BigLaw and Loan Payments

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ganggreen
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BigLaw and Loan Payments

Postby ganggreen » Wed Apr 04, 2012 11:37 am

I'm looking at more than $200k in loans if I go T14. This question is for graduates or students who have talked to graduates...

If I do BigLaw, I want to pay off my loans as quickly as possible. If I live as frugally as one can in NYC, how much can I realistically put towards the loan making $160k? 30? 35? More?

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englawyer
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Re: BigLaw and Loan Payments

Postby englawyer » Wed Apr 04, 2012 11:43 am

100k after tax approximately. figure out a budget based on that. if you live in your parent's manhattan condo within walking distance to work rent-free you can pay way more loans than if you rent a 2BR for yourself etc.

FloridaCoastalorbust
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Re: BigLaw and Loan Payments

Postby FloridaCoastalorbust » Wed Apr 04, 2012 11:57 am

Use the initial debt number as an approximation:

Total indebtedness at graduation: $180,394
Total payment plan (10 year monthly payments): $256,972

Total payment/month: $2,141

Biglaw - NYC
Gross: $160,000
Net before debt: $96,366.48
Net after debt: $68,278.32

Biglaw - DC/Chicago
Gross: $160,000
Net before debt: $103,272.96
Net after debt: $75,184.80

Biglaw - Dallas
Gross: $160,000
Net before debt: $111,368.40
Net after debt: $83,280.24


In NYC, at a market paying gig, you can expect to net around $65k-$70k if you are on a 10-year repayment plan. Add in what, $1500 for rent(?), and you take home $47k-$52k.

Renzo
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Re: BigLaw and Loan Payments

Postby Renzo » Wed Apr 04, 2012 12:01 pm

Really depends of how dedicated you are to being frugal.

I can feed, clothe, house, entertain, etc. myself and my family frugally but comfortably for $70k/year. So, after taxes I will contribute about $30k out of $160k to paying loans, savings, buying opium, and whatnot. If I were a single, unencumbered dood, and willing to have a roommate and commute a little further, I could probably add another $35k/yr to that amount.

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Mr. Somebody
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Re: BigLaw and Loan Payments

Postby Mr. Somebody » Wed Apr 04, 2012 12:06 pm

FloridaCoastalorbust wrote:Use the initial debt number as an approximation:

Total indebtedness at graduation: $180,394
Total payment plan (10 year monthly payments): $256,972

Total payment/month: $2,141

Biglaw - NYC
Gross: $160,000
Net before debt: $96,366.48
Net after debt: $68,278.32

Biglaw - DC/Chicago
Gross: $160,000
Net before debt: $103,272.96
Net after debt: $75,184.80

Biglaw - Dallas
Gross: $160,000
Net before debt: $111,368.40
Net after debt: $83,280.24


In NYC, at a market paying gig, you can expect to net around $65k-$70k if you are on a 10-year repayment plan. Add in what, $1500 for rent(?), and you take home $47k-$52k.


Does anyone know what the net figures are for CA?

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jrthor10
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Re: BigLaw and Loan Payments

Postby jrthor10 » Wed Apr 04, 2012 12:08 pm

More info like this.

FloridaCoastalorbust
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Re: BigLaw and Loan Payments

Postby FloridaCoastalorbust » Wed Apr 04, 2012 12:09 pm

fyi. as is the math above doesn't make sense, but i've redacted some personal numbers, etc. you get the general idea.

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bk1
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Re: BigLaw and Loan Payments

Postby bk1 » Wed Apr 04, 2012 12:17 pm

If you live off 60-70k/year post-tax you should be able to pay off sticker price debt (250k at graduation due to interest) in 5 years (keeping in mind bonuses/raises). It is definitely quite possible to live more frugally and pay it off in possibly 4 years (but that would be really pushing it since it would require living on around 30-40k? I haven't done that math). It's also important to note that only 20% of associates make it to 5 years.

redbullvodka
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Re: BigLaw and Loan Payments

Postby redbullvodka » Wed Apr 04, 2012 12:40 pm

Even if you don't stick it out 5 years, that trajectory puts you on a strong downward debt path, so if you leave after 3 years (the typical first wave if I'm remembering correctly) you'll have a solid amount of debt paid off, and can take in-house/smaller firm jobs that pay on order of ~100K.

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Tiago Splitter
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Re: BigLaw and Loan Payments

Postby Tiago Splitter » Wed Apr 04, 2012 12:48 pm

redbullvodka wrote:Even if you don't stick it out 5 years, that trajectory puts you on a strong downward debt path, so if you leave after 3 years (the typical first wave if I'm remembering correctly) you'll have a solid amount of debt paid off, and can take in-house/smaller firm jobs that pay on order of ~100K.


If you have 250K in debt when you graduate the monthly payments on a ten year plan are almost $3,000. After three years you'd still have around 190K in total debt. Even if you paid an extra $500 per month you're still at 170K. It wasn't long ago that sticker left you with 170-190K in debt. I need some Tylenol.

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bk1
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Re: BigLaw and Loan Payments

Postby bk1 » Wed Apr 04, 2012 12:51 pm

redbullvodka wrote:Even if you don't stick it out 5 years, that trajectory puts you on a strong downward debt path, so if you leave after 3 years (the typical first wave if I'm remembering correctly) you'll have a solid amount of debt paid off, and can take in-house/smaller firm jobs that pay on order of ~100K.


I don't necessarily agree with this. If you start with 250k debt at graduation and live off 70k/year, your debt will be around 150k after 3 years. If you then downgrade to a 100k/year job, you're looking at what, 65k after taxes? After having lived at 70k/year prior to that you're only making 65k/year without even factoring in debt repayments or the fact that you have 150k left to repay. A 4th year in biglaw on the other hand can chop that 150k almost in half.

redbullvodka
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Re: BigLaw and Loan Payments

Postby redbullvodka » Wed Apr 04, 2012 1:04 pm

bk1 wrote:
redbullvodka wrote:Even if you don't stick it out 5 years, that trajectory puts you on a strong downward debt path, so if you leave after 3 years (the typical first wave if I'm remembering correctly) you'll have a solid amount of debt paid off, and can take in-house/smaller firm jobs that pay on order of ~100K.


I don't necessarily agree with this. If you start with 250k debt at graduation and live off 70k/year, your debt will be around 150k after 3 years. If you then downgrade to a 100k/year job, you're looking at what, 65k after taxes? After having lived at 70k/year prior to that you're only making 65k/year without even factoring in debt repayments or the fact that you have 150k left to repay. A 4th year in biglaw on the other hand can chop that 150k almost in half.



If I pay off in 5 years (which I'm planning), I'd rather front load the debt, and attempt to pay 48-50K per year, at the 160K, 170K, and 185K brackets, rather than commit to 70K/year regardless of salary. Without bonuses factored in, the math looks something like this:

96K-48K(loans)=48K to live off of in year 1
102K-48K(loans)=54K to live off of year 2
111k-48K(loans)=63K to live off of year 3
126K-48K(loans)=78K to live off of year 4
138K-48K(loans)=90K to live off of year 5

Year 1 is rough, but if I end up working in NYC i have absolutely zero intention of living in Manhattan (prob Queens, Jersey City, etc.), so that should be plenty. This kicks the shit out of a medical residency, so I'm pretty happy with that debt/spending outlook.

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Tiago Splitter
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Re: BigLaw and Loan Payments

Postby Tiago Splitter » Wed Apr 04, 2012 1:11 pm

redbullvodka wrote:If I pay off in 5 years (which I'm planning), I'd rather front load the debt, and attempt to pay 48-50K per year, at the 160K, 170K, and 185K brackets, rather than commit to 70K/year regardless of salary. Without bonuses factored in, the math looks something like this:

96K-48K(loans)=48K to live off of in year 1
102K-48K(loans)=54K to live off of year 2
111k-48K(loans)=63K to live off of year 3
126K-48K(loans)=78K to live off of year 4
138K-48K(loans)=90K to live off of year 5

Year 1 is rough, but if I end up working in NYC i have absolutely zero intention of living in Manhattan (prob Queens, Jersey City, etc.), so that should be plenty. This kicks the shit out of a medical residency, so I'm pretty happy with that debt/spending outlook.


Given the uncertainty around staying in BigLaw this is probably the way to go. But that's an extremely aggressive schedule, especially in year one. Keep in mind that many firms pay an advance on your first year's salary so that you have money to live off of between graduation and your start date. They also pay the taxes on this advance for you up front. This substantially lowers your take home income in year one.

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bk1
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Re: BigLaw and Loan Payments

Postby bk1 » Wed Apr 04, 2012 5:10 pm

redbullvodka wrote:If I pay off in 5 years (which I'm planning), I'd rather front load the debt, and attempt to pay 48-50K per year, at the 160K, 170K, and 185K brackets, rather than commit to 70K/year regardless of salary. Without bonuses factored in, the math looks something like this:

96K-48K(loans)=48K to live off of in year 1
102K-48K(loans)=54K to live off of year 2
111k-48K(loans)=63K to live off of year 3
126K-48K(loans)=78K to live off of year 4
138K-48K(loans)=90K to live off of year 5

Year 1 is rough, but if I end up working in NYC i have absolutely zero intention of living in Manhattan (prob Queens, Jersey City, etc.), so that should be plenty. This kicks the shit out of a medical residency, so I'm pretty happy with that debt/spending outlook.


That's fair, though I still have some nitpicky things. That's only 240k you've paid off. That's seriously short of the amount need to pay off sticker at the more expensive T14's within 5 years (though I understand that makes sense for you since you're likely calculating based on your debt level). It's going to take someone about 7 years to payoff 250k at 4k per month. They'd have to basically go 5k/month on average to end up debt-free in 5 years. It also doesn't account for other expenses one might have. While you might not have them, some things I want to do are: set up a rainy day fund when I start, possibly get a car if I end up in CA, not sure if I want to pay into 401k (haven't done the math on it), etc.

I see the value in front-loading, but I think I'd prefer to find an amount I'm comfortable living on (I think that'll be way less than 70k but I estimate rent at an absurd 4k/month) and put everything I make above that into my loans.

Tiago Splitter wrote:Given the uncertainty around staying in BigLaw this is probably the way to go. But that's an extremely aggressive schedule, especially in year one. Keep in mind that many firms pay an advance on your first year's salary so that you have money to live off of between graduation and your start date. They also pay the taxes on this advance for you up front. This substantially lowers your take home income in year one.


I think that's a nonfactor. You'll make 20-30k as a 2L SA. That should cover 1L/2L/postgrad summer costs.

Ignatius
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Re: BigLaw and Loan Payments

Postby Ignatius » Wed Apr 04, 2012 5:19 pm

Tiago Splitter wrote:
redbullvodka wrote:Even if you don't stick it out 5 years, that trajectory puts you on a strong downward debt path, so if you leave after 3 years (the typical first wave if I'm remembering correctly) you'll have a solid amount of debt paid off, and can take in-house/smaller firm jobs that pay on order of ~100K.


If you have 250K in debt when you graduate the monthly payments on a ten year plan are almost $3,000. After three years you'd still have around 190K in total debt. Even if you paid an extra $500 per month you're still at 170K. It wasn't long ago that sticker left you with 170-190K in debt. I need some Tylenol.


haha

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Tiago Splitter
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Re: BigLaw and Loan Payments

Postby Tiago Splitter » Wed Apr 04, 2012 5:20 pm

bk1 wrote:
Tiago Splitter wrote:Given the uncertainty around staying in BigLaw this is probably the way to go. But that's an extremely aggressive schedule, especially in year one. Keep in mind that many firms pay an advance on your first year's salary so that you have money to live off of between graduation and your start date. They also pay the taxes on this advance for you up front. This substantially lowers your take home income in year one.


I think that's a nonfactor. You'll make 20-30k as a 2L SA. That should cover 1L/2L/postgrad summer costs.


Not with my lifestyle 8)

But seriously, NealRic pointed out this isse in another thread so I figured it was worth mentioning. I do think that paying down loans in the first year is especially difficult because of some of the fixed costs of moving and starting a new job. But that's probably mitigated by starting as soon as possible in the fall.

bbalcrzy23
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Re: BigLaw and Loan Payments

Postby bbalcrzy23 » Wed Apr 04, 2012 5:36 pm

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Last edited by bbalcrzy23 on Wed Jun 20, 2012 12:34 pm, edited 1 time in total.

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bk1
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Re: BigLaw and Loan Payments

Postby bk1 » Wed Apr 04, 2012 5:38 pm

bbalcrzy23 wrote:Is this a valid option?

Once you start your biglaw job, take out private loans (most likely lower interest rate) and pay off all (or some) federal loans.


What lending institution would lend anywhere near $250,000 to someone who has no assets and $250,000 in debt?

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zozin
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Re: BigLaw and Loan Payments

Postby zozin » Wed Apr 04, 2012 5:40 pm

bk1 wrote:
bbalcrzy23 wrote:Is this a valid option?

Once you start your biglaw job, take out private loans (most likely lower interest rate) and pay off all (or some) federal loans.


What lending institution would lend anywhere near $250,000 to someone who has no assets and $250,000 in debt?

Countrywide... Oh wait.

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Tiago Splitter
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Re: BigLaw and Loan Payments

Postby Tiago Splitter » Wed Apr 04, 2012 5:42 pm

bbalcrzy23 wrote:Is this a valid option?

Once you start your biglaw job, take out private loans (most likely lower interest rate) and pay off all (or some) federal loans.


A guy on here who is going into BigLaw tried this and was rebuffed.

bbalcrzy23
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Re: BigLaw and Loan Payments

Postby bbalcrzy23 » Wed Apr 04, 2012 5:48 pm

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Last edited by bbalcrzy23 on Wed Jun 20, 2012 12:34 pm, edited 1 time in total.

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englawyer
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Re: BigLaw and Loan Payments

Postby englawyer » Wed Apr 04, 2012 6:23 pm

Tiago Splitter wrote:
bbalcrzy23 wrote:Is this a valid option?

Once you start your biglaw job, take out private loans (most likely lower interest rate) and pay off all (or some) federal loans.


A guy on here who is going into BigLaw tried this and was rebuffed.


one strat is apparently to take a second mortgage on a home you own, pay off student loans, then BK. but you will get disbarred 8) .

Renzo
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Re: BigLaw and Loan Payments

Postby Renzo » Wed Apr 04, 2012 7:21 pm

englawyer wrote:
Tiago Splitter wrote:
bbalcrzy23 wrote:Is this a valid option?

Once you start your biglaw job, take out private loans (most likely lower interest rate) and pay off all (or some) federal loans.


A guy on here who is going into BigLaw tried this and was rebuffed.


one strat is apparently to take a second mortgage on a home you own, pay off student loans, then BK. but you will get disbarred 8) .


Only if you were foolish enough to make it look like you did it intentionally.

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sunynp
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Re: BigLaw and Loan Payments

Postby sunynp » Wed Apr 04, 2012 7:42 pm

I think C&F would figure that out pretty quickly. They don't like practicing lawyers to use the law to get out of student loans. Maybe if you were disabled or unemployed for a ling time, but even then I am not convinced c&f would let this pass.

Also I live in new York. I think living a biglaw lifestyle with the requisite attire and expenses can cost more than $70,000. You also need to include deducted firm costs like insurance.

I get nervous when people who haven't lived in new York calculate how cheaply they will live on a biglaw salary. And I don't think anyone should make this calculation until after they have an actual biglaw job. Biglaw is not an easy gig to get and it is not an easy gig to keep. If you go to school counting on biglaw to save your ass from debt, you need to seriously consider dropping out if you don't make it.

Renzo
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Re: BigLaw and Loan Payments

Postby Renzo » Wed Apr 04, 2012 11:44 pm

sunynp wrote:Also I live in new York. I think living a biglaw lifestyle with the requisite attire and expenses can cost more than $70,000. You also need to include deducted firm costs like insurance.

I get nervous when people who haven't lived in new York calculate how cheaply they will live on a biglaw salary. And I don't think anyone should make this calculation until after they have an actual biglaw job. Biglaw is not an easy gig to get and it is not an easy gig to keep. If you go to school counting on biglaw to save your ass from debt, you need to seriously consider dropping out if you don't make it.


While I agree with your second point, I disagree with the first; as I said, I am able to maintain my entire family on about $70k a year, so most new associates should be able to live on much less if they choose to.




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