Paying back 200K in three years?

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daisyduck
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Paying back 200K in three years?

Postby daisyduck » Thu May 07, 2009 11:30 am

so i'm borrowing 63K just for next year ( :cry: ), and over the course of next three years i'm expecting to borrow a total of 180K. with interests accrued over three years (since i'm doing private loans), i expect the debt immediately after graduation to be about 200K. (....fuck.)

i know most people plan on paying back their loans over 10-20 years, but i hate the idea of compounding interests and having the debt loom over me, so i want to pay back this loan as soon as possible, preferably in three years before babies and/or mortgages come. if i live like a student while working BigLaw (crap apt, ikea furniture, bargain shopping, etc), i think i can do it. anyone planning on doing the same? let's talk about the juiciness that is loan repayment plans.

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Cleareyes
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Re: Paying back 200K in three years?

Postby Cleareyes » Thu May 07, 2009 11:35 am

It is basically impossible to live like a student while working big law. Certain things are expected of you, and they raise your expenses significantly. You may be able to get away with a small apartment and cheap furnishings etc... but you will need to at least spend the money necessary to have a respectable outward appearance, and unless you want to be seen as anti-social and weird will need to spend money at restaurants, bars, etc... with colleagues and, possibly, clients as well. You can live more cheaply or more lavishly, but it's unlikely that you can live so frugally that you will be able to pay it all back in 3 years.

indecisive09
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Re: Paying back 200K in three years?

Postby indecisive09 » Thu May 07, 2009 11:37 am

i'll most likely be borrowing the full coa (220k) in 3 years which will be a lot more w/ interest... uh oh!

how do you think you will pay it back in 3 years? do you have a general breakdown?
also- what type of private loans are you borrowing?

aer
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Re: Paying back 200K in three years?

Postby aer » Thu May 07, 2009 11:37 am

I am planning on paying off my loans as quickly as possible, but I don't know if I can do it that quickly. Don't forget that when making Biglaw money your taxes will be higher and I think it is required that you spend a good amount of money on your wardrobe. Good luck.

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rayiner
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Re: Paying back 200K in three years?

Postby rayiner » Thu May 07, 2009 11:38 am

If you're getting federal loans at low interests rates, you won't pay THAT much in interest. $180k at 6.8% over 10 years results in about $70k of interest total. If you pay it off in 5 years, that's only about $30k in interest. 5 years is certainly doable, though. If you make $160k (= $100k after taxes) and end up paying $42k/year in loans, you'll be looking at about $4k/month after taxes, which is equivalent to a $60k/year salary in real terms.

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LawandOrder
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Re: Paying back 200K in three years?

Postby LawandOrder » Thu May 07, 2009 11:40 am

I plan to open a bakery in NYC as a front to launder money from my heroin & amphetamine operations to pay back the debt in 3 years.

Solid plan.

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Hook 'Em
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Re: Paying back 200K in three years?

Postby Hook 'Em » Thu May 07, 2009 11:41 am

One of my friends is trying to do something similar. She pays back about 4k/month, but her SO pays for a majority of their living expenses. She also lives in Dallas, so COL is significantly cheaper than many other parts of the country. I agree that it is possible, but highly improbable. Good luck.

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Cleareyes
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Re: Paying back 200K in three years?

Postby Cleareyes » Thu May 07, 2009 11:41 am

rayiner wrote:If you're getting federal loans at low interests rates, you won't pay THAT much in interest. $180k at 6.8% over 10 years results in about $70k of interest total. If you pay it off in 5 years, that's only about $30k in interest. 5 years is certainly doable, though. If you make $160k (= $100k after taxes) and end up paying $42k/year in loans, you'll be looking at about $4k/month after taxes, which is equivalent to a $60k/year salary in real terms.


You're forgetting (ignoring?) raises, which are pretty significant in real terms because your debt payments are static. I think 5 years is doable if you are dedicated.

Now all you have to do is last 5 years in big law :)

imchuckbass58
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Re: Paying back 200K in three years?

Postby imchuckbass58 » Thu May 07, 2009 11:44 am

daisyduck wrote:so i'm borrowing 63K just for next year ( :cry: ), and over the course of next three years i'm expecting to borrow a total of 180K. with interests accrued over three years (since i'm doing private loans), i expect the debt immediately after graduation to be about 200K. (....fuck.)

i know most people plan on paying back their loans over 10-20 years, but i hate the idea of compounding interests and having the debt loom over me, so i want to pay back this loan as soon as possible, preferably in three years before babies and/or mortgages come. if i live like a student while working BigLaw (crap apt, ikea furniture, bargain shopping, etc), i think i can do it. anyone planning on doing the same? let's talk about the juiciness that is loan repayment plans.


Not to be discouraging, but on one income, this is very, very, very hard, if possible at all. Perhaps if you subsist on a diet of ramen noodles and water and live in your parents' basement, but under no other circumstances.

Assume you get a biglaw job (potentially big assumption, depending on where you're going, especially with layoffs galore), and that this job pays $160k (also a big assumption, judging by the salary cuts going down right now).

Taxes immediately take you down to 100k (yes, taxes are that much, especially in jurisdictions like NY and CA where the biglaw jobs are). Assume you can live on $2500 a month by living frugally (again, big assumption since you will be living in a major metro and paying ludicrous rent) - no vacations, cooking most nights you're not in the office, brown bagging lunch, etc. You're down to $70,000.

Not sure what the terms on your loan are, but this should barely cover 1 years worth of principal + interest.

So I guess it is possible, but requires a very frugal lifestyle. If you ask me, I would say extend it out to 5 years, and it could be much more realistic. While you'd have to avoid spending too much, you could live a little.

Of course this is irrelevant if you have parents/a significant other helping you out.

pomona
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Re: Paying back 200K in three years?

Postby pomona » Thu May 07, 2009 11:53 am

daisyduck wrote:so i'm borrowing 63K just for next year ( :cry: ), and over the course of next three years i'm expecting to borrow a total of 180K. with interests accrued over three years (since i'm doing private loans), i expect the debt immediately after graduation to be about 200K. (....fuck.)

i know most people plan on paying back their loans over 10-20 years, but i hate the idea of compounding interests and having the debt loom over me, so i want to pay back this loan as soon as possible, preferably in three years before babies and/or mortgages come. if i live like a student while working BigLaw (crap apt, ikea furniture, bargain shopping, etc), i think i can do it. anyone planning on doing the same? let's talk about the juiciness that is loan repayment plans.

It might not be the smartest idea to pay back that money as soon as possible, especially if you could put your income to more productive uses (such as investing it, putting it in CDs, etc.).

For example, when I locked in my student loans for undergrad at around 4.5% interest a few years ago, I was sure to pick the slowest possible pay-back plan because, well, that interest rate is so darn low and it has been better for me to put my income elsewhere than to paying down the debt quickly. Granted interest rates are higher today, it still doesn't necessarily mean that your best bet is paying off the loans ASAP; it really depends on your alternatives.

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rayiner
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Re: Paying back 200K in three years?

Postby rayiner » Thu May 07, 2009 11:58 am

Cleareyes wrote:
rayiner wrote:If you're getting federal loans at low interests rates, you won't pay THAT much in interest. $180k at 6.8% over 10 years results in about $70k of interest total. If you pay it off in 5 years, that's only about $30k in interest. 5 years is certainly doable, though. If you make $160k (= $100k after taxes) and end up paying $42k/year in loans, you'll be looking at about $4k/month after taxes, which is equivalent to a $60k/year salary in real terms.


You're forgetting (ignoring?) raises, which are pretty significant in real terms because your debt payments are static. I think 5 years is doable if you are dedicated.

Now all you have to do is last 5 years in big law :)


Not really ignoring, just too lazy to calculate. :-P

I definitely agree 5 years is doable if you're good with your money.

2009 Prospective
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Re: Paying back 200K in three years?

Postby 2009 Prospective » Thu May 07, 2009 12:00 pm

Cleareyes wrote:It is basically impossible to live like a student while working big law. Certain things are expected of you, and they raise your expenses significantly. You may be able to get away with a small apartment and cheap furnishings etc... but you will need to at least spend the money necessary to have a respectable outward appearance, and unless you want to be seen as anti-social and weird will need to spend money at restaurants, bars, etc... with colleagues and, possibly, clients as well. You can live more cheaply or more lavishly, but it's unlikely that you can live so frugally that you will be able to pay it all back in 3 years.


I understand the outward appearance argument but as far as going out with colleagues and clients, expect a significant portion of these Biglaw outings to be charged directly to the firm card rather than straight from your pocket.

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silenziatori
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Re: Paying back 200K in three years?

Postby silenziatori » Thu May 07, 2009 12:01 pm

imchuckbass58 wrote:You're down to $70,000.

Not sure what the terms on your loan are, but this should barely cover 1 years worth of principal + interest.

So I guess it is possible, but requires a very frugal lifestyle. If you ask me, I would say extend it out to 5 years, and it could be much more realistic. While you'd have to avoid spending too much, you could live a little.

Of course this is irrelevant if you have parents/a significant other helping you out.


Assuming an 8.5 % interest rate, $ 70,000 wouldn't merely barely cover 1 year's worth of principal and interest, it would allow you to pay almost 25 % of your total principal balance. I agree 5 years would be more realistic, if you're paying around $ 70,000 annually.

2009 Prospective
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Re: Paying back 200K in three years?

Postby 2009 Prospective » Thu May 07, 2009 12:04 pm

pomona wrote:
daisyduck wrote:so i'm borrowing 63K just for next year ( :cry: ), and over the course of next three years i'm expecting to borrow a total of 180K. with interests accrued over three years (since i'm doing private loans), i expect the debt immediately after graduation to be about 200K. (....fuck.)

i know most people plan on paying back their loans over 10-20 years, but i hate the idea of compounding interests and having the debt loom over me, so i want to pay back this loan as soon as possible, preferably in three years before babies and/or mortgages come. if i live like a student while working BigLaw (crap apt, ikea furniture, bargain shopping, etc), i think i can do it. anyone planning on doing the same? let's talk about the juiciness that is loan repayment plans.

It might not be the smartest idea to pay back that money as soon as possible, especially if you could put your income to more productive uses (such as investing it, putting it in CDs, etc.).

For example, when I locked in my student loans for undergrad at around 4.5% interest a few years ago, I was sure to pick the slowest possible pay-back plan because, well, that interest rate is so darn low and it has been better for me to put my income elsewhere than to paying down the debt quickly. Granted interest rates are higher today, it still doesn't necessarily mean that your best bet is paying off the loans ASAP; it really depends on your alternatives.


It's too bad that the current federal rates are closer to 6.8% or so right now (if I remember correctly). The question is whether said investments can outperform the current higher rates.

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lawfool
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Re: Paying back 200K in three years?

Postby lawfool » Thu May 07, 2009 12:05 pm

You can also fake it till you make it. I know a lot of people who appear to earn a lot more than they do. This is America for heavens sake. If you are smart, you can keep up appearances and still bank a lot of cash.

Don't forget 2L summer as well.

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OperaAttorney
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Re: Paying back 200K in three years?

Postby OperaAttorney » Thu May 07, 2009 12:06 pm

daisyduck wrote:so i'm borrowing 63K just for next year ( :cry: ), and over the course of next three years i'm expecting to borrow a total of 180K. with interests accrued over three years (since i'm doing private loans), i expect the debt immediately after graduation to be about 200K. (....fuck.)

i know most people plan on paying back their loans over 10-20 years, but i hate the idea of compounding interests and having the debt loom over me, so i want to pay back this loan as soon as possible, preferably in three years before babies and/or mortgages come. if i live like a student while working BigLaw (crap apt, ikea furniture, bargain shopping, etc), i think i can do it. anyone planning on doing the same? let's talk about the juiciness that is loan repayment plans.


I know someone who attended Yale and paid off his debt relatively quickly. How did he do it? He hoarded his money from 1L and 2L summers and lived like a poor church rat while doing BigLaw. If I recall correctly, he only did BigLaw for 2 or 3 years. I'll check my facts and post a report soon.
Last edited by OperaAttorney on Thu May 07, 2009 12:13 pm, edited 1 time in total.

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dresden doll
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Re: Paying back 200K in three years?

Postby dresden doll » Thu May 07, 2009 12:09 pm

I do know of someone that paid off a six figure debt in the vicinity of 200k over the course of three years. She was an international student and had to take out private loans since she didn't qualify for fed aid. All was paid off before the expiry of her H1B visa (three year period; she had the option of getting another one - max is six years - but chose not to pursue it).

However, this person took out 200k for Columbia, graduated 4th in her class and snagged a V5 job in DC. (Her Christmas bonus alone was 20k and all of it went into loans). She also lived as cheaply as was humanly possible in a small, cheaply furnished flat and drove a used car.

Bottom line: It is possible but a damn long shot, particularly ITE.

trojans09
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Re: Paying back 200K in three years?

Postby trojans09 » Thu May 07, 2009 12:09 pm

Finance person here with something else to consider. Interest is completely tax-deductible. With this new administration people in BigLaw will likely be taxed at at least 50%. This means your interest tax shield cuts the effective interest rate from 6.8% to 3.4%, hardly a high cost of capital. So to sum up, you can write off interest payments which just means you will be paying a lot less taxes.

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paratactical
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Re: Paying back 200K in three years?

Postby paratactical » Thu May 07, 2009 12:11 pm

2009 Prospective wrote:I understand the outward appearance argument but as far as going out with colleagues and clients, expect a significant portion of these Biglaw outings to be charged directly to the firm card rather than straight from your pocket.


No. Not anymore. The NYC firms, at least, are severly cutting back on paying for these things.

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Kohinoor
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Re: Paying back 200K in three years?

Postby Kohinoor » Thu May 07, 2009 12:12 pm

trojans09 wrote:Finance person here with something else to consider. Interest is completely tax-deductible. With this new administration people in BigLaw will likely be taxed at at least 50%. This means your interest tax shield cuts the effective interest rate from 6.8% to 3.4%, hardly a high cost of capital. So to sum up, you can write off interest payments which just means you will be paying a lot less taxes.
What?

imchuckbass58
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Re: Paying back 200K in three years?

Postby imchuckbass58 » Thu May 07, 2009 12:15 pm

silenziatori wrote:
Assuming an 8.5 % interest rate, $ 70,000 wouldn't merely barely cover 1 year's worth of principal and interest, it would allow you to pay almost 25 % of your total principal balance. I agree 5 years would be more realistic, if you're paying around $ 70,000 annually.


Sorry, meant 1 year's worth of tuition + COL (if your goal is to pay down 3 years of law school in 3 years)

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lawfool
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Re: Paying back 200K in three years?

Postby lawfool » Thu May 07, 2009 12:15 pm

trojans09 wrote:Finance person here with something else to consider. Interest is completely tax-deductible. With this new administration people in BigLaw will likely be taxed at at least 50%. This means your interest tax shield cuts the effective interest rate from 6.8% to 3.4%, hardly a high cost of capital. So to sum up, you can write off interest payments which just means you will be paying a lot less taxes.


You can claim the deduction if all of the following apply:

1. You paid interest on a qualified student loan in tax year 2008
2. Your filing status is not married filing separately
3. Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly)
4. You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return

http://www.irs.gov/taxtopics/tc456.html

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Dick Whitman
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Re: Paying back 200K in three years?

Postby Dick Whitman » Thu May 07, 2009 12:19 pm

lawfool wrote:
trojans09 wrote:Finance person here with something else to consider. Interest is completely tax-deductible. With this new administration people in BigLaw will likely be taxed at at least 50%. This means your interest tax shield cuts the effective interest rate from 6.8% to 3.4%, hardly a high cost of capital. So to sum up, you can write off interest payments which just means you will be paying a lot less taxes.


You can claim the deduction if all of the following apply:

1. You paid interest on a qualified student loan in tax year 2008
2. Your filing status is not married filing separately
3. Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly)
4. You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return

http://www.irs.gov/taxtopics/tc456.html


There should be a phaseout, so hopefully we will still be able to deduct part of it.

trojans09
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Re: Paying back 200K in three years?

Postby trojans09 » Thu May 07, 2009 12:21 pm

You can get an accountant's help to manipulate all the deductions below that 70k level.

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Dick Whitman
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Re: Paying back 200K in three years?

Postby Dick Whitman » Thu May 07, 2009 12:22 pm

You will need to drop some serious cash on work clothes.

If you can land an SA gig both summers, you should be able to live off that money for the rest fo the year and only take out loans for your tuition. Of course, the more likely scenario is needing loans for living expenses while working a PI gig your first summer.

Unless there is an interest rate hike or prepayment penalty, there's no reason not to refinance your loans to stretch them out as long as possible, then just make extra payments.




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