Twenty's guide to new (ish) LRAPs

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abl
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Re: Twenty's guide to new (ish) LRAPs

Postby abl » Fri Jul 26, 2013 12:35 pm

For the most part, unless a school stops contributing entirely above a certain threshold (i.e, Chicago), you can typically expect to add a third of whatever amount is above the maximum "100% contribution" threshold. You can also typically count on lower 100% contribution thresholds to ultimately cost more than their higher counterparts:

Chicago, if you're making 75k, you pay $0. If you're making 85k, you pay $6780 a year (PAYE).

Harvard, if you're making 75k, you pay $10,400 a year. If you're making 85k, $14,400/yr.

The only difference in threshold I can see is schools that use a third above a cap contribution (i.e, Columbia) > Chicago, since Chicago literally cuts off after 80k, and Columbia is 1/3 contribution over 71k. Columbia at $80,001 you'd be paying $324 a year, and at Chicago you'd be paying $6780 a year.


Ok, in that case can you maybe do some more outlining of the differences between the schools that use PAYE and other federal programs and the schools that do not? My intuition is that there's no way that Chicago, say, has a better LRAP program than Harvard, but hey -- maybe I'm wrong. I know, for example, that Stanford is a bit more generous than Yale, but covers fewer scenarios. Your description right now shows that Stanford covers fewer scenarios than Yale but not the second part of the equation.

dkb17xzx
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Re: Twenty's guide to new (ish) LRAPs

Postby dkb17xzx » Fri Jul 26, 2013 1:20 pm

twentypercentmore wrote:
dkb17xzx wrote:I was hoping someone would be able to help me out with PAYE eligibility.

I took out federal loans in 2006 (before Oct 1., 2007) and had an active balance (the loans from 2006) on and after Oct 1, 2007.

Am I ineligible?


You're ineligible for PAYE, but you are not ineligible for IBR. The good news is, if you do get an LRAP eligible spot, it wouldn't have mattered anyway since the school will (generally -- I think GULC is an exception) just as soon take care of IBR payment as PAYE payments. The bad news is, any other kind of employment, including biglaw for the 20-25 year track, is now significantly more expensive.

Is there any way you can pay off your student loans before you go to law school?



thank you for your response.


all of the loans? or the ones before Oct 1, 2007? no for the first one. yes for the second one.

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Fri Jul 26, 2013 1:21 pm

abl wrote:Ok, in that case can you maybe do some more outlining of the differences between the schools that use PAYE and other federal programs and the schools that do not? My intuition is that there's no way that Chicago, say, has a better LRAP program than Harvard, but hey -- maybe I'm wrong. I know, for example, that Stanford is a bit more generous than Yale, but covers fewer scenarios. Your description right now shows that Stanford covers fewer scenarios than Yale but not the second part of the equation.


Keep in mind that just because at a certain point, Chicago's LRAP does provide more benefit than does Harvard's, that doesn't implicitly mean that Harvard's is a worse LRAP. For instance, if you were looking to start your own firm right out of law school, Harvard's LRAP is exponentially better than Chicago's, since 1) it covers private sector employment, and 2) once you do start making a fair amount of money, you're not penalized for not being in PSLF.

Also, since Harvard's LRAP is theoretically limitless, if you work in a midlaw job that's way above any threshold for other LRAPs (say, 120k/yr), and you have 220k of debt that you'd otherwise be shelling out 32k a year on in payments, Harvard's LRAP will drop your overall payment to about 27k/yr. Obviously that's peanuts once you get up in that range, and certainly if you're in a midlaw job, 120k salary isn't going to last for long -- but the point remains that at some level, Harvard's LRAP could feasibly be better than Chicago's, even though the dollar amount is lower from the getgo.

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Fri Jul 26, 2013 1:26 pm

dkb17xzx, if you had an outstanding balance on a direct loan before October 1 2007, AND you continued to have an outstanding balance when you received a direct loan after that date, you're ineligible.

If you want to make absolutely certain, I'd highly recommend contacting the DoED. They are incredibly fast -- I've contacted them several times to double-check information I've provided in this thread, and they've always gotten back to me within two working days.

https://studentaid.ed.gov/contact

abl
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Re: Twenty's guide to new (ish) LRAPs

Postby abl » Fri Jul 26, 2013 2:03 pm

Keep in mind that just because at a certain point, Chicago's LRAP does provide more benefit than does Harvard's, that doesn't implicitly mean that Harvard's is a worse LRAP. For instance, if you were looking to start your own firm right out of law school, Harvard's LRAP is exponentially better than Chicago's, since 1) it covers private sector employment, and 2) once you do start making a fair amount of money, you're not penalized for not being in PSLF.


That's why I think it could be helpful to run a couple examples for each of these schools -- say, to see how a single graduate making $30,000, $45,000, and $60,000 fairs in each of these programs in a 10 year and 20 year repayment -- similar to what the previous LRAP thread did.

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Fri Jul 26, 2013 3:23 pm

abl wrote:
Keep in mind that just because at a certain point, Chicago's LRAP does provide more benefit than does Harvard's, that doesn't implicitly mean that Harvard's is a worse LRAP. For instance, if you were looking to start your own firm right out of law school, Harvard's LRAP is exponentially better than Chicago's, since 1) it covers private sector employment, and 2) once you do start making a fair amount of money, you're not penalized for not being in PSLF.


That's why I think it could be helpful to run a couple examples for each of these schools -- say, to see how a single graduate making $30,000, $45,000, and $60,000 fairs in each of these programs in a 10 year and 20 year repayment -- similar to what the previous LRAP thread did.


Unfortunately, unlike past LRAP programs which offered very clear information on their forgiveness programs, IBR->PSLF programs are fairly nebulous. I only found out that UChicago completely drops off once you reach their threshold from a poster who contacted the financial aid office. For instance, GULC's only mention of post-maximum contribution is, "Georgetown Law benefits would continue on a diminishing basis for incomes exceeding $75,000." UVA's does mention that benefits stop at 75k, but between 55k and 75k, only says, "The benefits for participants who earn more than $55,000 annually are prorated based on income."

Not especially helpful.

The good news is, since IBR/PAYE are fairly straight forward, you can be sure that all your payments will be coming off a 10-year repayment plan. Even on fairly-underwhelming salaries in the 40k-45k range, you're certainly not going to be contributing to any of the LRAP programs on that list. If you're considering gunning for a PI/Govt job that pays in the 75k-90k range, then I'd recommend evaluating each LRAP program individually based on its merits to your situation. The math is fairly straight forward, but there is no one "best program" to be a part of.

For instance, if I were to do a PhD program after law school, I would pick Harvard over everything. If I were doing a dual degree, Columbia's program is no-question the best available. If I was thinking I would be jumping ship on PI once I did 3~ years of seat time, I'd absolutely pick NYU. Career goals are critical in evaluating program merit.

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StillIll
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Re: Twenty's guide to new (ish) LRAPs

Postby StillIll » Fri Jul 26, 2013 3:45 pm

Can PAYE only be used if you're in PI work? I thought it could be used to pay back your loans in general, so long as your loans > your income (or something like that). But I am very new to it and trying to get a better understanding on if it is a possible option. Could I, say, get biglaw out of Columbia with ~160,000 in debt and use PAYE?

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Fri Jul 26, 2013 3:58 pm

StillIll wrote:Can PAYE only be used if you're in PI work? I thought it could be used to pay back your loans in general, so long as your loans > your income (or something like that). But I am very new to it and trying to get a better understanding on if it is a possible option. Could I, say, get biglaw out of Columbia with ~160,000 in debt and use PAYE?


PAYE can be used for any kind of full-time work, but the forgiveness then moves to 20 years rather than 10 years for PI, and as of right now, there's a pretty big tax bomb when all that debt gets forgiven. There's another logistical issue that if you are making 200k after a year or two, but only have 160k debt, you're not going to be able to qualify for PAYE because the PAYE amount is going to be more than the amount you would have paid on a ten-year repayment plan.

Even assuming you stayed at 160k for the rest of your career, you'll be paying just under 300k towards PAYE over 20 years. That seems silly if you had half-that to start with.

If you're in 300k+ debt and you're starting off in a secondary market where the lock step starts at 145k or something, then PAYE might make sense for biglaw. Otherwise, if you're aiming for biglaw, pay off the loans as fast as you possibly can.

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Re: Twenty's guide to new (ish) LRAPs

Postby dkb17xzx » Fri Jul 26, 2013 4:04 pm

twentypercentmore wrote:dkb17xzx, if you had an outstanding balance on a direct loan before October 1 2007, AND you continued to have an outstanding balance when you received a direct loan after that date, you're ineligible.

If you want to make absolutely certain, I'd highly recommend contacting the DoED. They are incredibly fast -- I've contacted them several times to double-check information I've provided in this thread, and they've always gotten back to me within two working days.

https://studentaid.ed.gov/contact



thank you.... i appreciate it.

abl
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Re: Twenty's guide to new (ish) LRAPs

Postby abl » Fri Jul 26, 2013 4:32 pm

Unfortunately, unlike past LRAP programs which offered very clear information on their forgiveness programs, IBR->PSLF programs are fairly nebulous. I only found out that UChicago completely drops off once you reach their threshold from a poster who contacted the financial aid office. For instance, GULC's only mention of post-maximum contribution is, "Georgetown Law benefits would continue on a diminishing basis for incomes exceeding $75,000." UVA's does mention that benefits stop at 75k, but between 55k and 75k, only says, "The benefits for participants who earn more than $55,000 annually are prorated based on income."

Not especially helpful.

The good news is, since IBR/PAYE are fairly straight forward, you can be sure that all your payments will be coming off a 10-year repayment plan. Even on fairly-underwhelming salaries in the 40k-45k range, you're certainly not going to be contributing to any of the LRAP programs on that list. If you're considering gunning for a PI/Govt job that pays in the 75k-90k range, then I'd recommend evaluating each LRAP program individually based on its merits to your situation. The math is fairly straight forward, but there is no one "best program" to be a part of.

For instance, if I were to do a PhD program after law school, I would pick Harvard over everything. If I were doing a dual degree, Columbia's program is no-question the best available. If I was thinking I would be jumping ship on PI once I did 3~ years of seat time, I'd absolutely pick NYU. Career goals are critical in evaluating program merit.


Do we at least know if plans based on IBR/PAYE require you to be enrolled all 10 years or none? Can you start your enrollment one or two years post-graduation? Is there a tax hit at the end? These are relevant details.

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Fri Jul 26, 2013 4:51 pm

abl wrote:Do we at least know if plans based on IBR/PAYE require you to be enrolled all 10 years or none?


The "all or nothing" approach is inherent in all plans that ultimately use PSLF.

Can you start your enrollment one or two years post-graduation?


You can find this information under each of the school's eligibility section. I've also included schools with clerkship exceptions that defer eligibility 1-2 years.

Is there a tax hit at the end?


On the PSLF track, no. On the 20-year PAYE track (i.e, non-public interest), right now, yes. Who knows how much longer that will be a thing.

LRAP payments are not taxable.

http://www.irs.gov/pub/irs-drop/rr-08-34.pdf

Go down to § 108(f)(1).

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StillIll
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Re: Twenty's guide to new (ish) LRAPs

Postby StillIll » Fri Jul 26, 2013 7:40 pm

twentypercentmore wrote:
StillIll wrote:Can PAYE only be used if you're in PI work? I thought it could be used to pay back your loans in general, so long as your loans > your income (or something like that). But I am very new to it and trying to get a better understanding on if it is a possible option. Could I, say, get biglaw out of Columbia with ~160,000 in debt and use PAYE?


PAYE can be used for any kind of full-time work, but the forgiveness then moves to 20 years rather than 10 years for PI, and as of right now, there's a pretty big tax bomb when all that debt gets forgiven. There's another logistical issue that if you are making 200k after a year or two, but only have 160k debt, you're not going to be able to qualify for PAYE because the PAYE amount is going to be more than the amount you would have paid on a ten-year repayment plan.

Even assuming you stayed at 160k for the rest of your career, you'll be paying just under 300k towards PAYE over 20 years. That seems silly if you had half-that to start with.

If you're in 300k+ debt and you're starting off in a secondary market where the lock step starts at 145k or something, then PAYE might make sense for biglaw. Otherwise, if you're aiming for biglaw, pay off the loans as fast as you possibly can.


Thank you.

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RetakeFrenzy
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Re: Twenty's guide to new (ish) LRAPs

Postby RetakeFrenzy » Wed Jul 31, 2013 1:56 pm

bananasplit19 wrote:Thanks for doing the legwork! :D Going into the decision process this cycle, I was totally in the dark about each school's LRAP prospects. This should be stickied for future 0Ls!

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Re: Twenty's guide to new (ish) LRAPs

Postby Ti Malice » Fri Nov 01, 2013 1:34 pm

Bumping this useful thread.

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wowhio
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Re: Twenty's guide to new (ish) LRAPs

Postby wowhio » Sat Nov 02, 2013 12:49 pm

Thanks for writing this up! Extremely useful.

I'm thinking it probably does, but does anyone know if public defense work qualifies as "public interest" for the purposes of most LRAPs? (Seems like it definitely should, but who knows.)

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Sun Nov 03, 2013 3:13 am

If you're working directly for the government and you're doing a legal job, you qualify for every LRAP. Public defender is pretty much textbook definition of that. :)

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Re: Twenty's guide to new (ish) LRAPs

Postby bizzybone1313 » Sun Nov 03, 2013 3:24 am

Great.

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Re: Twenty's guide to new (ish) LRAPs

Postby masked kavana » Thu Nov 14, 2013 7:41 pm

Awesome post. Can you add a bit about the tax bomb? I've heard about it, but don't really understand how big it would be. Thanks!

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Mon Nov 18, 2013 1:53 pm

The idea behind the tax bomb is that the IRS treats forgiven loans as personal income. So when all your loans magically disappear on year 20, the IRS goes, "ohey, you just made 200k in forgiven debt." So now you're looking at owing the IRS many tens of thousands of dollars even though your actual salary was only like 70k/yr or whatever.

The removal of the tax bomb would restrict the IRS from being able to tax discovered income through student loan forgiveness. This is already true of PSLF/that teacher forgiveness program, (including any forgiven loans the school issues you to repay your federal student debt) but is not currently true of the 20-year PAYE forgiveness.

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Re: Twenty's guide to new (ish) LRAPs

Postby ColbyBryant » Mon Mar 03, 2014 2:08 pm

Hey twenty, excellent post! I keep seeing your posts everywhere. I am getting used to TLS and appreciate your PI threads.

It would be useful to add a section about how spouses are taken into account. For many of us older applicants, it is the biggest factor going into decisions about LRAPs. In fact, it made me completely ineligible for most of them (HYS). While many argue that I therefore don't deserve an LRAP (fair point), it is still something that applicants should strongly consider. Law students fall in love during law school, and certainly get married (if not in law school than within 10 years after graduating).
(Example: If you make 40k as a legal aid worker with 300k of law school loans, and your spouse makes 160k (big law) and also has 300k of law school loans, you are now ineligible for Berkeley's LRAP because your income is averaged)

From my research...

Consideration of spousal income: Grades given A, B, C, D
A: Chicago- does not care about spousal income, even if you file jointly
B: Penn - will ignore spousal income if you file separately (not given an A due to loss of tax benefits)
D: Berkeley - will consider spousal income no matter what (requires joint filing); does NOT consider spousal educational loans in their calculations
C: Harvard - anybody who has tried to fill out HLS financial aid will know that by the time you are done, they know more about your finances than you do. Spousal income counts, but they do still consider spousal educational loans. They also consider assets (ie inheritance, trusts, etc). They get a "C" and not a "D" because they take spousal educational loans into account.
B: Michigan - will ignore spousal income if you file separately (loss of tax benefits)

These are the only schools that I called and spoke with financial aid directly. It is my understanding that Y and S are the same as H in how they consider the spouse. I do not know about the rest of the T14.

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Dingo Starr
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Re: Twenty's guide to new (ish) LRAPs

Postby Dingo Starr » Mon Mar 03, 2014 2:48 pm

ColbyBryant wrote:Hey twenty, excellent post! I keep seeing your posts everywhere. I am getting used to TLS and appreciate your PI threads.

Agreed.
Also:
I therefore don't deserve an LRAP (fair point), it is still something that applicants should strongly consider.

So much this.

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Re: Twenty's guide to new (ish) LRAPs

Postby anyriotgirl » Mon Mar 03, 2014 2:59 pm

twenty wrote:Thanks Zoidberg -- you're right, Michigan's LRAP does cover low-paying private sector jobs too, but only on what appears to be a 25-year (though the website is probably out of date, and would also apply to a 20-year PAYE) timeline. This is different from Harvard or Yale's LRAPs, which are on ten-year timeframes even with non-PSLF qualifying jobs. Only PSLF-qualifying jobs are eligible for Michigan's ten-year LRAP, as it ties in to the forgiveness clause.

I've updated the OP to reflect this option. Thanks again. :)


doxing myself to Michigan's LRAP lady if shes's reading this, but I've spoken to her on the phone, and she says that the program now uses PAYE instead of IBR for those who qualify. The other cool thing about this program is that while you are in it, if your PAYE payments aren't covering all of your interest, M puts the balance into escrow, and when you leave the program you can cash out the account. Essentially, it means that you won't leave the program with a higher loan balance than you started with.

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Re: Twenty's guide to new (ish) LRAPs

Postby ColbyBryant » Mon Mar 03, 2014 3:01 pm

Dingo Starr wrote:
ColbyBryant wrote:Hey twenty, excellent post! I keep seeing your posts everywhere. I am getting used to TLS and appreciate your PI threads.

Agreed.
Also:
I therefore don't deserve an LRAP (fair point), it is still something that applicants should strongly consider.

So much this.


There are subtle differences in income that will make people ineligible for certain LRAPs, with spousal income being an enormous variable that most of these threads do not take into account. I mean there are countless threads discussing how paying off 300k in loans on a big law salary is terrifying. Now imagine that big lawyer has a do gooder spouse that they met in law school. THAT is terrifying. All PI applicants who are entertaining the possibility of getting married in the next 8 to 12 years should at least review how a spouse enters the equation.

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Mon Mar 03, 2014 3:16 pm

ColbyBryant wrote:Hey twenty, excellent post! I keep seeing your posts everywhere. I am getting used to TLS and appreciate your PI threads.

It would be useful to add a section about how spouses are taken into account. For many of us older applicants, it is the biggest factor going into decisions about LRAPs. In fact, it made me completely ineligible for most of them (HYS). While many argue that I therefore don't deserve an LRAP (fair point), it is still something that applicants should strongly consider. Law students fall in love during law school, and certainly get married (if not in law school than within 10 years after graduating).
(Example: If you make 40k as a legal aid worker with 300k of law school loans, and your spouse makes 160k (big law) and also has 300k of law school loans, you are now ineligible for Berkeley's LRAP because your income is averaged)

From my research...

Consideration of spousal income: Grades given A, B, C, D
A: Chicago- does not care about spousal income, even if you file jointly
B: Penn - will ignore spousal income if you file separately (not given an A due to loss of tax benefits)
D: Berkeley - will consider spousal income no matter what (requires joint filing); does NOT consider spousal educational loans in their calculations
C: Harvard - anybody who has tried to fill out HLS financial aid will know that by the time you are done, they know more about your finances than you do. Spousal income counts, but they do still consider spousal educational loans. They also consider assets (ie inheritance, trusts, etc). They get a "C" and not a "D" because they take spousal educational loans into account.
B: Michigan - will ignore spousal income if you file separately (loss of tax benefits)

These are the only schools that I called and spoke with financial aid directly. It is my understanding that Y and S are the same as H in how they consider the spouse. I do not know about the rest of the T14.


Since I wrote the OP, a lot of people have come to me with these concerns, which I generally try and explain on a case-by-case basis. The good news is, PAYE does not take into account spousal income unless you file jointly. That does suck, but it means that at the very worst, you pay 3-6k/yr.

For what it's worth though, the IBR LRAP schools that do not consider spousal income are:

Chicago
GULC
Penn*
Michigan*

*(if you file separately)

The schools that do consider spousal income are:

NYU
Columbia
Stanford
Duke(???)
UVA
Berkeley
Northwestern(???)

*(???, not 100% sure about these, would need to contact financial aid office)

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twenty
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Re: Twenty's guide to new (ish) LRAPs

Postby twenty » Mon Mar 03, 2014 3:17 pm

Now imagine that big lawyer has a do gooder spouse that they met in law school.


In fairness, almost without exception, LRAPs will then treat both people in the marriage as individuals. That's actually less of a problem than if one spouse was in biglaw.




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