Pay as You Earn on Big Law Salary Forum

[20141023]

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[A. Nony Mouse]

I wouldn't count on the tax bomb being magically fixed. Plenty of conservative people hate the idea that students don't repay loans. Right now interest rates are still going to double unless congress takes action. What makes you think they will suddenly go into the tax forgiveness business? Maybe this has been discussed and I missed it.

There's a bill going through that will fix the tax bomb - I say "going through" because it's not passed yet, but people have been talking about it as having bi-partisan support. So to that extent, people aren't making up some kind of a wishful-thinking-inspired solution.

I haven't been paying much attention to the bill, but when you say the tax bomb will be "fixed," do you mean "eliminated," or what are they proposing to do with it?

Hmmm. I thought you were one of the people posting about it? Maybe that was Desert Fox... Anyway, the goal is to eliminate it: http://bucks.blogs.nytimes.com/2013/04/ ... dent-debt/

I'm quite sure I remember someone posting a link somewhere here to the actual bill, but I can't find that on a quick search. So who knows how close to passing it is - I just thought it was promising that eliminating the tax bomb had reached the point of being written into a bill, rather than just being talked about.

(But I'm not PAYE-eligible and am gunning for PSLF, so haven't paid that close attention.)

[DorthyMantooth]

Does anyone have a link to the bill?

[20141023]

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[20141023]

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[A. Nony Mouse]

Yeah, I've read that article before, but I haven't actually looked at the actual bill to see exactly what they're proposing. Either way, I am concerned that although everything is fine now, there will be a lot of opposition when biglaw lawyers or successful doctors start having their loans forgiven because they took advantage of PAYE by only making minimal monthly payments. I mean, for those of us about to go to law school, there are still 23 years in which things could change for the worse.

No, I haven't read the bill either (I remember following the link and glancing at the headings, so I'm quite sure it exists but I don't know the details), and yes, it's hard to know what will happen. I tend to be someone who says, "I can't see the future so I can only decide based on what we know now"; but I also don't think anyone - INCLUDING the government - knows what this will look like once it comes time to actually forgive the debts. Granted, I've seen people make calculations suggesting that under PAYE even with biglaw/doctors buying in, PAYE turns out more economical for the government (don't remember at all how the numbers work, just that people here have argued it's not such a catastrophe for the government as it seems), but there's also an intuitive thing where people who make a lot of money not paying back all their loans just seems wrong.

I mean, this is really all moot for me, because I'm not in biglaw and I just can't afford the flat repayments, so it's not really a choice I can agonize over. (My debt's also smaller - ~$100K, though it's sad that that's "smaller" than anything.) And I kinda think that if I were in biglaw, I'd just make the regular repayments and be done with it. But it's tough given the potentially limited shelf-life in biglaw (the incentives in this profession are really screwed up sometimes).

(Thanks for the link!)

[20141023]

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[NYstate]

Refer to page 77 of this... it also discusses the taxation of forgiven loans.

It is somewhere in the presidents proposed budget for 2014.

That link is great. Something I didn't know was that the loan is taxable if it is discharged because you die. I think making sure you have a decent life insurance policy might be prudent if the tax bomb doesn't go away. You don't want to leave your eventual family with nothing.

I knew the loans were discharged by death but didn't make the connection there would be a tax against whatever estate you are trying to leave.

Even if it is taxed, how much would it be. I know less about estate tax then I do income tax.

[DorthyMantooth]

Is this it? H.R.1330- http://beta.congress.gov/bill/113th-con ... -bill/1330

[quakeroats]

The New America Foundation has an Excel calculator you might find helpful: http://edmoney.newamerica.net/sites/new ... 20IBR.xlsx

[Tiago Splitter]

Granted, I've seen people make calculations suggesting that under PAYE even with biglaw/doctors buying in, PAYE turns out more economical for the government (don't remember at all how the numbers work, just that people here have argued it's not such a catastrophe for the government as it seems), but there's also an intuitive thing where people who make a lot of money not paying back all their loans just seems wrong.

Both good points. People will hear that individuals making 200K+ are going to get their loans forgiven and freak out. But rational people will realize that anyone making 200K+ for 20 years will have the debt paid off before forgiveness kicks in (unless their debt is ridiculously sky high, like they went to both medical school and law school) and will end up paying a lot more to the government than if they had just aggressively paid down their loans during the first 5-6 years out of school.

[Revolver066]

Granted, I've seen people make calculations suggesting that under PAYE even with biglaw/doctors buying in, PAYE turns out more economical for the government (don't remember at all how the numbers work, just that people here have argued it's not such a catastrophe for the government as it seems), but there's also an intuitive thing where people who make a lot of money not paying back all their loans just seems wrong.

Both good points. People will hear that individuals making 200K+ are going to get their loans forgiven and freak out. But rational people will realize that anyone making 200K+ for 20 years will have the debt paid off before forgiveness kicks in (unless their debt is ridiculously sky high, like they went to both medical school and law school) and will end up paying a lot more to the government than if they had just aggressively paid down their loans during the first 5-6 years out of school.

So...if one makes 200k for 20 years, that'd be roughly what 400k paid off. How much is one paying back even in 5-6 years if the sticker price is around 260k? I'd imagine its pretty close to that 400k number still, no?

[quakeroats]

Granted, I've seen people make calculations suggesting that under PAYE even with biglaw/doctors buying in, PAYE turns out more economical for the government (don't remember at all how the numbers work, just that people here have argued it's not such a catastrophe for the government as it seems), but there's also an intuitive thing where people who make a lot of money not paying back all their loans just seems wrong.

Both good points. People will hear that individuals making 200K+ are going to get their loans forgiven and freak out. But rational people will realize that anyone making 200K+ for 20 years will have the debt paid off before forgiveness kicks in (unless their debt is ridiculously sky high, like they went to both medical school and law school) and will end up paying a lot more to the government than if they had just aggressively paid down their loans during the first 5-6 years out of school.

So...if one makes 200k for 20 years, that'd be roughly what 400k paid off. How much is one paying back even in 5-6 years if the sticker price is around 260k? I'd imagine its pretty close to that 400k number still, no?

Use the calculator from my last post.

[Stinson]

Granted, I've seen people make calculations suggesting that under PAYE even with biglaw/doctors buying in, PAYE turns out more economical for the government (don't remember at all how the numbers work, just that people here have argued it's not such a catastrophe for the government as it seems), but there's also an intuitive thing where people who make a lot of money not paying back all their loans just seems wrong.

Both good points. People will hear that individuals making 200K+ are going to get their loans forgiven and freak out. But rational people will realize that anyone making 200K+ for 20 years will have the debt paid off before forgiveness kicks in (unless their debt is ridiculously sky high, like they went to both medical school and law school) and will end up paying a lot more to the government than if they had just aggressively paid down their loans during the first 5-6 years out of school.

I think our association with doctors will help us lawyer folk. If they hear "lawyer is making six figures and getting his loans forgiven" people will freak, but if it's a doctor they'll like it.

[TTRansfer]

Not to necro an old thread but I didn't want to start a new one . . .

PAYE is specifically limited to those who have not had a federal student loan prior to 2007, correct?

I had a private loan taken out for undergrad in 2006. Parents ended up paying for it for me (taking it from me and the balance is now 0, regardless).

I had my first law school dispersement in August of 2011.

Eligible?

[quakeroats]

Not to necro an old thread but I didn't want to start a new one . . .

PAYE is specifically limited to those who have not had a federal student loan prior to 2007, correct?

I had a private loan taken out for undergrad in 2006. Parents ended up paying for it for me (taking it from me and the balance is now 0, regardless).

I had my first law school dispersement in August of 2011.

Eligible?

Possibly. When did your parents pay it off? From memory, my take on the reg was that you'd be disqualified if you had an old loans outstanding at the moment you take out a loan you'd like to use PAYE for. If it's fully paid off, I suspect your loan servicer won't know the different unless there's some other organization out there that checks eligibility.

[TTRansfer]

Not to necro an old thread but I didn't want to start a new one . . .

PAYE is specifically limited to those who have not had a federal student loan prior to 2007, correct?

I had a private loan taken out for undergrad in 2006. Parents ended up paying for it for me (taking it from me and the balance is now 0, regardless).

I had my first law school dispersement in August of 2011.

Eligible?

Possibly. When did your parents pay it off? From memory, my take on the reg was that you'd be disqualified if you had an old loans outstanding at the moment you take out a loan you'd like to use PAYE for. If it's fully paid off, I suspect your loan servicer won't know the different unless there's some other organization out there that checks eligibility.

Paid off a while before the loan was taken out. It was a private loan, though, for the record (through my bank).

[thelawyler]

Has anybody heard where this is going? I did some rough calculations and the Net Present Value of the total payout from aggressively paying my debt down in 5-6 years is almost identical to me doing a 20 year repayment + forgiveness, except that I can invest that money and get a return on it over that 15 years (and thus make more than without PAYE) + enjoy a higher quality of life in my 20s and early 30s.

Just need to know if forgiveness is still realistic and if the program will indeed extend to before 2007 date. Otherwise I'm back to the rapid repay.

[09042014]

Has anybody heard where this is going? I did some rough calculations and the Net Present Value of the total payout from aggressively paying my debt down in 5-6 years is almost identical to me doing a 20 year repayment + forgiveness, except that I can invest that money and get a return on it over that 15 years (and thus make more than without PAYE) + enjoy a higher quality of life in my 20s and early 30s.

Just need to know if forgiveness is still realistic and if the program will indeed extend to before 2007 date. Otherwise I'm back to the rapid repay.

As far as I know it's still just in Obama's budget. We'll see what happens. I'm in the same boat you are.

At a certain income I'll end up paying more on PAYE but it won't be much. Considering having Fuck You money from big law in 2-3 years instead of 7-8? Well worth the chance of paying a minor amount more.

[thelawyler]

Has anybody heard where this is going? I did some rough calculations and the Net Present Value of the total payout from aggressively paying my debt down in 5-6 years is almost identical to me doing a 20 year repayment + forgiveness, except that I can invest that money and get a return on it over that 15 years (and thus make more than without PAYE) + enjoy a higher quality of life in my 20s and early 30s.

Just need to know if forgiveness is still realistic and if the program will indeed extend to before 2007 date. Otherwise I'm back to the rapid repay.

As far as I know it's still just in Obama's budget. We'll see what happens. I'm in the same boat you are.

At a certain income I'll end up paying more on PAYE but it won't be much. Considering having Fuck You money from big law in 2-3 years instead of 7-8? Well worth the chance of paying a minor amount more.

Yeah. With my debt load of 290k, I'll have paid about 60k more total with PAYE on average with projected future earnings, but that 60k~ discounted at 3% inflation over 15 years is actually not that much more when the money that I didn't pay into debt is accumulating 6-8% on avg in the market through 401k's, etc.