% total COA) scholarship offer at a t-14 school. If I want to do public interest anyway isn't a HUGE advantage to ignore the debt and go to the better school to get the better job opportunities and national portability?

I would really like to hear people's thoughts on this because I am finding this to be a rather difficult part of my law school decision.

[General Tso]

you have to at least consider the possibility that you won't get IBR for some reason (govt budget problems --> axe spending)

for all you know, you may run up $300k debt only to find Mrs. Palin slashing your benefits 4 years from now. IBR =/= a license to go crazy racking up debt

[cavebat2000]

Considering IBR passed under Bush II and it appears that it might even expand under Obama, it seems to be pretty darn solid, politically speaking.

Also, I believe it actually saves the gov't money in the long run so their doesn't seem to be a really compelling reason why gov't would get rid of it.

But yes I agree that a Palin administration would be catostrophic for a number of reasons.

[Interminable_Waiting]

I've been thinking about this lately as well, and I am coming to a similar conclusion as the OP.

While there is certainly some risk that the gov't will axe it, it seems very minimal to me, and when you add in the better job prospects associated with going to a better school + better LRAP programs the higher-ranked schools generally have, I am starting to wonder why debt scares people so much.

[ravens20]

VanWinkle made a post along these lines in another recent thread. He talked about the advantages of being at a top 14 law school for public interest (he goes to UVA I think) and then how the extra debt really doesn't matter with the 10 year IBR payments. This doesn't even factor LRAP, which could provide additional assistance (though it depends on the terms of the program).

[Z3RO]

There's no way to know if IBR is going to be around in its present form for 20 years, even if it's currently on sound footing.

People are afraid of debt, because $200k earns $1,416 in interest per month. That's a ton of money, and paying all that would make your debt not one penny smaller.

I take it pretty seriously. I have a coworker with private loans from Sallie Mae from undergrad that are about 110k. She's leaving the city to move back with her parents, because there's no way that she can afford to live on her own while paying even the interest on her loan back.

I would say that a school's LRAP is probably a safe thing to rely on, but I wouldn't stake my whole future on IBR.

[EijiMiyake]

There's no way to know if IBR is going to be around in its present form for 20 years, even if it's currently on sound footing.

People are afraid of debt, because $200k earns $1,416 in interest per month. That's a ton of money, and paying all that would make your debt not one penny smaller.

I take it pretty seriously. I have a coworker with private loans from Sallie Mae from undergrad that are about 110k. She's leaving the city to move back with her parents, because there's no way that she can afford to live on her own while paying even the interest on her loan back.

I would say that a school's LRAP is probably a safe thing to rely on, but I wouldn't stake my whole future on IBR.

The other thing is that none of us have been lawyers before - are you absolutely, positively sure that you will be working in law, let alone in public interest law, in 10 years?

[scribelaw]

Well if you take a job in the private sector and use IBR, you'll be paying for 25 years. That's a long time to have debt stay with you. Most people, especially those in BigLaw, will want to get out from under those loans in 10 years or less and IBR won't be a factor. Thus, debt still matters greatly.

[vanwinkle]

for all you know, you may run up $300k debt only to find Mrs. Palin slashing your benefits 4 years from now. IBR =/= a license to go crazy racking up debt

The more obsessed with popularity a politician is the less likely they are to slash popular programs. Politicians go after "pork", but they don't go after programs that are easily construed as helping poor people gain an education and climb the class ladder. There's no way Palin would touch this. She'd be no different than George W. Bush; a lot of talk about smaller government, while growing it even more than the Democrats do.

[ravens20]

There's no way to know if IBR is going to be around in its present form for 20 years, even if it's currently on sound footing.

People are afraid of debt, because $200k earns $1,416 in interest per month. That's a ton of money, and paying all that would make your debt not one penny smaller.

I take it pretty seriously. I have a coworker with private loans from Sallie Mae from undergrad that are about 110k. She's leaving the city to move back with her parents, because there's no way that she can afford to live on her own while paying even the interest on her loan back.

I would say that a school's LRAP is probably a safe thing to rely on, but I wouldn't stake my whole future on IBR.

The other thing is that none of us have been lawyers before - are you absolutely, positively sure that you will be working in law, let alone in public interest law, in 10 years?

Well the IBR (10 year) thing is for ANY public interest job. That means government work, teaching at a public school, etc. It doesn't have to be law. But most LRAPs usually do have a "law-related job" component to them.

[shaville]

Does IBR cover all loans taken out for school - or only certain kinds? The IBR site refers only to "federal loans." Is it possible to take out 200k in federal loans? Don't you need to take them out from private lenders as well?

[ravens20]

Does IBR cover all loans taken out for school - or only certain kinds? The IBR site refers only to "federal loans." Is it possible to take out 200k in federal loans? Don't you need to take them out from private lenders as well?

Yes there are federal loans that allow you to take that much. The GradPlus loans will usually cover the entire cost of attendance of a professional/graduate school. Any private loans though won't be covered by the IBR.

[iminlstrick]

IBR only covers certain federal loans; any private loans you take out to supplement federal loans or cover other costs won't fall under IBR and you're still responsible for them.

[sumus romani]

Hey, under IBR does the money each year above what you pay go away, or does is just stack up on top of your other debt? If it stacks up, I understand that the debt can still be relieved after a couple of decades. But lots of people will get raises throughout their careers. So, does this mean that one who gets substantial raises will end up paying the debt back plus interest anyways? If this were so, it would seem that IBR is mostly in place to help you get through the early tough years than it is to make law school affordable and enable a decent quality of life.

[ravens20]

for all you know, you may run up $300k debt only to find Mrs. Palin slashing your benefits 4 years from now. IBR =/= a license to go crazy racking up debt

The more obsessed with popularity a politician is the less likely they are to slash popular programs. Politicians go after "pork", but they don't go after programs that are easily construed as helping poor people gain an education and climb the class ladder. There's no way Palin would touch this. She'd be no different than George W. Bush; a lot of talk about smaller government, while growing it even more than the Democrats do.

I hope you're right but I wonder though how popular these programs really are. How much of an outcry would there really be if they were taken away? Sure anyone can use them but how many people besides prospective law students would even consider going $200,000 in debt for a $50,000 public interest job such that they would rely on the IBR? My biggest fear is that the program will be cut if cuts need to be made, and only those of us who made use of the IBR will care.

[ravens20]

Hey, under IBR does the money each year above what you pay go away, or does is just stack up on top of your other debt? If it stacks up, I understand that the debt can still be relieved after a couple of decades. But lots of people will get raises throughout their careers. So, does this mean that one who gets substantial raises will end up paying the debt back plus interest anyways? If this were so, it would seem that IBR is mostly in place to help you get through the early tough years than it is to make law school affordable and enable a decent quality of life.

The debt keeps accumulating technically through interest...but at the end of 25 years (10 for public interest) the remaining balance is supposed to be forgiven. For the public interest folk who are paying full tuition to attend law school, these 10 years might not even pay off the interest on the loans. Under Obama's plan, the 25 years would be cut down to 20 years, and the required portion of one's salary that he/she would have to pay back per year would go down from 15% to 10%. I'm not sure what raises have to do with anything...you are paying back more money but the same percentage of the salary (say 10% throughout). At least that's how I understand it.

[ggocat]

Also, I believe it actually saves the gov't money in the long run so their doesn't seem to be a really compelling reason why gov't would get rid of it.

How does it save the gov't money?

[Onion]

for all you know, you may run up $300k debt only to find Mrs. Palin slashing your benefits 4 years from now. IBR =/= a license to go crazy racking up debt

The more obsessed with popularity a politician is the less likely they are to slash popular programs. Politicians go after "pork", but they don't go after programs that are easily construed as helping poor people gain an education and climb the class ladder. There's no way Palin would touch this. She'd be no different than George W. Bush; a lot of talk about smaller government, while growing it even more than the Democrats do.

I hope you're right but I wonder though how popular these programs really are. How much of an outcry would there really be if they were taken away? Sure anyone can use them but how many people besides prospective law students would even consider going $200,000 in debt for a $50,000 public interest job such that they would rely on the IBR? My biggest fear is that the program will be cut if cuts need to be made, and only those of us who made use of the IBR will care.

I have a hard time believing it would be "cut" rather then just discontinued. I feel like the end result would be that loans already taken out during a period when IBR was offered would still be forgiven in 25 (or 10) years, and that students who missed a certain deadline would not be eligible for the IBR program. HOWEVER, I would not recommend relying on a program such as IBR as it could easily be done away with and there would be (as others have stated on this board) little to no public outcry other than by those who are already enrolled in the program.

[Interminable_Waiting]

With few exceptions, I am pretty sure that people can take out all the money they will need in Grad Plus and Stafford loans. I would definitely stay away from private loans.

[09042014]

Relying on IBR and LRAP for PI is fine.

But replying on IBR for working in shit law is a horrible plan. You'll be paying 15% for 25 years. But during that 25 years interests compounds and your 150K loan turns into 400K. Lets say 15 years down the road you and your wife start making good cash, you'll actually have to pay that 400K back.

Do not rely on IBR to pay off your loans for private sector work. Its really a last resort type of thing.

[ravens20]

I hope you're right but I wonder though how popular these programs really are. How much of an outcry would there really be if they were taken away? Sure anyone can use them but how many people besides prospective law students would even consider going $200,000 in debt for a $50,000 public interest job such that they would rely on the IBR? My biggest fear is that the program will be cut if cuts need to be made, and only those of us who made use of the IBR will care.

I have a hard time believing it would be "cut" rather then just discontinued. I feel like the end result would be that loans already taken out during a period when IBR was offered would still be forgiven in 25 (or 10) years, and that students who missed a certain deadline would not be eligible for the IBR program. HOWEVER, I would not recommend relying on a program such as IBR as it could easily be done away with and there would be (as others have stated on this board) little to no public outcry other than by those who are already enrolled in the program.

Yea it seems that they would honor the original IBR commitments, but even the chance of a cut is a huge gamble to take if one is banking entirely on IBR. Luckily for some of us of the public interest persuasion, there is still LRAP.

[guardgrl2013]

I keep trying to figure out what happens to your loan payments under IBR if you become unemployed at some point? 15% of nothing is nothing.

Also, it seems like I've heard that if you can't get a job out of law school, then you will have to pay back your loans outside of IBR until you do find a job. Anyone know specifics around that?

[sumus romani]

Thanks!

Hey, under IBR does the money each year above what you pay go away, or does is just stack up on top of your other debt? If it stacks up, I understand that the debt can still be relieved after a couple of decades. But lots of people will get raises throughout their careers. So, does this mean that one who gets substantial raises will end up paying the debt back plus interest anyways? If this were so, it would seem that IBR is mostly in place to help you get through the early tough years than it is to make law school affordable and enable a decent quality of life.

The debt keeps accumulating technically through interest...but at the end of 25 years (10 for public interest) the remaining balance is supposed to be forgiven. For the public interest folk who are paying full tuition to attend law school, these 10 years might not even pay off the interest on the loans. Under Obama's plan, the 25 years would be cut down to 20 years, and the required portion of one's salary that he/she would have to pay back per year would go down from 15% to 10%. I'm not sure what raises have to do with anything...you are paying back more money but the same percentage of the salary (say 10% throughout). At least that's how I understand it.

[Grizz]

Relying on IBR and LRAP for PI is fine.

But replying on IBR for working in shit law is a horrible plan. You'll be paying 15% for 25 years. But during that 25 years interests compounds and your 150K loan turns into 400K. Lets say 15 years down the road you and your wife start making good cash, you'll actually have to pay that 400K back.

Do not rely on IBR to pay off your loans for private sector work. Its really a last resort type of thing.

+1. Also, you you think 15%ish off the top of your income isn't that much money, well, its a bunch. Don't be fooled.

[swc65]

for all you know, you may run up $300k debt only to find Mrs. Palin slashing your benefits 4 years from now. IBR =/= a license to go crazy racking up debt

The more obsessed with popularity a politician is the less likely they are to slash popular programs. Politicians go after "pork", but they don't go after programs that are easily construed as helping poor people gain an education and climb the class ladder. There's no way Palin would touch this. She'd be no different than George W. Bush; a lot of talk about smaller government, while growing it even more than the Democrats do.

I hope you're right but I wonder though how popular these programs really are. How much of an outcry would there really be if they were taken away? Sure anyone can use them but how many people besides prospective law students would even consider going $200,000 in debt for a $50,000 public interest job such that they would rely on the IBR? My biggest fear is that the program will be cut if cuts need to be made, and only those of us who made use of the IBR will care.

It probably doesn't matter how popular they are or if they survive. Even if they axe the entire program after you go into debt it shouldn't affect you. That's why most federal loan conditions are tied to the date the loans were issued i.e. 6.8% interest for loans dispersed between date x and date y and then another interest rate for loans dispersed in other periods. The terms and conditions of the loan usually remain the same for loans already issued. Generally, only new loans would be affected after a change in interest rates or repayment options.

The government usually will not just change the terms of the loans in the middle of your repayment.