USF - worth it for $120,000 in loans?

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General Tso
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Re: USF - worth it for $120,000 in loans?

Postby General Tso » Wed Apr 29, 2009 1:29 pm

Kohinoor wrote:The initial premise of swheat was "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k." Now we've narrowed it down to "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k and find a job in an industry with a compensation structure where annual raises of roughly 4% are the norm". Now, biglaw doesn't work that way period and I'm not sure which jobs that require a JD do work that way.


Really? Biglaw doesnt work that way, huh?
http://www.infirmation.com/shared/lss/o ... r_id=XX762

Those salary increases range from 5.1% to 12% per year.

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Re: USF - worth it for $120,000 in loans?

Postby Kohinoor » Wed Apr 29, 2009 1:36 pm

swheat wrote:
Kohinoor wrote:The initial premise of swheat was "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k." Now we've narrowed it down to "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k and find a job in an industry with a compensation structure where annual raises of roughly 4% are the norm". Now, biglaw doesn't work that way period and I'm not sure which jobs that require a JD do work that way.


Really? Biglaw doesnt work that way, huh?
http://www.infirmation.com/shared/lss/o ... r_id=XX762

Those salary increases range from 5.1% to 12% per year.

Show me that trend continuing for 30 years. Moreover, as salary increases, your formula becomes more and more disadvantageous since the opportunity cost becomes greater and greater. If the 20,000 increase puts you at biglaw market (160,000), you're already down to a 330,000 profit over 30 years. A profit? Yes. A million dollars? Not even close. Moreover, your initial premise of "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k." does in fact fail past a certain salary point at which the money gained by the salary increase is never able to compensate for the opportunity cost of tuition and lost wages.

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Re: USF - worth it for $120,000 in loans?

Postby General Tso » Wed Apr 29, 2009 1:37 pm

hypermeganet wrote:I didn't do any, but I tossed these figures into excel and your first number is correct, the sum of all future cash flows of 45k, taxed at 30% for 30 years is 1,766,676. The sum of future cash flows of 65k is 2,551,865 not 2,994,610. That's your error.

So, you have 2551865-359266-1766676 = $425923 total difference. Account for lost wages: 425923-98330 = $327,593. This is the total amount earned in excess by going to law school. Nearly 10k a year more. Not bad.


My excel formula was flawed. Instead of multiplying by 1.04, it multiplied by 1.04, 1.05, 1.06, etc.

Nonetheless, the additional 10k per year still makes sense from a pure financial standpoint. Is it enough to justify attending law school? For some yes, for others no.

I could adjust my argument to say that an additional 25 or 30k in yearly salary is needed to justify law school @150k debt, and it probably wouldn't be too far from reality for most people attending T100 law schools.

And this scenario also assumes that the person is making the minimum monthly payment for 30 years.

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Re: USF - worth it for $120,000 in loans?

Postby General Tso » Wed Apr 29, 2009 1:42 pm

Kohinoor wrote:
swheat wrote:
Kohinoor wrote:The initial premise of swheat was "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k." Now we've narrowed it down to "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k and find a job in an industry with a compensation structure where annual raises of roughly 4% are the norm". Now, biglaw doesn't work that way period and I'm not sure which jobs that require a JD do work that way.


Really? Biglaw doesnt work that way, huh?
http://www.infirmation.com/shared/lss/o ... r_id=XX762

Those salary increases range from 5.1% to 12% per year.

Show me that trend continuing for 30 years. Moreover, as salary increases, your formula becomes more and more disadvantageous since the opportunity cost becomes greater and greater. If the 20,000 increase puts you at biglaw market (160,000), you're already down to a 330,000 profit over 30 years. A profit? Yes. A million dollars? Not even close. Moreover, your initial premise of "I've crunched the numbers and borrowing up to 150k to go to law school is a good investment if you are confident that you will raise your yearly salary by at least 20k." does in fact fail past a certain salary point at which the money gained by the salary increase is never able to compensate for the opportunity cost of tuition and lost wages.


You are dumb dude. Growth in the economy always puts upward pressure on wages, whether you are a lawyer or whether you are a janitor. Do you really think that lawyers at biglaw firms, or any law firm, are going to max out at 150k and be stuck there for the next 30 years?

deadatheist
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Re: USF - worth it for $120,000 in loans?

Postby deadatheist » Wed Apr 29, 2009 1:44 pm

op, i only say this not to throw gas into the fire of a t14 or bust debacle, but to give you another perspective...

i know a successful Top4 grad who is overwhelmed by debt, and advises against any debt period because she is miserable.
i know a cooley grad who has no debt, another degree under the belt from yale (post cooley), debt free and super successful.

i know they're not the same thing at all, but it's worth realizing t14 or bust obviously can't be for everyone, and sometimes the seemingly worse alternatives aren't the most horrible, terrible things one can do.

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Re: USF - worth it for $120,000 in loans?

Postby dresden doll » Wed Apr 29, 2009 1:52 pm

deadatheist wrote:op, i only say this not to throw gas into the fire of a t14 or bust debacle, but to give you another perspective...

i know a successful Top4 grad who is overwhelmed by debt, and advises against any debt period because she is miserable.
i know a cooley grad who has no debt, another degree under the belt from yale (post cooley), debt free and super successful.

i know they're not the same thing at all, but it's worth realizing t14 or bust obviously can't be for everyone, and sometimes the seemingly worse alternatives aren't the most horrible, terrible things one can do.


Is Top4 meant to indicate this person went to CLS?

What type of degree from Yale did the other person get post-Cooley?

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Re: USF - worth it for $120,000 in loans?

Postby OperaAttorney » Wed Apr 29, 2009 1:55 pm

spinsta wrote:No. To me, 120k in loans is only worth it for T14. If you don't go T14, go to the best school where you get a really big scholly (full tuition would be best).


Cosigned. But I'm less charitable than Spinsta. To me, 120K in loans is only worth for HYS. Maybe CCN. I wouldn't want to pay sticker for BMVPDNG. That said, sometimes you gotta do what you gotta do.

I hope you make the right decision.
Last edited by OperaAttorney on Wed Apr 29, 2009 1:57 pm, edited 2 times in total.

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Re: USF - worth it for $120,000 in loans?

Postby mardimar » Wed Apr 29, 2009 1:55 pm

.
Last edited by mardimar on Wed Jun 30, 2010 11:15 am, edited 1 time in total.

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Re: USF - worth it for $120,000 in loans?

Postby hypermeganet » Wed Apr 29, 2009 2:02 pm

deadatheist wrote:op, i only say this not to throw gas into the fire of a t14 or bust debacle, but to give you another perspective...

i know a successful Top4 grad who is overwhelmed by debt, and advises against any debt period because she is miserable.
i know a cooley grad who has no debt, another degree under the belt from yale (post cooley), debt free and super successful.

i know they're not the same thing at all, but it's worth realizing t14 or bust obviously can't be for everyone, and sometimes the seemingly worse alternatives aren't the most horrible, terrible things one can do.


Image

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Re: USF - worth it for $120,000 in loans?

Postby sbalive » Wed Apr 29, 2009 2:05 pm

deadatheist wrote:i know a successful Top4 grad who is overwhelmed by debt, and advises against any debt period because she is miserable.


It seems (though this is based on anecdotal reports, and of course it may well be different for your friend) that this is related to a combination of three factors - high undergrad debt, a spouse/partner with high debt, and a high cost/debt lifestyle. The issue of household student loan debt I think is underrated. If you're married with both of you working, and you jointly have $120K, that's not bad at all given that you have a combined income. When it's jointly $240K, that's more of a problem, especially if now each of you has an additional $50K in undergrad debt, and wow, suddenly that's a $340K burden on your family. Also, this household risks falling even further behind if they're borrowing money to buy a couple $40K SUV's, a $600K house, and a $10K timeshare in the Hamptons.

So, it's a complex picture. Also, you have to take into account the nature of work, not just the salary - does having a professional degree (however devalued) give greater security? What was the opportunity for advancement available for the undergrad degree? How do you quantify "happiness"?

The point of "swheat"'s analysis is that the $120K in loans is at least affordable and not financially disastrous. That's a fair starting point to consider other factors.

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Re: USF - worth it for $120,000 in loans?

Postby deadatheist » Wed Apr 29, 2009 2:07 pm

phd from yale.

the t4 grad has a spouse. but naturally for this anecdote, he is a doctor from a t4 med school, and though super successful as well, i think they both have debt with their big salaries.

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Re: USF - worth it for $120,000 in loans?

Postby hypermeganet » Wed Apr 29, 2009 2:08 pm

OperaAttorney wrote:
spinsta wrote:No. To me, 120k in loans is only worth it for T14. If you don't go T14, go to the best school where you get a really big scholly (full tuition would be best).


To me, 120K in loans is only worth for HYS. Maybe CCN. I wouldn't want to pay sticker for BMVPDNG.


Any reasoning? Those schools all put you in good position to have a job that shoul deasily allow you to pay the loans back and still make significantly more money than you likely would without a law degree. Or you could do PI work and pretty much get your loans paid back and land a solid PI job.

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Re: USF - worth it for $120,000 in loans?

Postby deadatheist » Wed Apr 29, 2009 2:09 pm

hypermeganet wrote:
deadatheist wrote:op, i only say this not to throw gas into the fire of a t14 or bust debacle, but to give you another perspective...

i know a successful Top4 grad who is overwhelmed by debt, and advises against any debt period because she is miserable.
i know a cooley grad who has no debt, another degree under the belt from yale (post cooley), debt free and super successful.

i know they're not the same thing at all, but it's worth realizing t14 or bust obviously can't be for everyone, and sometimes the seemingly worse alternatives aren't the most horrible, terrible things one can do.


Image


noted, which is why i threw out all the disclaimers. but it's true, not a "friend of a friend" story, and it's probably nice for some people who are not headed to the top to know these scenarios are real and do exist. the cooley grad story is probably SUPER rare, but... it's a fact my friend.

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Re: USF - worth it for $120,000 in loans?

Postby Helmholtz » Wed Apr 29, 2009 2:11 pm

hypermeganet wrote:
OperaAttorney wrote:
spinsta wrote:No. To me, 120k in loans is only worth it for T14. If you don't go T14, go to the best school where you get a really big scholly (full tuition would be best).


To me, 120K in loans is only worth for HYS. Maybe CCN. I wouldn't want to pay sticker for BMVPDNG.


Any reasoning? Those schools all put you in good position to have a job that should easily allow you to pay the loans back and still make significantly more money than you likely would without a law degree. Or you could do PI work and pretty much get your loans paid back and land a solid PI job.


+1

I generally think sticker at any T14 isn't a bad idea.

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Re: USF - worth it for $120,000 in loans?

Postby hypermeganet » Wed Apr 29, 2009 2:12 pm

sbalive wrote:
It seems (though this is based on anecdotal reports, and of course it may well be different for your friend) that this is related to a combination of three factors - high undergrad debt, a spouse/partner with high debt, and a high cost/debt lifestyle. The issue of household student loan debt I think is underrated. If you're married with both of you working, and you jointly have $120K, that's not bad at all given that you have a combined income. When it's jointly $240K, that's more of a problem, especially if now each of you has an additional $50K in undergrad debt, and wow, suddenly that's a $340K burden on your family. Also, this household risks falling even further behind if they're borrowing money to buy a couple $40K SUV's, a $600K house, and a $10K timeshare in the Hamptons.



340k burden with 300k in annual income isn't really that bad...not at all. That'd be like $10k/month left after taxes and after loans for that scenario in NYC.

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Re: USF - worth it for $120,000 in loans?

Postby deadatheist » Wed Apr 29, 2009 2:14 pm

dresden doll wrote:Is Top4 meant to indicate this person went to CLS?


missed this one. noo... i just deleted the 1 in t14, because she went to one of the top 4. my using t4 is not a loaded term for columbia, just hysc.

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Re: USF - worth it for $120,000 in loans?

Postby hypermeganet » Wed Apr 29, 2009 2:20 pm

deadatheist wrote:noted, which is why i threw out all the disclaimers. but it's true, not a "friend of a friend" story, and it's probably nice for some people who are not headed to the top to know these scenarios are real and do exist. the cooley grad story is probably SUPER rare, but... it's a fact my friend.


I could win the lottery and never have to work again. It's a fact. People win. Does that mean it should be used as an argument telling the lower class that not finding a job and trying to earn more money isn't the end of the world?

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Re: USF - worth it for $120,000 in loans?

Postby sbalive » Wed Apr 29, 2009 2:24 pm

hypermeganet wrote:
sbalive wrote:
It seems (though this is based on anecdotal reports, and of course it may well be different for your friend) that this is related to a combination of three factors - high undergrad debt, a spouse/partner with high debt, and a high cost/debt lifestyle. The issue of household student loan debt I think is underrated. If you're married with both of you working, and you jointly have $120K, that's not bad at all given that you have a combined income. When it's jointly $240K, that's more of a problem, especially if now each of you has an additional $50K in undergrad debt, and wow, suddenly that's a $340K burden on your family. Also, this household risks falling even further behind if they're borrowing money to buy a couple $40K SUV's, a $600K house, and a $10K timeshare in the Hamptons.



340k burden with 300k in annual income isn't really that bad...not at all. That'd be like $10k/month left after taxes and after loans for that scenario in NYC.


I'm not saying it's bad either, I'm just saying it combines with all those other factors. Whenever you read horror stories about Harvard grad lawyers and doctors struggling to get by because of student loan debt, you read more carefully and all this other stuff starts to come out about their expenses and cumulative debt.

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Re: USF - worth it for $120,000 in loans?

Postby snotrocket » Wed Apr 29, 2009 2:26 pm

The view of this put forth above is quite wrong. Your approach to calculating the "returns" from law school is incorrect, and your estimates are also dangerously optimistic. The proper comparison is this:

(1) You can either stay at your $45k job or go to law school for three years.
(2) At the end of law school, assume you get a job paying $65k.
(3) Salary at both jobs will increase at 4% per year, and your discount rate (inflation) is about the same.

After the three years of work, you have earned $94,500 in net income after taxes. After three years in law school you have earned zero income and taken on a bunch of loans. Then you have an (assumed) higher starting salary with your JD, compared to your prior salary of $45k which has just increased by our assumed 0.04 per year in the past three years. The problem is that after law school you have $150k in debt, which reduces your net income by $1,100 per month.* As a result, your post-JD net, take-home income does not pass up your expected income from your prior job until at least eight years out.

So right away you're worse off, and even over the long term it's a total net present value loss of $32,000. Plus you've signed on to 30 years of working as a lawyer in order to realize that loss. Still, if you really want to be a lawyer, then maybe that is worth $32k to you. It gets worse though. Change your expected starting salary to a more plausible $55k** as reflected by the lower mode of the salary distribution of new attorneys, then up your debt to a more likely $180k to cover total cost of attendance, and you've got a net loss of $13k per year take home income the day you graduate from law school, with a quarter million dollar financial disaster on your hands over the long term (so much for buying a house . . . or retiring . . . and God help if you plan to have kids). This is much closer to the ACTUAL outcome for about 8 in 10 people who right now are considering doing exactly what you're suggesting.

--ImageRemoved--

--ImageRemoved--

(*) Income during law school will at best only reduce your loan balance, and you will be lucky to come out with ONLY $150k if you're starting law school today. Total cost of attendance is busting $60k per year at most schools, and that's assuming you are single, can live cheap as hell, and will have some sort of work to cover your summer expenses. You might come out only owing $150k if you already have $30k saved, or have a working spouse, or get Big Law your second summer (and this entire analysis obviously assumes that you will not). Also, a realistic interest rate is closer to 8%, especially with fees figured in, but even 7% only makes things marginally less awful.

(**) Even that is shaky, and probably a generous assumption in the current market. Many new grads, even three years from now, are going to be looking at starting salaries after the JD of around $45k. And this is assuming they get jobs at all -- something like 1/4 to 1/2 of new lawyers will wind up unemployed and unemployable each year, and this figure shows no sign of improving any time soon. Obviously the people taking on six figures of debt to make the same gross salary they gave up to attend law school are going to come out even worse than the worst case above.
Last edited by snotrocket on Wed Apr 29, 2009 4:19 pm, edited 1 time in total.

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Re: USF - worth it for $120,000 in loans?

Postby deadatheist » Wed Apr 29, 2009 2:29 pm

hypermeganet wrote:
deadatheist wrote:noted, which is why i threw out all the disclaimers. but it's true, not a "friend of a friend" story, and it's probably nice for some people who are not headed to the top to know these scenarios are real and do exist. the cooley grad story is probably SUPER rare, but... it's a fact my friend.


I could win the lottery and never have to work again. It's a fact. People win. Does that mean it should be used as an argument telling the lower class that not finding a job and trying to earn more money isn't the end of the world?


personally, i think that analogy comes off as incredibly elitist for the topic at hand, and hardly applicable to what i was saying.

You answered the op, your point was made. I did not answer the op, I just threw 2 most random examples out to show that things aren't always black and white. i'm not making an argument re: the topic, life choices, debt. and i won't say anymore bc again, i am not throwing gas on the fire here.

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Re: USF - worth it for $120,000 in loans?

Postby hypermeganet » Wed Apr 29, 2009 2:32 pm

sbalive wrote:
340k burden with 300k in annual income isn't really that bad...not at all. That'd be like $10k/month left after taxes and after loans for that scenario in NYC.


I'm not saying it's bad either, I'm just saying it combines with all those other factors. Whenever you read horror stories about Harvard grad lawyers and doctors struggling to get by because of student loan debt, you read more carefully and all this other stuff starts to come out about their expenses and cumulative debt.[/quote]

Definitely. I mean, imagine if you had a 750,000 home, 2 Mercedes, a boat, and a vacation home. Now one of the two incomes is suddenly gone. Could be bad.

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Re: USF - worth it for $120,000 in loans?

Postby General Tso » Wed Apr 29, 2009 2:38 pm

hypermeganet wrote:
sbalive wrote:
340k burden with 300k in annual income isn't really that bad...not at all. That'd be like $10k/month left after taxes and after loans for that scenario in NYC.


I'm not saying it's bad either, I'm just saying it combines with all those other factors. Whenever you read horror stories about Harvard grad lawyers and doctors struggling to get by because of student loan debt, you read more carefully and all this other stuff starts to come out about their expenses and cumulative debt.


Definitely. I mean, imagine if you had a 750,000 home, 2 Mercedes, a boat, and a vacation home. Now one of the two incomes is suddenly gone. Could be bad.[/quote]

That's why you shouldn't be a dumbass and get yourself in that scenario in the first place. My general rule is to have enough savings to last 6 months with zero income BEFORE making any major purchases.

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Re: USF - worth it for $120,000 in loans?

Postby jetlagz28 » Wed Apr 29, 2009 2:48 pm

You guys are ridiculous...

If USF and Santa Clara are you only options, pick Santa Clara.

If USF is your only option, its up to you if its worth it. Do you really want to be a lawyer? Is it worth $120,000 in loans to land your dream career?

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Re: USF - worth it for $120,000 in loans?

Postby General Tso » Wed Apr 29, 2009 4:51 pm

snotrocket wrote:The view of this put forth above is quite wrong. Your approach to calculating the "returns" from law school is incorrect, and your estimates are also dangerously optimistic. The proper comparison is this:

(1) You can either stay at your $45k job or go to law school for three years.
(2) At the end of law school, assume you get a job paying $65k.
(3) Salary at both jobs will increase at 4% per year, and your discount rate (inflation) is about the same.

After the three years of work, you have earned $94,500 in net income after taxes. After three years in law school you have earned zero income and taken on a bunch of loans. Then you have an (assumed) higher starting salary with your JD, compared to your prior salary of $45k which has just increased by our assumed 0.04 per year in the past three years. The problem is that after law school you have $150k in debt, which reduces your net income by $1,100 per month.* As a result, your post-JD net, take-home income does not pass up your expected income from your prior job until at least eight years out.

So right away you're worse off, and even over the long term it's a total net present value loss of $32,000. Plus you've signed on to 30 years of working as a lawyer in order to realize that loss. Still, if you really want to be a lawyer, then maybe that is worth $32k to you. It gets worse though. Change your expected starting salary to a more plausible $55k** as reflected by the lower mode of the salary distribution of new attorneys, then up your debt to a more likely $180k to cover total cost of attendance, and you've got a net loss of $13k per year take home income the day you graduate from law school, with a quarter million dollar financial disaster on your hands over the long term (so much for buying a house . . . or retiring . . . and God help if you plan to have kids). This is much closer to the ACTUAL outcome for about 8 in 10 people who right now are considering doing exactly what you're suggesting.

--ImageRemoved--

--ImageRemoved--

(*) Income during law school will at best only reduce your loan balance, and you will be lucky to come out with ONLY $150k if you're starting law school today. Total cost of attendance is busting $60k per year at most schools, and that's assuming you are single, can live cheap as hell, and will have some sort of work to cover your summer expenses. You might come out only owing $150k if you already have $30k saved, or have a working spouse, or get Big Law your second summer (and this entire analysis obviously assumes that you will not). Also, a realistic interest rate is closer to 8%, especially with fees figured in, but even 7% only makes things marginally less awful.

(**) Even that is shaky, and probably a generous assumption in the current market. Many new grads, even three years from now, are going to be looking at starting salaries after the JD of around $45k. And this is assuming they get jobs at all -- something like 1/4 to 1/2 of new lawyers will wind up unemployed and unemployable each year, and this figure shows no sign of improving any time soon. Obviously the people taking on six figures of debt to make the same gross salary they gave up to attend law school are going to come out even worse than the worst case above.


While you analysis is good, your assumptions are faulty. 1st, you assume that there's no other option but to repay at the 10 year rate of $1,100 per month. 2nd, you posit a "likely" scenario in which the person will have 180k debt and a "8 in 10 chance" of earning only 55k. This bimodal talk is probably perfectly valid in some markets. In CA, I don't believe it to be true. Why? I've talked with actual bottom of the class graduates from places like SCU, Hastings, etc. While they aren't earning biglaw money, 70k+ seems to be a perfectly reasonable expectation.

I did make formula errors in Excel. That is certain. But I don't see how a 150k debt, 65k starting salary scenario is "dangerously optimistic." On the contrary, I would argue that your 8 in 10 chance, 180k debt, 55k salary is ridiculously conservative. What is it about T14-or killself/ biglaw-or killself trolls that makes them abandon all reason when discussing lower ranked law schools? I vote for pride

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Re: USF - worth it for $120,000 in loans?

Postby snotrocket » Wed Apr 29, 2009 7:08 pm

swheat wrote:While you analysis is good, your assumptions are faulty. 1st, you assume that there's no other option but to repay at the 10 year rate of $1,100 per month. 2nd, you posit a "likely" scenario in which the person will have 180k debt and a "8 in 10 chance" of earning only 55k. This bimodal talk is probably perfectly valid in some markets.

Your math is way, way off. The $1,100 per month is for a 30-year repayment plan -- as you assumed. The payments on a 10-year plan, for $150k, at 8% interest are $1,819 per month. At 7% interest (the only number that I changed from your assumptions), the payments are $1,742 per month. Learn how to do simple math (or use a loan calculator) before you go around calling people trolls.

http://www.finaid.org/calculators/loanpayments.phtml

Talk to whoever you want -- $70k in the Bay Area is equivalent to $55k anywhere that doesn't have an astronomical cost of living, so the net effect there is the same. And $45-55k jobs are quite the rule in California the same as anywhere (more common, actually, owing to the truly ridiculous number of law schools in the market). If you want to make a stupid mistake based on misinformation and blatantly incorrect calculations, then fine. But at least keep it to yourself and stop spreading your silliness in places where people trying to find good information might accidentally take it seriously.
Last edited by snotrocket on Wed Apr 29, 2009 7:22 pm, edited 5 times in total.




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