"Don't take on debt more than your first year's salary" Forum

[Rahviveh]

I've seen this posted in several places and I saw it mentioned again in Campos' book. This seems really arbitrary to me, and would make basically any T6 or T14 at sticker a bad idea, and a regional school with a full ride a better choice. Where does this rule of thumb come from and does it really have merit when it comes to choosing law schools?

[Tuco Salamanca]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

[iMisto]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

[Real Madrid]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

There's really no such thing as T6 or T10. T6 exists only on TLS to explain hiring patterns among the top Vault NYC firms, and its usage is seriously becoming questioned as some schools like Penn are doing as well or better as NYU (a "T6"). T10 also isn't a real thing, even though the top ten schools pretty much stay the same, but people like groupings that are in neat lists like those found in a top-ten list.

"Top schools" isn't clear, but I think it's safe to assume (on TLS anyway) that top school = T14 unless otherwise specified.

[justonemoregame]

In terms of assessing your financial risk, there will be variations even within the top 14 schools. The 1:1 debt-income ratio is too strict though. You can manage 80K on 50 easily, 175K on 100, etc.

[iMisto]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

There's really no such thing as T6 or T10. T6 exists only on TLS to explain hiring patterns among the top Vault NYC firms, and its usage is seriously becoming questioned as some schools like Penn are doing as well or better as NYU (a "T6"). T10 also isn't a real thing, even though the top ten schools pretty much stay the same, but people like groupings that are in neat lists like those found in a top-ten list.

"Top schools" isn't clear, but I think it's safe to assume (on TLS anyway) that top school = T14 unless otherwise specified.

Thank you.

[nouseforaname123]

I've seen this posted in several places and I saw it mentioned again in Campos' book. This seems really arbitrary to me, and would make basically any T6 or T14 at sticker a bad idea, and a regional school with a full ride a better choice. Where does this rule of thumb come from and does it really have merit when it comes to choosing law schools?

Even if you land biglaw, the debt for a T6 at sticker qualifies for IBR.

Think about the implications of that.

[Tiago Splitter]

I've seen this posted in several places and I saw it mentioned again in Campos' book. This seems really arbitrary to me, and would make basically any T6 or T14 at sticker a bad idea, and a regional school with a full ride a better choice. Where does this rule of thumb come from and does it really have merit when it comes to choosing law schools?

Even if you land biglaw, the debt for a T6 at sticker qualifies for IBR.

Think about the implications of that.

You could also take a half-scholly, end up with debt lower than a first year BigLaw salary, and still be IBR eligible if you land BigLaw. I don't know if that says more about tuition, BigLaw salaries, or IBR.

[homestyle28]

Am I the only one annoyed by the uselessness of the advice? Someone tell me what my first year's salary would be when I'm agreeing to take on the debt? Even assuming I'm at a t-14 there's no guarantees, it could be a $35k public interest gig...it's useless advice and no help in deciding if law school is a good decision for you.

[Tuco Salamanca]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

There's really no such thing as T6 or T10. T6 exists only on TLS to explain hiring patterns among the top Vault NYC firms, and its usage is seriously becoming questioned as some schools like Penn are doing as well or better as NYU (a "T6"). T10 also isn't a real thing, even though the top ten schools pretty much stay the same, but people like groupings that are in neat lists like those found in a top-ten list.

"Top schools" isn't clear, but I think it's safe to assume (on TLS anyway) that top school = T14 unless otherwise specified.

I left it purposely ambiguous because it depends on the individual, but my personal standard would be T14 or Texas if you're from there.

[Tuco Salamanca]

Am I the only one annoyed by the uselessness of the advice? Someone tell me what my first year's salary would be when I'm agreeing to take on the debt? Even assuming I'm at a t-14 there's no guarantees, it could be a $35k public interest gig...it's useless advice and no help in deciding if law school is a good decision for you.

I am too, that's why I modified the language of it in my post. It's impossible to predict what you're going to make if you're being realistic. And it would tell you that Harvard, Stanford, and Yale are bad investments.

[nouseforaname123]

Am I the only one annoyed by the uselessness of the advice? Someone tell me what my first year's salary would be when I'm agreeing to take on the debt? Even assuming I'm at a t-14 there's no guarantees, it could be a $35k public interest gig...it's useless advice and no help in deciding if law school is a good decision for you.

I am too, that's why I modified the language of it in my post. It's impossible to predict what you're going to make if you're being realistic. And it would tell you that Harvard, Stanford, and Yale are bad investments.

While your salary may be impossible to predict, you can still make a very educated guess.

Just discount $160k by the likelihood that you'll get biglaw coming out of your school. So, if your school places 50% of the class in biglaw predict you'll earn $80k coming out of school.

Apply Campos's theory and limit your student loans to $80k at this hypothetical school. Seems like a reasonable amount to me.

[IAFG]

Am I the only one annoyed by the uselessness of the advice? Someone tell me what my first year's salary would be when I'm agreeing to take on the debt? Even assuming I'm at a t-14 there's no guarantees, it could be a $35k public interest gig...it's useless advice and no help in deciding if law school is a good decision for you.

It's useless for a lot of reasons.

It's a lot easier to make a fat loan payment on a fat salary than even a modest payment on $20k/yr.

[Tiago Splitter]

While your salary may be impossible to predict, you can still make a very educated guess.

Just discount $160k by the likelihood that you'll get biglaw coming out of your school. So, if your school places 50% of the class in biglaw predict you'll earn $80k coming out of school.

Apply Campos's theory and limit your student loans to $80k at this hypothetical school. Seems like a reasonable amount to me.

Might seem reasonable until you realize that no one without family or personal savings could attend HYS, and those people could really only attend anywhere else on a full ride.

[Drake014]

I've seen this posted in several places and I saw it mentioned again in Campos' book. This seems really arbitrary to me, and would make basically any T6 or T14 at sticker a bad idea, and a regional school with a full ride a better choice. Where does this rule of thumb come from and does it really have merit when it comes to choosing law schools?

Sounds like stupid advice to me unless you have psychic powers. If you do, why would you waste your life on law school? Go start a psychic hotline.

Also, even if you could predict your future salary, it ignores public interest loan repayment programs.

[nouseforaname123]

It's useless for a lot of reasons.

It's a lot easier to make a fat loan payment on a fat salary than even a modest payment on $20k/yr.

Expound, please. I'm not making the connection between your observation and your conclusion that the advice is "useless."

Might seem reasonable until you realize that no one without family or personal savings could attend HYS, and those people could really only attend anywhere else on a full ride.

There are plenty of goods and services which are only accessible to those from a wealthy family or with significant personal savings. I don't really see why that makes the advice useless. All he is suggesting is that a service is not worth it at certain price points.

Additionally, my guess is that something like 90% of HYS admits could get a full ride to a T14. It isn't like Campos is condemning an HYS admit to TJSOL by suggesting that a school isn't worth it at sticker on 100% debt.

The interesting thing to me is that absent government involvement in student lending and the bankruptcy laws pertaining to student loans, this is exactly the type of general rule that private lenders would use in determining whether a student is a good lending risk. Just think about it from that perspective: If a bank would be unwilling to lend you the money because you would be a bad risk, should you really take out the loan just because the government is willing to lend the money?

[Aberzombie1892]

I agree with the above.

[izy223]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

There's really no such thing as T6 or T10. T6 exists only on TLS to explain hiring patterns among the top Vault NYC firms, and its usage is seriously becoming questioned as some schools like Penn are doing as well or better as NYU (a "T6"). T10 also isn't a real thing, even though the top ten schools pretty much stay the same, but people like groupings that are in neat lists like those found in a top-ten list.

"Top schools" isn't clear, but I think it's safe to assume (on TLS anyway) that top school = T14 unless otherwise specified.

Blantant anti NYU pro Penn trolling i think 95% of realmadrid's posts are a variation on this theme

[Real Madrid]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

There's really no such thing as T6 or T10. T6 exists only on TLS to explain hiring patterns among the top Vault NYC firms, and its usage is seriously becoming questioned as some schools like Penn are doing as well or better as NYU (a "T6"). T10 also isn't a real thing, even though the top ten schools pretty much stay the same, but people like groupings that are in neat lists like those found in a top-ten list.

"Top schools" isn't clear, but I think it's safe to assume (on TLS anyway) that top school = T14 unless otherwise specified.

Blantant anti NYU pro Penn trolling i think 95% of realmadrid post or a variation on this theme

[AllTheLawz]

How on earth is this thread still going. Its obvious that this advice doesn't completely apply to students at top law schools. Campos probably read a very, very simple household finance book or asked a buddy that teaches a simple household finance class. In basic household finance they teach you the rule of thumb that no more than 10-15% of your gross income should be used toward student loans. At 6.5-7% interest this roughly translates into not taking out more than expected first year salary. For an average college grad taking an entry level job at 35-45k this makes perfect sense because a certain percentage of your income will be going toward necessities, tax and recommended savings and after that there not a ton will be left.

When you are making $160k (upwards of $105k after-tax for those of us not in NYC/Cali), 10-15% of gross income translates into ~$1600-2000 and easily manageable with reasonable expenses, meaning that the rule of thumb needs to be adjusted. There is obviously an upper limit but it is not debt=first-year salary.

And for those of you going all "I cant predict the future with precision so I don't believe in estimation," just assume a salary for yourself of zero and never take out a loan for anything.

[izy223]

The problem with this rule is special snowflake syndrome, and everyone everywhere believing that they're going to get 160k biglaw jobs. I'd say that outside of the T14 you should avoid 6 figure debt, though you could make arguments for T20s such as Texas. It really all boils down to how much risk you are comfortable with taking. With the legal economy in the state that it's in you really shouldn't be comfortable with much risk at all outside of the top schools in the country.

I need somebody to put this to rest for me. I thought T14 = top schools, but I've seen so many breakdowns of the T14 (HYS, T6, T10, etc...) that I'm confused as to what we're discussing when we say "top schools".

There's really no such thing as T6 or T10. T6 exists only on TLS to explain hiring patterns among the top Vault NYC firms, and its usage is seriously becoming questioned as some schools like Penn are doing as well or better as NYU (a "T6"). T10 also isn't a real thing, even though the top ten schools pretty much stay the same, but people like groupings that are in neat lists like those found in a top-ten list.

"Top schools" isn't clear, but I think it's safe to assume (on TLS anyway) that top school = T14 unless otherwise specified

Blantant anti NYU pro Penn trolling i think 95% of realmadrid post or a variation on this theme

Thank you so much for pointing out that my hastily written posts had some gramatical mistakes. Now that i fixed them I hope you could continue on with your day job of posting your anti-NYU pro-Penn garbage. The 0L's on this forum really appreciate your biased advice.

[ajax]

How on earth is this thread still going. Its obvious that this advice doesn't completely apply to students at top law schools. Campos probably read a very, very simple household finance book or asked a buddy that teaches a simple household finance class. In basic household finance they teach you the rule of thumb that no more than 10-15% of your gross income should be used toward student loans. At 6.5-7% interest this roughly translates into not taking out more than expected first year salary. For an average college grad taking an entry level job at 35-45k this makes perfect sense because a certain percentage of your income will be going toward necessities, tax and recommended savings and after that there not a ton will be left.

When you are making $160k (upwards of $105k after-tax for those of us not in NYC/Cali), 10-15% of gross income translates into ~$1600-2000 and easily manageable with reasonable expenses, meaning that the rule of thumb needs to be adjusted. There is obviously an upper limit but it is not debt=first-year salary.

And for those of you going all "I cant predict the future with precision so I don't believe in estimation," just assume a salary for yourself of zero and never take out a loan for anything.

It's not obvious at all. Keep in mind that interest on 225k in loans is 1600/mo over a 30 year period. So you have to make a 1600/mo payment and also pay down 225k. Sure, paying the interest is easy on 160k salary, but don't forget about the principal. Oh, and most people don't make it past 5 years in biglaw. So 225k/60months is 3750/mo. Add that 3750 to your 1600 you get 5350. Then add in your 3k/mo DECENT one bedroom in GOOD not great location in Manhattan. O, don't forget about food, utilities, going out... maybe a vacation?? Retiring some day?

Oh, and the massive supply of attorneys will never have an impact on starting biglaw salaries. That just wouldn't make any sense... LOL

But it's obvious that this advice doesn't completely apply, right brah?

[RickyDnwhyc]

It's not obvious at all. Keep in mind that interest on 225k in loans is 1600/mo over a 30 year period. So you have to make a 1600/mo payment and also pay down 225k. Sure, paying the interest is easy on 160k salary, but don't forget about the principal. Oh, and most people don't make it past 5 years in biglaw. So 225k/60months is 3750/mo. Add that 3750 to your 1600 you get 5350. Then add in your 3k/mo DECENT one bedroom in GOOD not great location in Manhattan. O, don't forget about food, utilities, going out... maybe a vacation?? Retiring some day?

Oh, and the massive supply of attorneys will never have an impact on starting biglaw salaries. That just wouldn't make any sense... LOL

But it's obvious that this advice doesn't completely apply, right brah?

That's insane. If those loan numbers are true then 225k is a terrible idea unless you plan on living in a shack and "vacationing" at Coney Island. But don't most law students come out to closer to 150-180k in debt?

[IAFG]

It's useless for a lot of reasons.

It's a lot easier to make a fat loan payment on a fat salary than even a modest payment on $20k/yr.

Expound, please. I'm not making the connection between your observation and your conclusion that the advice is "useless."

Let me correct myself. It's not necessarily useless in general. It's useless for us, the outliers, as AllTheLawz illustrates. The problem with rules of thumb is, you have to recognize when you're considering an outlier case that the model wasn't designed for.

Additionally, my guess is that something like 90% of HYS admits could get a full ride to a T14. It isn't like Campos is condemning an HYS admit to TJSOL by suggesting that a school isn't worth it at sticker on 100% debt.

Ach, poor Campos. He actually says in his book that a small number of law schools are worth sticker (alluding to HYS) but look how dangerous a little rule of thumb can be. People use and abuse them, because they're safe and simple and easier than thinking.

So you have to make a 1600/mo payment and also pay down 225k. Sure, paying the interest is easy on 160k salary, but don't forget about the principal. Oh, and most people don't make it past 5 years in biglaw. So 225k/60months is 3750/mo. Add that 3750 to your 1600 you get 5350. Then add in your 3k/mo DECENT one bedroom in GOOD not great location in Manhattan. O, don't forget about food, utilities, going out... maybe a vacation?? Retiring some day?

You don't make $160 all 5 years, and can easily afford to put more toward your loans with bonus and raises in the first 5 years (by year 5 you'll be making $230k in base alone). If you just put your bonuses and raises all toward your debt and otherwise made $3k/mo payments, you'd be fine getting pushed out at year 5. And that's completely ignoring the fact that 5th year biglaw associates still have income potential.

While your salary may be impossible to predict, you can still make a very educated guess.

Just discount $160k by the likelihood that you'll get biglaw coming out of your school. So, if your school places 50% of the class in biglaw predict you'll earn $80k coming out of school.

Ah, here's another beloved bit of flawed reasoning. Expected value is a ridiculous metric for a decision you make once. That tool is for many repeated decisions. For the person taking out the loans, they'll either win completely or lose completely, so a rule of thumb isn't going to be terribly useful for them. Instead, you have to decide for yourself how much risk you want to expose yourself too.

But even if we were going to proceed under an expected value model (which we definitely shouldn't, and wouldn't) you would also have to count in the number of people who don't get biglaw but ended up with LRAP-qualifying jobs or clerkships that will lead to biglaw jobs, because they're skewing your data.

[Bronte]

It's not obvious at all. Keep in mind that interest on 225k in loans is 1600/mo over a 30 year period. So you have to make a 1600/mo payment and also pay down 225k. Sure, paying the interest is easy on 160k salary, but don't forget about the principal. Oh, and most people don't make it past 5 years in biglaw. So 225k/60months is 3750/mo. Add that 3750 to your 1600 you get 5350. Then add in your 3k/mo DECENT one bedroom in GOOD not great location in Manhattan. O, don't forget about food, utilities, going out... maybe a vacation?? Retiring some day?

Oh, and the massive supply of attorneys will never have an impact on starting biglaw salaries. That just wouldn't make any sense... LOL

But it's obvious that this advice doesn't completely apply, right brah?

It is not difficult to pay down the entirety of a $225,000 debt if you stay at a large law firm for five years.

If you make an annual loan payment of $55,756.26 for five years, you will have paid down a $225,000 debt bearing 8.00% interest. On a big law salary (Cravath scale, excluding bonuses), this allows you to live on an average $70,000 a year, after-tax, after-loan payments.

Year / Salary (Cravath Scale) / After Tax Income / After Loan Pmt Income
1 / 160,000 / 104,000 / 49,253
2 / 170,000 / 110,500 / 55,753
3 / 185,000 / 120,250 / 65,503
4 / 210,000 / 136,500 / 81,753
5 / 230,000 / 149,500 / 94,753

And, yes, I remembered to include the principal.