how long does it REALLY take to pay the debt!?

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edcrane
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Re: how long does it REALLY take to pay the debt!?

Postby edcrane » Wed Jul 30, 2008 12:36 pm

lollypotter wrote:I think the financial analysis shows that you can pay off the debt quite quickly, the only issue is whether you will. Most people probably won't but then they probably would make the same poor financial decisions regardless of how much they were making, so it's besides the point.


I'm not sure the two always go hand in hand. Provided you don't get owned by the AMT, interest on your mortgage and property taxes are tax deductible, which means that in some situations it makes sense to acquire additional debt and pay off your student loans more slowly.

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JuryDueT1000
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Re: how long does it REALLY take to pay the debt!?

Postby JuryDueT1000 » Wed Jul 30, 2008 1:09 pm

SenatorDoherty wrote:
ChrisMike624 wrote:
paul1454 wrote:Glad you could enlighten us.


Take it for what it's worth. You'll live the reality soon enough.


Thank you ChrisMike. I love the advice of those in their late-20s who have lived through it all and can tell us what life in the real world is like. $10 on ChrisMike being a gunner and finishing in the bottom third.


Late-20s, or late-40s I've been successful enough to not have to take out a loan to pay for my schooling. I can be in the bottom third and I'll still be making more money than you!

zeezoo
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Re: how long does it REALLY take to pay the debt!?

Postby zeezoo » Wed Jul 30, 2008 1:52 pm

If you can avoid the trap and concentrate on the student loan you can pay it off real fast. Just avoid the temptation.


Why avoid temptation to enjoy life? How is buying things that make you happy if you can afford them a trap? Why is everyone so eager to pay off their loans if it involves a sacrifice? Personally, I would much rather live and enjoy my late-twenties and early thirties than squander money to pay off my loans ASAP. You could get hit by a fucking bus any day! Unless you absolutely loathe biglaw, it seems silly to scrounge for a few years to pay off your loans faster so you can live like a baller in the future--most of the people who do that end up with a very large estate, which is a very big travesty. If all goes well, I hope I have absolutely no net worth when I croak :)

Chem_PhD
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Re: how long does it REALLY take to pay the debt!?

Postby Chem_PhD » Wed Jul 30, 2008 2:22 pm

Why is everyone so eager to pay off their loans if it involves a sacrifice?
There is a freedom that comes with being debt-free. You can follow any career path you choose and aren't limited by debilitating debt. With 180k in loans, essentially your only career option is biglaw. With zero debt, you can go into public interest, open your own practice, choose a lifestyle firm, go into politics, start a business, take time off to have a family, work for the government, travel, live abroad, etc. I don't want to wake up one day and realize that I hate my job and I have 10+ years of paying off debt before I can do anything about it.

I plan to pay off the majority of my debt as quickly as possible to expand my options and minimize financial risk to my family should something happen to prevent me bringing in an adequate income (injury, layoff, illness).

typodragon
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Re: how long does it REALLY take to pay the debt!?

Postby typodragon » Wed Jul 30, 2008 2:36 pm

I'm counting on all of you to blow your money on expensive cars, houses, and cocaine.

lawgirl
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Re: how long does it REALLY take to pay the debt!?

Postby lawgirl » Wed Jul 30, 2008 2:45 pm

typodragon wrote:I'm counting on all of you to blow your money on expensive cars, houses, and cocaine.


hahaha...


but, to the OP - you need to def pay more than 20k. it won't take you seven years.

fwiw - right now i'm a freakin secretary with all sorts of crap freelance work and i can pay off close to 10k this year. granted, i live in houston, live in a semi decent apt (in a fab area though!), and still drive the civic i bought seven years ago....

also, no mortgage, and no cocaine helps relieve expenses, too.

typodragon
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Re: how long does it REALLY take to pay the debt!?

Postby typodragon » Wed Jul 30, 2008 3:02 pm

lawgirl wrote:also, no mortgage, and no cocaine helps relieve expenses, too.


that's a big if for most lawyers.

it's worth mentioning that any amount you throw at principle is going to be above the 15-20k a year you're paying in interest. the interest payments will go down as you eat into the loan, but unless you get a jump start on it you're gonna be paying for a long time. if you owe 180, and you want to pay off 1/4 of that in your first year, that'd be like 60k. that buys a lot of cocaine. live for the now.

snotrocket
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Re: how long does it REALLY take to pay the debt!?

Postby snotrocket » Wed Jul 30, 2008 5:57 pm

With 180k in loans, essentially your only career option is biglaw.

Well, it's not your only option. You have to be willing to live on less, but with CCRAA, you do have a choice. It's tough, but you can make it work. To put the big law example in perspective, here's what it would look like if you made $45k per year and relied on IBR. Your level of debt doesn't affect your payments here -- only your total income. And $45k is actually the largest mode in the salary distribution of private sector attorneys, so this applies for a lot of attorneys in the private sector as well as public. The big difference is getting forgiveness after 10 years rather than 25 if you land a public sector or public interest job.

Code: Select all

YEARLY
------------------------
Gross            45,000
403(b)           (4,500)
SLI              (2,500)
AGI              38,000

Gross            45,000
Deductions       (7,000)
Federal Tax      (4,335)
FICA             (3,443)
State Tax        (1,900)
------------------------
TAKE HOME        28,323
------------------------

IBR
------------------------
Poverty Level    15,600
IBR %             0.150
Payment            (280)
Interest           (280)
Principal             0
Annual Interest  (3,360)
NET %            (0.119)
GROSS %          (0.075)
------------------------

MONTHLY
------------------------
Income            2,360
Loans              (280)
------------------------
SPENDABLE         2,080
------------------------

10 YEARS
------------------------
Loans           (33,600)
Savings          45,000
------------------------

If you get married and have two people making $45k, then with IBR and 10 year forgiveness you can actually do pretty well. Your payments go up to around $600 per month due to the higher joint income. But ten years out you would have no debt and about $200k saved for retirement -- and you would have around $3,600 per month to live on. That's not the lap of luxury, but it's not the threshold of hell either. Bobby Big Law would have paid off his loans in 3 - 5 years and saved about four times as much as you in that same time. But then he also had to work in Big Law for a decade.

snotrocket
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Re: how long does it REALLY take to pay the debt!?

Postby snotrocket » Wed Jul 30, 2008 6:25 pm

It's practically like having a mortgage, except you have no asset but you education which doesn't appreciate and you owe over $150k+...

I have yet to see a house that will generate $60 - 160k gross income for you each year. And the national average rate of "appreciation" for real estate is about even with inflation over the long term.

Some people do better in some markets some of the time. Others get slaughtered when they overpay, or the market turns, or they have to sell on short notice. On the whole, residential real estate is not even a mediocre performer compared with other asset classes. And in most cases it's a net loss when you account for all related costs. But if you make a sensible down-payment and choose a house that fits your needs and your means, then it is still the best way for most people to manage the unavoidable expense of having a place to live.

Commercial real estate -- which is an actual investment -- is a whole other matter. You need a good bit of capital to get started in direct ownership. But you can do quite well with it if you get into the right location and keep your leverage at a sensible level.

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edcrane
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Re: how long does it REALLY take to pay the debt!?

Postby edcrane » Wed Jul 30, 2008 7:06 pm

snotrocket wrote:
It's practically like having a mortgage, except you have no asset but you education which doesn't appreciate and you owe over $150k+...

I have yet to see a house that will generate $60 - 160k gross income for you each year. And the national average rate of "appreciation" for real estate is about even with inflation over the long term.

Some people do better in some markets some of the time. Others get slaughtered when they overpay, or the market turns, or they have to sell on short notice. On the whole, residential real estate is not even a mediocre performer compared with other asset classes. And in most cases it's a net loss when you account for all related costs. But if you make a sensible down-payment and choose a house that fits your needs and your means, then it is still the best way for most people to manage the unavoidable expense of having a place to live.

Commercial real estate -- which is an actual investment -- is a whole other matter. You need a good bit of capital to get started in direct ownership. But you can do quite well with it if you get into the right location and keep your leverage at a sensible level.


On the other hand the government doesn't subsidize most other asset classes. Assuming you're making decent bucks, tax deductions for interest payments and property taxes will reduce associated expenses by a little less than a 1/3, which is quite substantial.

snotrocket
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Re: how long does it REALLY take to pay the debt!?

Postby snotrocket » Wed Jul 30, 2008 8:03 pm

On the other hand the government doesn't subsidize most other asset classes. Assuming you're making decent bucks, tax deductions for interest payments and property taxes will reduce associated expenses by a little less than a 1/3, which is quite substantial.

Sure, that's why -- provided you don't go insane and buy something way above your means -- it beats renting in most cases. But you're still going to get more in terms of real, long term return from maxing out 401(k) and IRA accounts and choosing a mix of real investments like stocks, bonds, and REITs.

My point is just that many people buy far larger houses and pay far more than they should because, "hey, it's an investment!" It makes very good sense as a shelter expense management vehicle -- up to a point. If you wind up "house poor" like most buyers do, then you're just screwing yourself.

And I think you could argue that getting a $180,000 education for about 1/6 the sticker price in total payments is pretty much the king boss of all subsidies.

Amory Blaine
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Re: how long does it REALLY take to pay the debt!?

Postby Amory Blaine » Wed Jul 30, 2008 9:24 pm

typodragon wrote:I'm counting on all of you to blow your money on expensive cars, houses, and cocaine.


This sounds like its going to be awful - only go to Dorsia like once a week and the rest the week you're going to have to go to restaurants that don't have good bathrooms to do coke in.

sorry paul

frazz
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Re: how long does it REALLY take to pay the debt!?

Postby frazz » Wed Jul 30, 2008 10:32 pm

.
Last edited by frazz on Wed Aug 20, 2008 12:51 am, edited 1 time in total.

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suite1718
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Re: how long does it REALLY take to pay the debt!?

Postby suite1718 » Wed Jul 30, 2008 11:14 pm

frazz wrote:
I'm going to address the dumb potential responses now:

a) One firm doesn't mean that the whole market is bad!
Response: You are, as the french say, a major league idiot. Not because you are wrong, but because you think that I haven't considered this idea. You are right, but the point is that a prestigious firm fired nearly 100 attorneys with great law degrees today. That is not a good thing, and it means that it is possible for lawyers with prestigious degrees to suddenly lose their jobs in firms you might not expect.

b) The market now isn't indicative of how it will be in three years!
Response: I know, of course it isn't. The point isn't that the layoffs that are happening now mean that the trend is destined to continue, the point is, once again, that there is a greater element of uncertainty than you may realize.


You're kickin' your ass! :wink:

Image
"I'm kicking my ass. Do you mind!?!"

frazz
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Re: how long does it REALLY take to pay the debt!?

Postby frazz » Wed Jul 30, 2008 11:19 pm

.
Last edited by frazz on Wed Aug 20, 2008 12:52 am, edited 1 time in total.

zeezoo
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Re: how long does it REALLY take to pay the debt!?

Postby zeezoo » Thu Jul 31, 2008 8:07 pm

With zero debt, you can go into public interest, open your own practice, choose a lifestyle firm, go into politics, start a business, take time off to have a family, work for the government, travel, live abroad, etc. I don't want to wake up one day and realize that I hate my job and I have 10+ years of paying off debt before I can do anything about it.


Then why are you paying sticker price and going into debt if you don't want biglaw? All of the options you listed do not require that you go to a top law school, and unless you are targeting T3/T4 law schools(which I asume you are not based on the title of this forum)--then you could get a full ride to a lower tier law school, or take advantage of LRAP if you wanted public interest.

The way law school admissions currently operates allows a lot of applicants with the opportunity of a full ride. Everyone at a T14 could get a full ride to multiple tier 1 schools. And tier1 students could get scholarships to T2/3 etc....

If you are so concerned with flexibility, perhaps you should not go to law school yet and work a few years to decide what it is that you actually want to do. Imagine if you used the same logic on a med student. Would you advise them to go through med school, residency, etc, if they were strongly questioning if they were going to hate being a doctor?

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dbt
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Re: how long does it REALLY take to pay the debt!?

Postby dbt » Fri Aug 01, 2008 1:48 am

Hmm well this is an enlightening thread. I did a spreadsheet, though I'm not too knowledgeable when it comes to loans, but I'm guessing it's about right? I'm assuming that (in this scenario) I apply to my top choice NYU ED, get in, get no merit aid, and am maxing out Stafford loans unsubsidized at 20,500/yr and GradPLUS at 49,500/yr (assuming 70k/yr should cover all expenses for the 2009-12 years that I'll be in law school). This seems to paint a dreary picture:

http://www.flickr.com/photos/29115704@N ... 2/sizes/o/

This is assuming paying 40k a year beginning in the fall after graduation, figuring 160k/yr. The repayment part is lacking though, since I didn't take into account bonuses (which most should expect 15-20k) and salary increases (10k/yr?). Even then, the initial data concerning the accrual of interest stands. Or is this right?

20k a year in merit aid is starting to look really good.


EDIT:

I didn't even take into account the repayment of Stafford loans and forgot to add the interest since they'd likely be unsubsidized! But anyways, this is at paying 40k/yr and it looks like it would take roughly 7 years to pay it off. But like I said, I'm guessing you could hit the big principal loan with bonuses/salary increases each year. As for living expenses, I figured this?

Salary 160,000
Taxes 62,400 (@ 39%, assuming that will cover all of them)
Living 30,000 (2,500/mth)
Food 9,000 (750/mth)
Other bills 12,000 (1,000/mth NO NEW CAR!!!#@$#@%@#)
Extra Living Expenses 6,000 (500/mth)

Total Leftover 40,600

The leftover should increase each year and there should hopefully be a bonus to tag in there, so maybe everything could be comfortably paid off in 5 years. But is the money I've set aside enough to live comfortably?

zeezoo
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Re: how long does it REALLY take to pay the debt!?

Postby zeezoo » Sat Aug 02, 2008 9:03 am

All of this analysis also completes ignores this simple fact:

How much money would you make in 3 years if you did not attend law school?

For most of us, even when you subtract loan payments, we will earn more from biglaw than our alternative career options.
Last edited by zeezoo on Sat Aug 02, 2008 9:42 am, edited 1 time in total.

typodragon
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Re: how long does it REALLY take to pay the debt!?

Postby typodragon » Sat Aug 02, 2008 9:27 am

maybe you're just not thinking outside of the box in terms of finding possible careers. maybe it wouldn't be so bad to pay your dues and work your way up the ranks in a company.

zeezoo
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Re: how long does it REALLY take to pay the debt!?

Postby zeezoo » Sat Aug 02, 2008 9:46 am

yea clearly you know more about my career options than I do.

Not even the most cynical writers on law have suggested that attending a top14ish school is a bad investment.

typodragon
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Re: how long does it REALLY take to pay the debt!?

Postby typodragon » Sat Aug 02, 2008 11:08 am

Sorry. I'm being silly, and I trust you'll take good care of your own career without my help. I do think that it can be a good investment for many people, and I hope it is for you.

At the same time, I suspect that a cult of belief has taken over that tells graduates with liberal arts degrees that they are unemployable without a law degree. Maybe a women's studies degree from podunk state isn't worth much on the market as a credential, but the law school or the poor house dichotomy that gets tossed around strikes me as a flawed picture perpetuated as an excuse by liberal arts grads too lazy or distracted to get a real job who want to rationalize going to law school without any real desire to practice law.

clothilde_168
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Re: how long does it REALLY take to pay the debt!?

Postby clothilde_168 » Sat Aug 02, 2008 11:41 am

I think a lot of people are assuming that after law school, the goal is either a job in BigLaw or working for public interest and using a school's LRAP. I would certainly see going to a T14 as a great investment in either case. But what if this is not your goal? What if you simply want to work for the government or a small/mid-size firm, hit a middling salary (around 80K), practice what you love, get great benefits and hours, and raise a family. If this is your goal, then I find paying off 180K in loans a little hard to swallow. In this case, a scholarship at a Tier 1 schools begins looking pretty good.

T14s offer you geographic freedom, which is huge. Scholarships offer you a different type of freedom. I guess it all depends on what stage of life you are in and what you value most.
Last edited by clothilde_168 on Sat Aug 02, 2008 11:41 am, edited 1 time in total.

zeezoo
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Re: how long does it REALLY take to pay the debt!?

Postby zeezoo » Sat Aug 02, 2008 11:41 am

I had a degree that allowed me to get a job with a starting salary much higher than the median for college graduates as a whole. And since I worked in accounting/finance, I knew what everyone got paid, from college grad to Vice President's, and I knew the amount of years of WE required for each job.

Attending a T14 law school was without question a choice that should increase my future earning power--liabilities included.

If you are accepted to a T14 law school there are probably only a few rare reasons that would cause it to be -EV or at least would make you think about the choice

1) You are a highly gifted entrepreneur
2) You have a job at an investment bank
3) You have at least 2 years WE and have been accepted to a Holy 7 MBA program
4) You work at McKinsey(an MBA in the future is probably a better option)
5) You are very old and make a lot of money(which means you probably would have never taken the LSAT and applied to law school unless you had a damn good reason)




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