Should I take this job? Forum

[bahama]

Additionally, you get with with a massive tax bill in 25 years since the discharge is considered income

I believe they have a provision to prevent that (though I'm not 100% sure).

Yeah, I heard it's something about how the taxes can't exceed your total assets (I'm not exactly sure about this one). Even then that sucks because you are selling your house and car to pay your taxes on your student loans when you are well into your 50s. Possibly even using any retirement money that you set aside/invested in stocks to repay it.

Do you really believe the govt isn't going to fix this tax issue? They are going to wait until it is a lot closer to being reality because the whole taxability is just a budget game to make the total cost of IBR appear less than it really is. Politically it just isn't going to fly to hit a bunch of middle age, middle class VOTERS with a six figure tax bill for student loans 25 yrs from now.

[bahama]

Not really. The government doesn't figure what you pay for loans and then tax you, they tax you on your gross income. So if you assume 30% goes to taxes (including FICA, etc) then post-tax that $70K is $49K. Take off another $24k from that for loans and you are at $25K /year to live off. A person who makes $40K /year getting taxes 30% post-tax would then make $28K /year. This analysis is a little bit ridiculous because realistically the person making $40K /year will be in a lower tax bracket and actually have a greater purchasing power then this, but I used 30% just to emphasize even if both those people were taxed the exact same percentage OP making $70K /year would be in a shittier situation.

I'm going to go out in a limb here and say odds are this insurance company is in Chicago. And it's not cheap to live in Chicago, even if you live in the ghetto. $70K in Chicago is probably worth less then $50K in the boonies somewhere. I'd imagine just paying rent is easily going to cost $15K /year if not more, so that leaves maybe $10K for food and everything else. Not a very good living at all ... The high school graduate that has been working at McDonalds since high school graduation (who was promoted to somewhere in McDonald's management) made out better after the 7 years that OP spent in college since the McDonald's manager makes more money and thus lives more comfortably (and it didn't take him 7 years of college and $150K in loans to do it).

The numbers you are using for the loans are making this much worse than it appears.
The IBR calculator at http://studentaid.ed.gov/PORTALSWebApp/ ... BRCalc.jsp comes up with below $700/mo depending on the mix of loans.
If you don't like IBR, the straight 25 yr plan payments would be between about $900 and $1100/mo depending on if they did fixed or graduated repayment.
So the real payments will be about $8 to $13k per year, not $24k.

There is no reason he needs to spent $1250/mo on rent in the Chicago area. As others have said, he can get something in the suburbs near the train or live with roommates if he has to be downtown.

Even assuming your 30% tax rate is right (I think it's close but a bit too high), his $70k with loans is equivalent to someone without the loans making pre-tax earnings of about $51-58K (depending on which type of repayment he does). Not where he wanted to be after 7yrs of higher ed, but certainly not poverty.

This is about double what a fast food manager makes. And OP has significantly better opportunities to increase his income over the next 10 years.

[XxSpyKEx]

The numbers you are using for the loans are making this much worse than it appears.
The IBR calculator at http://studentaid.ed.gov/PORTALSWebApp/ ... BRCalc.jsp comes up with below $700/mo depending on the mix of loans.
If you don't like IBR, the straight 25 yr plan payments would be between about $900 and $1100/mo depending on if they did fixed or graduated repayment.
So the real payments will be about $8 to $13k per year, not $24k.

But you are assuming a 25 year repayment, where I was assuming a 10 year repayment. 25 years is just outright ridiculous for a student loan repayment (especially if you are talking about non-IBR). I mean, seriously, would you be OK still repaying your student loans when you are into your 50s and hoping to retire soon? Not to mention how much more you will pay overall due to the interest accrual on that loan for 25 years (assuming you aren't doing IBR). And then, trying to get another $200K loan to buy an average size house in the suburbs would be completely unrealistic...

There is no reason he needs to spent $1250/mo on rent in the Chicago area. As others have said, he can get something in the suburbs near the train or live with roommates if he has to be downtown.

The commute is brutal, and even more so if you are talking about working a shitton of hours like attorneys typically do. At 3AM I live about 35 minutes from the loop. Taking the train during the day that's about a 1.5-2 hours commute (driving it can be even longer). Adding 3-4 hours a day in addition to a 50+ hour work week would be pretty awful for a job where you are only bringing home $25K post-taxes and post repaying your student loans (see my next point)

Even assuming your 30% tax rate is right (I think it's close but a bit too high), his $70k with loans is equivalent to someone without the loans making pre-tax earnings of about $51-58K (depending on which type of repayment he does).

How are you coming up with this? Are you assuming the 25 year repayment? If so, then that's why your numbers are a lot better then mine.

[XxSpyKEx]

Do you really believe the govt isn't going to fix this tax issue? They are going to wait until it is a lot closer to being reality because the whole taxability is just a budget game to make the total cost of IBR appear less than it really is. Politically it just isn't going to fly to hit a bunch of middle age, middle class VOTERS with a six figure tax bill for student loans 25 yrs from now.

You might be right. But they could also simply cut the program and screw some people. I mean how many people are really doing a 25 year repayment on grad school loans because they simply can't afford to repay their student loans after spending that much time in school (my guess is far from enough to vote for a change for the better)? My guess is that voters are going to vote to get rid of 25 year IBR altogether since they don't like the idea of paying more in taxes so some schmuck "rich lawyer" can have his debt forgiven, with the thought that they are just trying to screw them and that all attorneys are just a bunch of rich d'bags.

[Anonymous Loser]

OP is eligible for IBR in the job he's considering: the above poster doesn't seem to understand how this program works.

How does working for a for-profit insurance company qualify under the public service 10 year loan forgiveness under IBR? ... OP would be eligible for the 25 year plan, but that is pretty much a bullshit plan where you repay 15% of your salary for 25 years while the total size of your loans increases (meaning not being able to buy things like a house or a car ever since you will probably have something like $250K in student loans after 15+ years). Additionally, you get with with a massive tax bill in 25 years since the discharge is considered income, pretty much meaning if you are broke as a joke and haven't saved up a ton of money to throw away at paying your taxes for that year you will be going bankrupt in 25 years and then probably just reorganizing that debt to continue paying it (or if you have assets such as a house that you will have to sell your house to pay your taxes on the loan forgiveness!). Also, 25 years is a really long time and it's completely possible that this thing changes or even goes away completely so then there is the possibiilty of having to start repaying $250K of the remaining loans (based on interest accrual after that period) after 15 or 20 years. IMO, the best bet is to just try to repay those loans quickly as possible or doing IBR through something that qualifies for public service (since you get complete forgiveness in 10 years w/ no tax bill). But what sucks for OP is that repaying the loans as quickly means living shittier then a high school grad that manages a McDonalds for a good 10 years or more..

The "25 years is a long time" argument is a old one, lots of posters have propped up that strawman in previous threads. The argument badly flawed in that it suggests sweeping changes to educational lending are possible over the next 25 years, yet somehow overlooks the possibility that those changes will result in benefits available under the IBR/LRAP programs being increased, rather than decreased.

Seriously, the guy has a solid job with a respectable starting salary. Why the panic? Reading this thread is like watching Glen Beck: it seemed like everything was o.k., but now I want to put all my assets in gold and hide out in a cave, riding out the inevitable societal collapse that will come once the liberal elite finally unveil their secret plan of mind-control. C'mon man: the guy has a pretty cool in-house position that would likely be difficult to obtain even in a good economy, but you are suggesting that he take on an unskilled civil-service position instead?

The tax issue is a simple legislative fix: amendments to 26 U.S.C. § 108(f) were made to accommodate the 10-year LRAP, and there are several draft versions of proposed changes that will ensure that there is not tax liability for discharge of outstanding debt under the 25 year program as well. Indeed, as currently drafted it's somewhat unclear if there even is such tax liability for borrowers. It's just not that big a deal.

OP, take the job, and enjoy it. You'll get great experience and connections, and can take advantage of the IBR program to keep your loan payments low during the first few years of your career. Later, should your earnings increase, you will incur no penalty whatsoever for making accelerated loan payments. If things do go south, and there is some sort of radical dismantling of social programs that results in insignificant budgetary concerns like the IBR/LRAP programs suddenly becoming targets for reform, then so be it, but you'll likely be well on your way to a solid career by that point, and will be well-situated to deal with the changes. Of course, you can always hoard gold as a hedge against the downfall too, if that makes you feel more comfortable.

[bahama]

But you are assuming a 25 year repayment, where I was assuming a 10 year repayment. 25 years is just outright ridiculous for a student loan repayment (especially if you are talking about non-IBR). I mean, seriously, would you be OK still repaying your student loans when you are into your 50s and hoping to retire soon? Not to mention how much more you will pay overall due to the interest accrual on that loan for 25 years (assuming you aren't doing IBR). And then, trying to get another $200K loan to buy an average size house in the suburbs would be completely unrealistic...

He's in no worse situation than someone starting off making in the $50s with no loans. And eventually most of these people are able to buy houses, etc. Here's what I would do. Take the repayment plan with the lowest monthly option. Live as frugally as possible. Put extra money, raises, and bonuses into paying down the principal. In 5 years, assuming 5% raises, he'll be making about 90k. With some of the loans paid down and the higher income he will be able to start thinking about getting a mortgage. $90k income with a conservative 36% debt to income comes out to $2700/mo. Subtract a min $700 student loan payment and maybe $200 for a car, he will still be able to throw around $1800/mo for a mortgage which should get him above $200k.

The commute is brutal, and even more so if you are talking about working a shitton of hours like attorneys typically do. At 3AM I live about 35 minutes from the loop. Taking the train during the day that's about a 1.5-2 hours commute (driving it can be even longer). Adding 3-4 hours a day in addition to a 50+ hour work week would be pretty awful for a job where you are only bringing home $25K post-taxes and post repaying your student loans (see my next point)

He said the job has pretty reasonable hours. I know a guy who lives in Elburn and works downtown and his total commute is 1.5 hours door to door. And OP doesn't necessarily have to go that far out. It still sucks but is better than running up a bunch of credit card debt to support having a "nicer" place in the city.

With the IBR at $700/mo he'll have a little over $40k post tax and post loans not $25k.

How are you coming up with this? Are you assuming the 25 year repayment? If so, then that's why your numbers are a lot better then mine.

Yes, this assumes 25yr repayment, either IBR or standard. Just from an accounting standpoint, since he's getting the benefit of the law degree over the course of a 30+ year career it's perfectly reasonable to amortize the cost that way as well. And realistically, this is how someone in his position is going to probably pay it off.

We agree $70k doesn't go that far, but we differ on whether he's screwed for life or not. I hope some of the people considering law school who are thinking "I'd be thrilled to be making $70k" are reading this and understand what they are getting into and what their quality of life is going to be like on that "above average" income.

The scary thing here is compared to a lot (most?) law grads this guy is actually in much better shape. He has an offer, for a job as a lawyer, with some sort of career/advancement potential (and presumably some benefits), and will be graduating in the top half of a top 25 school with a high but not uncommon amount of debt.

[XxSpyKEx]

OP is eligible for IBR in the job he's considering: the above poster doesn't seem to understand how this program works.

How does working for a for-profit insurance company qualify under the public service 10 year loan forgiveness under IBR? ... OP would be eligible for the 25 year plan, but that is pretty much a bullshit plan where you repay 15% of your salary for 25 years while the total size of your loans increases (meaning not being able to buy things like a house or a car ever since you will probably have something like $250K in student loans after 15+ years). Additionally, you get with with a massive tax bill in 25 years since the discharge is considered income, pretty much meaning if you are broke as a joke and haven't saved up a ton of money to throw away at paying your taxes for that year you will be going bankrupt in 25 years and then probably just reorganizing that debt to continue paying it (or if you have assets such as a house that you will have to sell your house to pay your taxes on the loan forgiveness!). Also, 25 years is a really long time and it's completely possible that this thing changes or even goes away completely so then there is the possibiilty of having to start repaying $250K of the remaining loans (based on interest accrual after that period) after 15 or 20 years. IMO, the best bet is to just try to repay those loans quickly as possible or doing IBR through something that qualifies for public service (since you get complete forgiveness in 10 years w/ no tax bill). But what sucks for OP is that repaying the loans as quickly means living shittier then a high school grad that manages a McDonalds for a good 10 years or more..

The "25 years is a long time" argument is a old one, lots of posters have propped up that strawman in previous threads. The argument badly flawed in that it suggests sweeping changes to educational lending are possible over the next 25 years, yet somehow overlooks the possibility that those changes will result in benefits available under the IBR/LRAP programs being increased, rather than decreased.

[insert bahama's last post here -- I'm too lazy to quote this right not]

I don't I guess it's the American thing to do to rack up your credit cards, buy houses, and spend a shitton of money that you don't have by going into debt past your eyeballs. Then when you get laid off and really start feeling the heat of your creditors calling you all hours of the night and harassing to just file bankruptcy. I guess that's probably why they got rid of the chapter of bankruptcy that gives you total forgiveness (along with getting rid of student loan forgiveness altogether). But, I'll tell you guys this much, the idea of living like this sure as hell bothers me. I mean whatever happened to the typical suggestion of "don't borrow more then you can pay off in a year of work?" Now it's more like "borrow as much as you need/want and even paying it off for the rest of you life isn't that bad of a deal since you will be working in you career for the rest of you life." Best of luck you massive debtors... I want to just film a commercial right now advertising law school "borrow as much as you need to, and don't worry about massive student loans, and remember when you feel the heat of the creditors, just borrow more, and when no one will lend you money, even at the highest of interest rates, then file bankruptcy. Just remember it's the American way."

[Anonymous User]

Hey, this is OP again. I accepted the offer today. After reading what was said above, I am actually feeling pretty good about the deal now. I didn't really know about IBR before and after reading about it a bit more it does seem like a really good deal, at least for the short term for me. I estimate that with IBR I pay significantly less a month in loans after taxes and deductions decrease my AGI, which I am very happy about. Thanks to everyone that replied!

[James Bond]

Hey, this is OP again. I accepted the offer today. After reading what was said above, I am actually feeling pretty good about the deal now. I didn't really know about IBR before and after reading about it a bit more it does seem like a really good deal, at least for the short term for me. I estimate that with IBR I pay significantly less a month in loans after taxes and deductions decrease my AGI, which I am very happy about. Thanks to everyone that replied!

Congrats on the job

[SteelReserve]

OP,

Congratulations on taking the job. Sure the loans are going to sting and hurt but you knew that when you signed on the dotted line for Sallie Mae. All in all you came out winning and best of luck to you.

[James Bond]

OP,

Congratulations on taking the job. Sure the loans are going to sting and hurt but you knew that when you signed on the dotted line for Sallie Mae. All in all you came out winning and best of luck to you.

A $70k job ITE is most definitely a win

[ggocat]

OP,

Congratulations on taking the job. Sure the loans are going to sting and hurt but you knew that when you signed on the dotted line for Sallie Mae. All in all you came out winning and best of luck to you.

A $70k job ITE is most definitely a win

TITCR. Even with top 40% from UIUC in a normal economy, I would suspect $70K in-house is a win.

[09042014]

OP,

Congratulations on taking the job. Sure the loans are going to sting and hurt but you knew that when you signed on the dotted line for Sallie Mae. All in all you came out winning and best of luck to you.

A $70k job ITE is most definitely a win

TITCR. Even with top 40% from UIUC in a normal economy, I would suspect $70K in-house is a win.

Definite win. ITE its an epic win.

[General Tso]

OP,

Congratulations on taking the job. Sure the loans are going to sting and hurt but you knew that when you signed on the dotted line for Sallie Mae. All in all you came out winning and best of luck to you.

A $70k job ITE is most definitely a win

TITCR. Even with top 40% from UIUC in a normal economy, I would suspect $70K in-house is a win.

TITCR x 1,000,000,000

Even with top 40% from UIUC in a normal economy, I would suspect $10/hr mopping floors is a win.

[XxSpyKEx]

Even with top 40% from UIUC in a normal economy ... $10/hr mopping floors is a win.