How much debt is too much?

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bellbane12
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How much debt is too much?

Postby bellbane12 » Wed Feb 20, 2013 11:02 pm

I'm considering a tier 1 state school. I can attend with in state tuition, live at home, and my parents have agreed to support me. I expect to accrue 60-70K of debt by the time I graduate.
The employment score is over 50%, and the school does well regionally. I figure as long as I stay in the top half of the class I can find a good legal job.
Does this seem like an ok investment? Is 60-70k hard to pay off in reality?

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nickb285
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Re: How much debt is too much?

Postby nickb285 » Wed Feb 20, 2013 11:45 pm

First, don't make any assumptions about being in the top of the class. The difference between top 60% and top 40% is pretty small.

Second, use this: http://www.finaid.org/calculators/loanpayments.phtml . Nobody here can decide how much debt constitutes "too much," but this will tell you how much your payments would be. For reference, if you get mostly Stafford loans with a little bit extra via PLUS loans, and borrow $70k, you're looking at a bit over $800/month. That means that you'll need to make an extra $14-15k a year (before taxes) above your cost of living in order to cover your loan payments on a ten-year term. So if you would feel comfortable living on $40k a year, you'll need to make about $55k/year with that amount of debt.

I'm looking at borrowing a similar amount, but I currently make around $30k a year and I feel alright living at that level of income, so I figure if I can make at least $45k a year out of school I'll be fine. The odds of making that much mean it's a bet I'm willing to take to pursue what I want to do; your mileage may vary.

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quakeroats
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Re: How much debt is too much?

Postby quakeroats » Wed Feb 20, 2013 11:57 pm

bellbane12 wrote:I'm considering a tier 1 state school. I can attend with in state tuition, live at home, and my parents have agreed to support me. I expect to accrue 60-70K of debt by the time I graduate.
The employment score is over 50%, and the school does well regionally. I figure as long as I stay in the top half of the class I can find a good legal job.
Does this seem like an ok investment? Is 60-70k hard to pay off in reality?


Borrow the maximum amount possible. Under the new IBR, anything you borrow is at worst a 10% tax on your income. The rest is forgiven in 20 years. If you make the sort of salary that's typical of a tier-1 state school, it's quite possible you'll come out ahead and never have to pay back the majority of what you borrow. If you discount the payments you'll eventually make and compare it with what you'll get now, you're quite likely to come out ahead. As of now, the forgiven debt is included in gross income, but I doubt that will last.

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guano
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Re: How much debt is too much?

Postby guano » Thu Feb 21, 2013 8:05 am

Also keep in mind that 50% employment score doesn't mean the top half. Yes, being below median will mean struggling, but that doesn't mean top half is safe.
If there's nothing wrong with you, top quarter should be relatively secure, but, there will always be people who get jobs through connections, have incredible work experience, or are great at hustling, and get jobs despite being bottom half (or even bottom quarter).

For some examples:
There's a guy in my section whose family has a small law firm, so despite him being in the bottom quarter, he's got a job
There's another guy who's rich, and he's regularly meeting partners outside of school, because either his family or their friends are arranging it. He'll probably snag something far above his grade level

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Tom Joad
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Re: How much debt is too much?

Postby Tom Joad » Thu Feb 21, 2013 8:38 am

quakeroats wrote:
bellbane12 wrote:I'm considering a tier 1 state school. I can attend with in state tuition, live at home, and my parents have agreed to support me. I expect to accrue 60-70K of debt by the time I graduate.
The employment score is over 50%, and the school does well regionally. I figure as long as I stay in the top half of the class I can find a good legal job.
Does this seem like an ok investment? Is 60-70k hard to pay off in reality?


Borrow the maximum amount possible. Under the new IBR, anything you borrow is at worst a 10% tax on your income. The rest is forgiven in 20 years. If you make the sort of salary that's typical of a tier-1 state school, it's quite possible you'll come out ahead and never have to pay back the majority of what you borrow. If you discount the payments you'll eventually make and compare it with what you'll get now, you're quite likely to come out ahead. As of now, the forgiven debt is included in gross income, but I doubt that will last.

Are you crazy, dude? There is no guarantee IBR is going to exist in 20 years or in 2 years. Not to mention having a huge amount student loans for much of your adult life will make getting credit tough. And the tax bomb you think is going away. This is absurdly dangerous talk.

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hephaestus
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Re: How much debt is too much?

Postby hephaestus » Thu Feb 21, 2013 9:10 am

Tom Joad wrote:
quakeroats wrote:
bellbane12 wrote:I'm considering a tier 1 state school. I can attend with in state tuition, live at home, and my parents have agreed to support me. I expect to accrue 60-70K of debt by the time I graduate.
The employment score is over 50%, and the school does well regionally. I figure as long as I stay in the top half of the class I can find a good legal job.
Does this seem like an ok investment? Is 60-70k hard to pay off in reality?


Borrow the maximum amount possible. Under the new IBR, anything you borrow is at worst a 10% tax on your income. The rest is forgiven in 20 years. If you make the sort of salary that's typical of a tier-1 state school, it's quite possible you'll come out ahead and never have to pay back the majority of what you borrow. If you discount the payments you'll eventually make and compare it with what you'll get now, you're quite likely to come out ahead. As of now, the forgiven debt is included in gross income, but I doubt that will last.

Are you crazy, dude? There is no guarantee IBR is going to exist in 20 years or in 2 years. Not to mention having a huge amount student loans for much of your adult life will make getting credit tough. And the tax bomb you think is going away. This is absurdly dangerous talk.

Agreed TJ. Don't be so reckless. Also, it would be helpful to know the exact school. 60k is much closer to 90k when you consider interest.

Mal Reynolds
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Re: How much debt is too much?

Postby Mal Reynolds » Thu Feb 21, 2013 9:13 am

quakeroats wrote:
bellbane12 wrote:I'm considering a tier 1 state school. I can attend with in state tuition, live at home, and my parents have agreed to support me. I expect to accrue 60-70K of debt by the time I graduate.
The employment score is over 50%, and the school does well regionally. I figure as long as I stay in the top half of the class I can find a good legal job.
Does this seem like an ok investment? Is 60-70k hard to pay off in reality?


Borrow the maximum amount possible. Under the new IBR, anything you borrow is at worst a 10% tax on your income. The rest is forgiven in 20 years. If you make the sort of salary that's typical of a tier-1 state school, it's quite possible you'll come out ahead and never have to pay back the majority of what you borrow. If you discount the payments you'll eventually make and compare it with what you'll get now, you're quite likely to come out ahead. As of now, the forgiven debt is included in gross income, but I doubt that will last.


And Quaker oats makes his triumphant return.

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quakeroats
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Re: How much debt is too much?

Postby quakeroats » Thu Feb 21, 2013 2:38 pm

Tom Joad wrote:
quakeroats wrote:
bellbane12 wrote:I'm considering a tier 1 state school. I can attend with in state tuition, live at home, and my parents have agreed to support me. I expect to accrue 60-70K of debt by the time I graduate.
The employment score is over 50%, and the school does well regionally. I figure as long as I stay in the top half of the class I can find a good legal job.
Does this seem like an ok investment? Is 60-70k hard to pay off in reality?


Borrow the maximum amount possible. Under the new IBR, anything you borrow is at worst a 10% tax on your income. The rest is forgiven in 20 years. If you make the sort of salary that's typical of a tier-1 state school, it's quite possible you'll come out ahead and never have to pay back the majority of what you borrow. If you discount the payments you'll eventually make and compare it with what you'll get now, you're quite likely to come out ahead. As of now, the forgiven debt is included in gross income, but I doubt that will last.

Are you crazy, dude? There is no guarantee IBR is going to exist in 20 years or in 2 years. Not to mention having a huge amount student loans for much of your adult life will make getting credit tough. And the tax bomb you think is going away. This is absurdly dangerous talk.


1. There aren't many guarantees in life, and it's time you get used to it. Even affirmative guarantees depend on the strength of the guarantor. Guarantees merely reduce risk (if they even do that), the don't eliminate it. IBR could be removed tomorrow, but so what? The better question is how likely is it that it will go away (and not be replaced by something better)? My read on that is that it's unlikely to go away. If anything, something even better is probably coming in the next few years as the student loan bubble continues to pop: --LinkRemoved--

2. Having lots of student-loan debt doesn't do much to one's ability to get credit as long as you pay your bills on time and don't use a high percentage of your revolving accounts.

3. For removing the inclusion of forgiven student loan debt in gross income, the government has little choice in the matter. They've already done it for those working for PI/Government. The number of voters that'll have $100k+ in forgiven-loan tax bills in 20 years if this isn't changed is numbered in the millions. That's a political problem for which there's one clear solution.

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bellbane12
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Re: How much debt is too much?

Postby bellbane12 » Sat Feb 23, 2013 10:55 am

This thread took an interesting turn. For the record, I'll be looking to borrow as little as possible, because there's always a chance that I won't find any job coming out of law school.
I'm interested in PI and will be looking at LRAP. Problem is, the school I'm talking about, University of Washington, doesn't really have LRAP. I'm considering out of state schools that would cost me more to attend, but do have good LRAPs.

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cinephile
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Re: How much debt is too much?

Postby cinephile » Sat Feb 23, 2013 12:13 pm

guano wrote:Also keep in mind that 50% employment score doesn't mean the top half. Yes, being below median will mean struggling, but that doesn't mean top half is safe.
If there's nothing wrong with you, top quarter should be relatively secure, but, there will always be people who get jobs through connections, have incredible work experience, or are great at hustling, and get jobs despite being bottom half (or even bottom quarter).

For some examples:
There's a guy in my section whose family has a small law firm, so despite him being in the bottom quarter, he's got a job
There's another guy who's rich, and he's regularly meeting partners outside of school, because either his family or their friends are arranging it. He'll probably snag something far above his grade level


I would like to second this.

But it's not just the people with connections who'll get jobs. At my school, pretty much everyone above a 3.0 (which isn't hard to get, below a 3.0 puts you at the very bottom) but below the top 1/3 is treated as functionally the same. Personality and fit matters here more than anything.




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