IBR not all that great?

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
GettingReady2010
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Joined: Tue Jun 29, 2010 5:40 pm

IBR not all that great?

Postby GettingReady2010 » Sun Aug 15, 2010 10:47 pm

I was crunching some numbers today, and it doesn't seem like IBR is that big of a help even for those of us who are going into PI.

Using the IBR calculator, I've determined that monthly payments for the average government position will be around 500 per month. Span that out over 10 years, and you've paid 60k. On top of that, you have to pay interest/taxes. So unless you're going to an expensive/out of state school with little to no scholarship, it seems as though IBR isn't what it's cracked up to be.

Am I missing something?

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PKSebben
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Re: IBR not all that great?

Postby PKSebben » Sun Aug 15, 2010 10:48 pm

GettingReady2010 wrote:I was crunching some numbers today, and it doesn't seem like IBR is that big of a help even for those of us who are going into PI.

Using the IBR calculator, I've determined that monthly payments for the average government position will be around 500 per month. Span that out over 10 years, and you've paid 60k. On top of that, you have to pay interest/taxes. So unless you're going to an expensive/out of state school with little to no scholarship, it seems as though IBR isn't what it's cracked up to be.

Am I missing something?


No, that's right. It's really dependent on high debt to low income ratio. There is a pretty significant gap in the middle where it's helpful, but not overly so.

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skoobily doobily
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Re: IBR not all that great?

Postby skoobily doobily » Sun Aug 15, 2010 10:49 pm

GettingReady2010 wrote:I was crunching some numbers today, and it doesn't seem like IBR is that big of a help even for those of us who are going into PI.

Using the IBR calculator, I've determined that monthly payments for the average government position will be around 500 per month. Span that out over 10 years, and you've paid 60k. On top of that, you have to pay interest/taxes. So unless you're going to an expensive/out of state school with little to no scholarship, it seems as though IBR isn't what it's cracked up to be.

Am I missing something?


Welcome to 50-60% of all law school students.

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bgdddymtty
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Re: IBR not all that great?

Postby bgdddymtty » Sun Aug 15, 2010 11:20 pm

GettingReady2010 wrote:I was crunching some numbers today, and it doesn't seem like IBR is that big of a help even for those of us who are going into PI.

Using the IBR calculator, I've determined that monthly payments for the average government position will be around 500 per month. Span that out over 10 years, and you've paid 60k. On top of that, you have to pay interest/taxes. So unless you're going to an expensive/out of state school with little to no scholarship, it seems as though IBR isn't what it's cracked up to be.

Am I missing something?
Yes. If you go the PI route, any remaining amount on your loan, principal or interest, is forgiven after 10 years with no tax penalty. That still means that you'd make significantly more in BigLaw under nearly all circumstances, but the bottom line is that the program allows people who are PI-inclined to take those jobs (assuming they're willing to stick with that sector for a decade) without worrying about being crushed by school debt.

GettingReady2010
Posts: 426
Joined: Tue Jun 29, 2010 5:40 pm

Re: IBR not all that great?

Postby GettingReady2010 » Sun Aug 15, 2010 11:36 pm

bgdddymtty wrote:
GettingReady2010 wrote:I was crunching some numbers today, and it doesn't seem like IBR is that big of a help even for those of us who are going into PI.

Using the IBR calculator, I've determined that monthly payments for the average government position will be around 500 per month. Span that out over 10 years, and you've paid 60k. On top of that, you have to pay interest/taxes. So unless you're going to an expensive/out of state school with little to no scholarship, it seems as though IBR isn't what it's cracked up to be.

Am I missing something?
Yes. If you go the PI route, any remaining amount on your loan, principal or interest, is forgiven after 10 years with no tax penalty. That still means that you'd make significantly more in BigLaw under nearly all circumstances, but the bottom line is that the program allows people who are PI-inclined to take those jobs (assuming they're willing to stick with that sector for a decade) without worrying about being crushed by school debt.


You sure about this? I keep hearing people on TLS say otherwise.

On an unrelated note, isn't there some type of loan forgiveness other than IBR though the government? I'm not talking about LRAP.

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Thomas Jefferson
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Re: IBR not all that great?

Postby Thomas Jefferson » Sun Aug 15, 2010 11:41 pm

GettingReady2010 wrote:
bgdddymtty wrote:
GettingReady2010 wrote:I was crunching some numbers today, and it doesn't seem like IBR is that big of a help even for those of us who are going into PI.

Using the IBR calculator, I've determined that monthly payments for the average government position will be around 500 per month. Span that out over 10 years, and you've paid 60k. On top of that, you have to pay interest/taxes. So unless you're going to an expensive/out of state school with little to no scholarship, it seems as though IBR isn't what it's cracked up to be.

Am I missing something?
Yes. If you go the PI route, any remaining amount on your loan, principal or interest, is forgiven after 10 years with no tax penalty. That still means that you'd make significantly more in BigLaw under nearly all circumstances, but the bottom line is that the program allows people who are PI-inclined to take those jobs (assuming they're willing to stick with that sector for a decade) without worrying about being crushed by school debt.


You sure about this? I keep hearing people on TLS say otherwise.

On an unrelated note, isn't there some type of loan forgiveness other than IBR though the government? I'm not talking about LRAP.


I think you're confusing the public service IBR loan forgiveness and private sector IBR loan forgiveness. The public service loan forgiveness applies after making 120 monthly IBR payments (need not be consecutive) while in public service work. The private sector forgiveness applies after 25 years of IBR payments. The private sector forgiveness is taxed under the current writing of the law, but the public service forgiveness is not. Under both forgiveness plans, any remaining principal and interest are forgiven at the appropriate time.

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legalease9
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Re: IBR not all that great?

Postby legalease9 » Mon Aug 16, 2010 10:22 am

It depends where you are going to school, but since going to a law school at sticker can run you 190-210k (including COL), IBRing it down to 60 k is a pretty sweet deal. It certainly is not supposed to give you the equivilent of a big law salary though. It is to allow you to pursue low paying work without suffocating yourself in debt. You are still making a financial sacrifice (assuming you could have gotten big law), just not as much of one as without IBR. Its about what you want to do with your legal career, not wealth maximization (the latter of which Big law is the one and only answer).




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