200k debt, 100k salary. Drop out? Forum

[Anonymous User]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

[Wholigan]

A - I can't imagine this is a choice between $200k debt and $0 debt. What would the debt be if you dropped out now? This is obviously an important consideration.

B - What would you earn by going back to your other career?

C - What kind of job is the $100k job, and in what market? Is it at a firm with high attrition rates? What will exit options be?

D - If you really want to be a lawyer, why are you even considering dropping out if you have a $100k job lined up? People stay in law school and get $40k jobs with $200k debt who really want to be lawyers, so you certainly aren't in the worst situation ever.

[Bosque]

No. Stop being silly.

[Anonymous User]

Unless you are making 100K at a midlaw firm in NY, where cost of living is high and the long-term prospects of the firm are maybe not so hot, I don't think dropping out makes sense. 100k in most American cities--especially the secondary markets where you are likely to make 100k--is still good money. 200k is lot of debt, but, if you're willing to pretend that you are actually only making 40k for the next 6-7 years, you can definitely climb out of that hole. Of course, there is the ever present risk of burning out or being fired, but again, if you're in a secondary market, burnout is less likely--and some of the healthier firms in secondary markets really aren't leveraged at all and do not have a strong up or out policy, so you can stick around longer.

On top of all that, you want to be a lawyer. Go do it. Everyone sacrifices and takes risks to follow the career they really want.

[CanuckObserver]

A - I can't imagine this is a choice between $200k debt and $0 debt. What would the debt be if you dropped out now? This is obviously an important consideration.

B - What would you earn by going back to your other career?

C - What kind of job is the $100k job, and in what market? Is it at a firm with high attrition rates? What will exit options be?

D - If you really want to be a lawyer, why are you even considering dropping out if you have a $100k job lined up? People stay in law school and get $40k jobs with $200k debt who really want to be lawyers, so you certainly aren't in the worst situation ever.

This, especially the bolded. $100k is hardly peanuts.

[KamaalTheAbstract]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

Shut up

[Anonymous User]

A - I can't imagine this is a choice between $200k debt and $0 debt. What would the debt be if you dropped out now? This is obviously an important consideration.

B - What would you earn by going back to your other career?

C - What kind of job is the $100k job, and in what market? Is it at a firm with high attrition rates? What will exit options be?

D - If you really want to be a lawyer, why are you even considering dropping out if you have a $100k job lined up? People stay in law school and get $40k jobs with $200k debt who really want to be lawyers, so you certainly aren't in the worst situation ever.

This, especially the bolded. $100k is hardly peanuts.

Secondary market, (much) lower COL than NYC. Litigation. Drop out now debt would be about half. Could get a job in backup career for 70-90k.

Shutting up now... TY All

EDIT: Def have/had no intention of dropping out. Just wondering what the board wisdom on this type of situation is, since I see a lot of doom and gloom on here sometimes.

[vanwinkle]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

[Bosque]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

Student loan interest deduction is subject to both a cap and a phase out though.

[Wholigan]

Actually, since OP clarified that (s)he is a rising 2L with the $100k offer in a cheap secondary market, this question is essentially the equivalent of getting a NYC offer and asking "Should I take a $160k job, or just drop out now"? Great thread.

[keg411]

Actually, since OP clarified that (s)he is a rising 2L with the $100k offer in a cheap secondary market, this question is essentially the equivalent of getting a NYC offer and asking "Should I take a $160k job, or just drop out now"? Great thread.

<3 (Miss you!!)

[LawWeb]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

It may be a bit clearer to put a post taxes number on it - if you earn 100K, you won't take home 8,333 but rather 5,000/month after taxes. Take away the 2426 for student loans, and you have 2574 a month to live on. To make this budget work (unless you are really in a secondary market where you can get a one bedroom for 500-700) you will need to be in a roommate situation, keep rent/utilities under 1000 a month. You will not only live with a roommate, but without a lot of fun money. If the firm gives big raises, then maybe that will only be for a few years, but if not, it will be a very rough go, like living poorish-but-functional. I say this as someone who recently made somewhat over 100K and was paying down debt at a similar rate. I managed to get to a living budget of 2,500 a month based on what I said above. It kind of sucked, but was survivable.

[Wholigan]

Actually, since OP clarified that (s)he is a rising 2L with the $100k offer in a cheap secondary market, this question is essentially the equivalent of getting a NYC offer and asking "Should I take a $160k job, or just drop out now"? Great thread.

<3 (Miss you!!)

Without derailing the thread, hope things are going better than at first out there!

[BeenDidThat]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

It may be a bit clearer to put a post taxes number on it - if you earn 100K, you won't take home 8,333 but rather 5,000/month after taxes. Take away the 2426 for student loans, and you have 2574 a month to live on. To make this budget work (unless you are really in a secondary market where you can get a one bedroom for 500-700) you will need to be in a roommate situation, keep rent/utilities under 1000 a month. You will not only live with a roommate, but without a lot of fun money. If the firm gives big raises, then maybe that will only be for a few years, but if not, it will be a very rough go, like living poorish-but-functional. I say this as someone who recently made somewhat over 100K and was paying down debt at a similar rate. I managed to get to a living budget of 2,500 a month based on what I said above. It kind of sucked, but was survivable.

Check you deductibility

[dr123]

100k in a city such as Seattle where you can find a place (w/ roommates) for 400/ month, is good fuckin money.

[merc280]

Would anyone in a law firm like high ups care if you live in a dump?

[birdlaw117]

Would anyone in a law firm like high ups care if you live in a dump?

If they do, they should pay someone enough that they don't have to.

[LawWeb]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

It may be a bit clearer to put a post taxes number on it - if you earn 100K, you won't take home 8,333 but rather 5,000/month after taxes. Take away the 2426 for student loans, and you have 2574 a month to live on. To make this budget work (unless you are really in a secondary market where you can get a one bedroom for 500-700) you will need to be in a roommate situation, keep rent/utilities under 1000 a month. You will not only live with a roommate, but without a lot of fun money. If the firm gives big raises, then maybe that will only be for a few years, but if not, it will be a very rough go, like living poorish-but-functional. I say this as someone who recently made somewhat over 100K and was paying down debt at a similar rate. I managed to get to a living budget of 2,500 a month based on what I said above. It kind of sucked, but was survivable.

Check you deductibility

I've found it standard that around the 100K mark, multiply what you earn by .60 and you have what you actually take home after taxes, SS tax, your portion of benefits, medicare, state disability, etc. For salaries 80K or under, multiply by .65. Of course as with any tax advice, please consult a tax professional before taking any action (but since this is just a darn chat board, safe bet you'll find this percentages to play out).

[KMaine]

No. Stop being silly.

[Glock]

[Patriot1208]

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

It may be a bit clearer to put a post taxes number on it - if you earn 100K, you won't take home 8,333 but rather 5,000/month after taxes. Take away the 2426 for student loans, and you have 2574 a month to live on. To make this budget work (unless you are really in a secondary market where you can get a one bedroom for 500-700) you will need to be in a roommate situation, keep rent/utilities under 1000 a month. You will not only live with a roommate, but without a lot of fun money. If the firm gives big raises, then maybe that will only be for a few years, but if not, it will be a very rough go, like living poorish-but-functional. I say this as someone who recently made somewhat over 100K and was paying down debt at a similar rate. I managed to get to a living budget of 2,500 a month based on what I said above. It kind of sucked, but was survivable.

Check you deductibility

I've found it standard that around the 100K mark, multiply what you earn by .60 and you have what you actually take home after taxes, SS tax, your portion of benefits, medicare, state disability, etc. For salaries 80K or under, multiply by .65. Of course as with any tax advice, please consult a tax professional before taking any action (but since this is just a darn chat board, safe bet you'll find this percentages to play out).

You are overestimating tax rates a little bit.

On 100k salary you'll pay (assuming single and no other deductions):

Federal Income Tax: 17,025 + (.28*16,400 = 4,592) = 21617
Medicare: (.0145*100,000) = 1450
SS: (.042*100,000) = 4200

So federal taxes come out to 27267

Now since this is a secondary market where 100k is fairly normal i'll pick St. Louis as place of residence since this is around what the big firms pay there. Note that while I used missouri and st. louis, the taxes won't be much different in most other secondary markets. The only time they may increase substantially would be a city such as NYC, Chicago, DC, LA, etc.

State tax: 5775
City tax: 1000

This brings your total tax burden to 34,042 and your after tax income of 65,958 dollars or 5496.50/month. Take out your loan payments and you have (5496.50-2426) = 3070.50 a month. Or 36846 a year after taxes and loan repayment. Essentially you are living for ten years at the level of someone making around 50k in that same area.

Now if you dropped out now with 90k in debt and made 80k you'd be looking at:

Federal Income tax: 4750 + 11375 = 16125
SS: 1160
Medicare: 3360
State: 4575
City: 800

so total tax burden is 26020 and your after tax income is 53980 or 4498.33 a month. Then your loan repayment on 90k in loans would be roughly 1067.96 a month for a 10 year repayment. Then you'd be looking at 3430.70 a month.

So essentially you are better off in the short term going back to an old job of 80k with 90k in debt then starting a new job that pays 100k with 200k in debt. But then you have to take into account long term earning potential, quality of life, etc. And once the loan repayment is over you'd certainly be making more money as a lawyer assuming steady income increases at both jobs. So it's really up to you. If you want to be a lawyer i'd stay, but you'd be better off in the extreme short term dropping out with an 80k job. Also in a place like St. Louis you can find a really nice one bedroom for 1000 before utilities and cable (and pretty good places for ~650-700) so I wouldn't be worried about that unless your "secondary market" is meant as Chicago.

[Omerta]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

It may be a bit clearer to put a post taxes number on it - if you earn 100K, you won't take home 8,333 but rather 5,000/month after taxes. Take away the 2426 for student loans, and you have 2574 a month to live on. To make this budget work (unless you are really in a secondary market where you can get a one bedroom for 500-700) you will need to be in a roommate situation, keep rent/utilities under 1000 a month. You will not only live with a roommate, but without a lot of fun money. If the firm gives big raises, then maybe that will only be for a few years, but if not, it will be a very rough go, like living poorish-but-functional. I say this as someone who recently made somewhat over 100K and was paying down debt at a similar rate. I managed to get to a living budget of 2,500 a month based on what I said above. It kind of sucked, but was survivable.

Are you kidding me? How can living on ~ 2,500 a MONTH post taxes/loans "kind of suck" and be considered living poor-ish? That's greater than the pre-tax median family income in 2006 which, as you may be aware, was a slightly better economic climate.

PSA: 2.5k is apparently survivable but poorish.

[ToTransferOrNot]

Thoughts?

EDIT: Assume person in this position has had other careers, but really wants to be a lawyer. And, they like the job where they'd get 100k.

This sounds like an annoying hypothetical. If 0L, why assume you'll get $100K? There are few if any jobs out there for new grads that pay that much to start. Bimodal distribution means most entry-level jobs pay higher ($160K, but unsustainable) or lower ($30-70K). If rising 2L/3L, you already have loans you have to repay and likely no job prospects if you drop out, meaning it's a bit late to ask this and evade all of that debt.

That said... An online student loan calculator (which can easily be found online by Googling "student loan calculator") says that $200K in debt on a 10-year repayment plan requires monthly payments of $2,426. $100K/yr comes out to $8,333 per month, so you end up with ($8,333 - $2,426) or $5,907 per month to pay taxes, rent, transportation, living expenses, etc. That's still $70K/year, and granted, you'll pay higher taxes than if you were straight-up just making $70K, but you'll also get to deduct student loan interest from your taxes. Then, after your 10 years are up, your pay basically increases by nearly $30K because you get to start keeping the money that would've went to your loans.

So, assuming this job is real, your question should be considered like this: "Do I want to make $70K, and after 10 years get a $30K pay raise?"

It may be a bit clearer to put a post taxes number on it - if you earn 100K, you won't take home 8,333 but rather 5,000/month after taxes. Take away the 2426 for student loans, and you have 2574 a month to live on. To make this budget work (unless you are really in a secondary market where you can get a one bedroom for 500-700) you will need to be in a roommate situation, keep rent/utilities under 1000 a month. You will not only live with a roommate, but without a lot of fun money. If the firm gives big raises, then maybe that will only be for a few years, but if not, it will be a very rough go, like living poorish-but-functional. I say this as someone who recently made somewhat over 100K and was paying down debt at a similar rate. I managed to get to a living budget of 2,500 a month based on what I said above. It kind of sucked, but was survivable.

Are you kidding me? How can living on ~ 2,500 a MONTH post taxes/loans "kind of suck" and be considered living poor-ish? That's greater than the pre-tax median family income in 2006 which, as you may be aware, was a slightly better economic climate.

PSA: 2.5k is apparently survivable but poorish.

To be fair, US median income includes low COL places, among other things. It's not going to make you a pauper anywhere, but in many places, having $2.5k a month for living expenses and discretionary spending = a rather frugal existence, especially when you consider that you're not going to be saving anything for retirement.

[Anonymous User]

2,500 gives you enough $$$ to afford NFL Sunday Ticket. This is not poor-ish.

[Patriot1208]

2,500 gives you enough $$$ to afford NFL Sunday Ticket. This is not poor-ish.

This certainly depends on where you live and if you are single or have a family. 2500 in NYC with 2 kids and a stay at home wife is definitely poor-ish and you won't be able to afford things like Sunday Ticket.

Also, as I pointed out above the monthly take home after taxes and loan repayment is just over 3000 a month, not 2500.