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

[Bronte]

It's not obvious at all. Keep in mind that interest on 225k in loans is 1600/mo over a 30 year period.

You need to re-do the math here.

Do I need to re-do the math? Do you realize you can't make that statement without knowing the rate I used. Classic TLS poster with a BA.

The rate you used, if you did it right, is 8.53% APR monthly. But it's difficult to see why that matters. The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes. And that is using a conservative 8.00% interest rate and ignoring bonuses and benefits, which are substantial. This is just math. No amount of obfuscation is going to get you out of it.

Now, I'll be the first to tell you that going to law school is a shitty idea for most people. In fact, I tell people that all the time of these boards. As a general proposition, it is very unwise to take out six figures of debt to attend a school that gives you only a 50% chance of legal employment, much of which is low-salary, soul-crushing work.

However, "don't take on more debt than your first year's salary" is clearly not a reasonably proposition. First, and most importantly, the entire problem is that 0Ls cannot know their first year salary. So this rule of thumb begs the question. Second, because roughly $180,000 is effectively the highest salary available out of law school, this rule of thumb would prohibit people from attending Harvard, Yale, and Stanford at full freight. A rule that says the top three schools in the nation are out overstates the problem.

Most importantly, this rule of thumb creates a false dichotomy. It makes it seem as if it's safe to take out $160,000 to go to Harvard but not safe to take out $180,000. In reality, if it's unsafe to take out $180,000, it's unsafe to take out $160,000. It's either you get big law or you don't. If you do, you can pay down either loan. If you don't, you can't pay down either loan. The heuristic won't have helped you much if you end up with low six figures of debt but no job.

[ajax]

ITT: Interest rates on student loans are not commonly known.

ITT: Interest paid does not decline as the principal declines.

If you struggle with mathematics, you can always use something like this:

http://www.law.georgetown.edu/admission ... geid=61621

FWIW 222k paid over 25 years comes to 1,650/mo on that calculator. I'll admit I was off a bit, but I clearly wasn't off by much. That said, you still cannot make a statement about someone's math being off when calculating loan repayments, without knowing the interest rate on said loans. Many people also use private loans to supplement federal loans, so you're mixing in many different rates.

[ajax]

The rate you used, if you did it right, is 8.53% APR monthly. But it's difficult to see why that matters. The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes. And that is using a conservative 8.00% interest rate and ignoring bonuses and benefits, which are substantial. This is just math. No amount of obfuscation is going to get you out of it.

Now, I'll be the first to tell you that going to law school is a shitty idea for most people. In fact, I tell people that all the time of these boards. As a general proposition, it is very unwise to take out six figures of debt to attend a school that gives you only a 50% chance of legal employment, much of which is low-salary, soul-crushing work.

However, "don't take on more debt than your first year's salary" is clearly not a reasonably proposition. First, and most importantly, the entire problem is that 0Ls cannot know their first year salary. So this rule of thumb begs the question. Second, because roughly $180,000 is effectively the highest salary available out of law school, this rule of thumb would prohibit people from attending Harvard, Yale, and Stanford at full freight. A rule that says the top three schools in the nation are out overstates the problem.

Most importantly, this rule of thumb creates a false dichotomy. It makes it seem as if it's safe to take out $160,000 to go to Harvard but not safe to take out $180,000. In reality, if it's unsafe to take out $180,000, it's unsafe to take out $160,000. It's either you get big law or you don't. If you do, you can pay down either loan. If you don't, you can't pay down either loan. The heuristic won't have helped you much if you end up with low six figures of debt but no job.[/quote]


I'm not sure you understand that some cities are more expensive than others... rent in NYC is quite a bit different than rent in Chicago, for example.

http://lawprofessors.typepad.com/legal_ ... power.html

So your point quoted from above, "The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes" needs a little more context. After all, as you say, "This is just math", yet you ignore the difference in cost of living throughout the country. I would say differences in cost of living are mathematically significant, wouldn't you?

[bk1]

I'm not sure you understand that some cities are more expensive than others... rent in NYC is quite a bit different than rent in Chicago, for example.

http://lawprofessors.typepad.com/legal_ ... power.html

So your point quoted from above, "The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes" needs a little more context. After all, as you say, "This is just math", yet you ignore the difference in cost of living throughout the country. I would say differences in cost of living are mathematically significant, wouldn't you?

I'm pretty sure Bronte understands that. An average of 70k is livable even in NYC.

[Bronte]

I'm not sure you understand that some cities are more expensive than others... rent in NYC is quite a bit different than rent in Chicago, for example.

http://lawprofessors.typepad.com/legal_ ... power.html

So your point quoted from above, "The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes" needs a little more context. After all, as you say, "This is just math", yet you ignore the difference in cost of living throughout the country. I would say differences in cost of living are mathematically significant, wouldn't you?

No, that's the thing though, even if a bagel costs $70,000 in NYC, it is still just a point of fact that, on a big law salary for five years, you can pay down $225,000 loan with an average income of $70,000 after taxes and loan payments. Do you see how the cost of living in NYC is a distinct issue from the amount of after-tax, after-loan payments income you have?

To address that point, like bk187 said, I am well-aware of the fact that NYC is the most expensive city in the country. However, even in NYC, one can live reasonably well on $70,000 a year after taxes. You will not be hobnobbing with hedge fund managers, but you will be OK.

[ajax]

I'm not sure you understand that some cities are more expensive than others... rent in NYC is quite a bit different than rent in Chicago, for example.

http://lawprofessors.typepad.com/legal_ ... power.html

So your point quoted from above, "The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes" needs a little more context. After all, as you say, "This is just math", yet you ignore the difference in cost of living throughout the country. I would say differences in cost of living are mathematically significant, wouldn't you?

No, that's the thing though, even if a bagel costs $70,000 in NYC, it is still just a point of fact that, on a big law salary for five years, you can pay down $225,000 loan with an average income of $70,000 after taxes and loan payments. Do you see how the cost of living in NYC is a distinct issue from the amount of after-tax, after-loan payments income you have?

To address that point, like bk187 said, I am well-aware of the fact that NYC is the most expensive city in the country. However, even in NYC, one can live reasonably well on $70,000 a year after taxes. You will not be hobnobbing with hedge fund managers, but you will be OK.

Sure you can pay it down. Heck, you might even be able to pay down 350k in five years if you live in Bed-Stuy. I hear it's gentrifying.

[AllTheLawz]

I'm not sure you understand that some cities are more expensive than others... rent in NYC is quite a bit different than rent in Chicago, for example.

http://lawprofessors.typepad.com/legal_ ... power.html

So your point quoted from above, "The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes" needs a little more context. After all, as you say, "This is just math", yet you ignore the difference in cost of living throughout the country. I would say differences in cost of living are mathematically significant, wouldn't you?

No, that's the thing though, even if a bagel costs $70,000 in NYC, it is still just a point of fact that, on a big law salary for five years, you can pay down $225,000 loan with an average income of $70,000 after taxes and loan payments. Do you see how the cost of living in NYC is a distinct issue from the amount of after-tax, after-loan payments income you have?

To address that point, like bk187 said, I am well-aware of the fact that NYC is the most expensive city in the country. However, even in NYC, one can live reasonably well on $70,000 a year after taxes. You will not be hobnobbing with hedge fund managers, but you will be OK.

Sure you can pay it down. Heck, you might even be able to pay down 350k in five years if you live in Bed-Stuy. I hear it's gentrifying.

Ok, everybody. Stop feeding the troll.

[Tiago Splitter]

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.

This math isn't just "off by a little bit."

[thelawyler]

Considering a ton of consulting bros straight out of ugrad make about 70k/year and get by just fine in NYC, I'm sure if you wanted to make it work you could easily do it as an attorney.

[Yukos]

I'm not sure you understand that some cities are more expensive than others... rent in NYC is quite a bit different than rent in Chicago, for example.

http://lawprofessors.typepad.com/legal_ ... power.html

So your point quoted from above, "The point is that, on a big law salary for five years, one can pay down an entire $225,000 loan with an average salary of $70,000 after taxes" needs a little more context. After all, as you say, "This is just math", yet you ignore the difference in cost of living throughout the country. I would say differences in cost of living are mathematically significant, wouldn't you?

No, that's the thing though, even if a bagel costs $70,000 in NYC, it is still just a point of fact that, on a big law salary for five years, you can pay down $225,000 loan with an average income of $70,000 after taxes and loan payments. Do you see how the cost of living in NYC is a distinct issue from the amount of after-tax, after-loan payments income you have?

To address that point, like bk187 said, I am well-aware of the fact that NYC is the most expensive city in the country. However, even in NYC, one can live reasonably well on $70,000 a year after taxes. You will not be hobnobbing with hedge fund managers, but you will be OK.

Sure you can pay it down. Heck, you might even be able to pay down 350k in five years if you live in Bed-Stuy. I hear it's gentrifying.

There are really nice parts of Bed-Stuy, I would definitely consider living there.

For the record, I'm living in Manhattan on less than $30,000. It's not great -- I never get more than a beer when I go to bars -- but it's definitely doable. If you can't live comfortably on $70k then you need to reevaluate your budgeting.

[rayiner]

It's not obvious at all. Keep in mind that interest on 225k in loans is 1600/mo over a 30 year period.

You need to re-do the math here.

Do I need to re-do the math? Do you realize you can't make that statement without knowing the rate I used. Classic TLS poster with a BA.

I've got a BS in Aerospace Engineering and Bronte is right about your math.

[vanwinkle]

For the record, I'm living in Manhattan on less than $30,000. It's not great -- I never get more than a beer when I go to bars -- but it's definitely doable. If you can't live comfortably on $70k then you need to reevaluate your budgeting.

What neighborhood? What's your rent? I'm curious.

[Yukos]

For the record, I'm living in Manhattan on less than $30,000. It's not great -- I never get more than a beer when I go to bars -- but it's definitely doable. If you can't live comfortably on $70k then you need to reevaluate your budgeting.

What neighborhood? What's your rent? I'm curious.

Harlem. I'm living with my gf in a studio for $825 each a month.

[cahwc12]

I like how this thread is about a quote from Paul Campos in his book, and he himself explains what that quote means, and no one even acknowledges his post.

[ajax]

"I've got a BS in Aerospace Engineering and Bronte is right about your math."
-Rayiner

This is quite silly. At my undergrad all this means is that you made it through multivariable calc and differential equations. Want me to throw you a cookie? That doesn't even get you a math minor, brah.

I'm not saying you're not a smart guy/gal. I'm sure you are. However I know plenty of people who have Aerospace Engineering degrees from a top 5 Engineering Undegrad, and they don't make clown comments like that.

[dingbat]

I really want to grab my financial calculator and run the numbers, but I don't want to feed thd (known) troll*

*not actually a troll, just a persistently obtuse and willfully stubborn ignoramus

[Rahviveh]

I like how this thread is about a quote from Paul Campos in his book, and he himself explains what that quote means, and no one even acknowledges his post.

its not just Campos book, I've seen this quote multiple times on TLS!

[Bronte]

"I've got a BS in Aerospace Engineering and Bronte is right about your math."
-Rayiner

This is quite silly. At my undergrad all this means is that you made it through multivariable calc and differential equations. Want me to throw you a cookie? That doesn't even get you a math minor, brah.

I'm not saying you're not a smart guy/gal. I'm sure you are. However I know plenty of people who have Aerospace Engineering degrees from a top 5 Engineering Undegrad, and they don't make clown comments like that.

His comment was obviously in direct response to your quip that someone was a "classic TLS poster with a BA." You're the one who started challenging people's undergrad credentials. In any event, one doesn't need higher math to figure out the payments on a loan.

You are in stubborn denial of the fact that you're wrong about this. A person can comfortably pay down six figures of debt on a big law salary over five years. That doesn't mean it's a good idea to take out a six figure loan. It just means that your argument that even if you stay in big law for five years you won't be able to do it is wrong. You should just admit that and move on.

[vanwinkle]

"I've got a BS in Aerospace Engineering and Bronte is right about your math."
-Rayiner

This is quite silly. At my undergrad all this means is that you made it through multivariable calc and differential equations. Want me to throw you a cookie? That doesn't even get you a math minor, brah.

I'm not saying you're not a smart guy/gal. I'm sure you are. However I know plenty of people who have Aerospace Engineering degrees from a top 5 Engineering Undegrad, and they don't make clown comments like that.

His comment was obviously in direct response to your quip that someone was a "classic TLS poster with a BA." You're the one who started challenging people's undergrad credentials. In any event, one doesn't need higher math to figure out the payments on a loan.

You are in stubborn denial of the fact that you're wrong about this. A person can comfortably pay down six figures of debt on a big law salary over five years. That doesn't mean it's a good idea to take out a six figure loan. It just means that your argument that even if you stay in big law for five years you won't be able to do it is wrong. You should just admit that and move on.

+1 to all of this.

[sunynp]

Yes, it is doable to pay it down in 5 years. I wonder how many people pull that off? I do know a couple of people who have. They are incredibly disciplined and lived very modestly. Both of them were single too, so they had no one helping to pay the rent and no family money. They are also excellent attorneys who are staying until they are up for partner.

I'm just not sure that everyone can be that disciplined. And not that many people make it to their fifth year in biglaw.

[IAFG]

"I've got a BS in Aerospace Engineering and Bronte is right about your math."
-Rayiner

This is quite silly. At my undergrad all this means is that you made it through multivariable calc and differential equations. Want me to throw you a cookie? That doesn't even get you a math minor, brah.

I'm not saying you're not a smart guy/gal. I'm sure you are. However I know plenty of people who have Aerospace Engineering degrees from a top 5 Engineering Undegrad, and they don't make clown comments like that.

His comment was obviously in direct response to your quip that someone was a "classic TLS poster with a BA." You're the one who started challenging people's undergrad credentials. In any event, one doesn't need higher math to figure out the payments on a loan.

You are in stubborn denial of the fact that you're wrong about this. A person can comfortably pay down six figures of debt on a big law salary over five years. That doesn't mean it's a good idea to take out a six figure loan. It just means that your argument that even if you stay in big law for five years you won't be able to do it is wrong. You should just admit that and move on.

+1 to all of this.

Also, lol @ next calling next challenging the quality of his engineering program when his UG is right in his profile. Unless the insinuation was supposed to be that he is lying about having gone to a top 5 engineering UG?

[dingbat]

Yes, it is doable to pay it down in 5 years. I wonder how many people pull that off? I do know a couple of people who have. They are incredibly disciplined and lived very modestly. Both of them were single too, so they had no one helping to pay the rent and no family money. They are also excellent attorneys who are staying until they are up for partner.

I'm just not sure that everyone can be that disciplined. And not that many people make it to their fifth year in biglaw.

My goal is to apply for a 25 year repayment schedule but to pay on a 5 year schedule (just in case the gravy train ends)

[rayiner]

I'm just not sure that everyone can be that disciplined. And not that many people make it to their fifth year in biglaw.

Just set up your direct deposit to put part of your paycheck in a separate account, and set up your student loan account to withdraw automatic payments from that account. No discipline needed.

It's not like you have to live in poverty to get your loans to a manageable level. You can pay down your loans to manageable levels in five years and still live like you're making $70k+bonus. Unless your alternative was finance, consulting, or engineering, you'll be living better than you would have without law school even with the debt burden.

As for people making it to their fifth year, I think you have to take the attrition statistics in context. Most of those numbers stating that 80% of people leave big law by year 6 are from 2002-2006. Those people had dramatically lower debt loads, were paying lower interest rates, and the economy was good so they had much better opportunities outside big law. Those people weren't leaving because firms pushed them out as third years just as they had learned the ropes--firms were paying $45-55k bonuses to second-third years to keep them from leaving.

Are there people who are going to get Lathamed, or stealthed as second years? Sure. That's a risk. But the vast majority of people, even during the financial collapse, did not get Lathamed or stealthed. The vast majority of people leave because they want to. You might have a hard time understanding why they do if they didn't get pushed out, but you seem to have this idea that everyone has $270k+ of debt. The average debt load for this year's graduating class is under $140k at every T14. These people have small enough loan payments that they can afford to leave big law for the kinds of exits that pop up at years 2-3.

[sunynp]

I'm just not sure that everyone can be that disciplined. And not that many people make it to their fifth year in biglaw.

Just set up your direct deposit to put part of your paycheck in a separate account, and set up your student loan account to withdraw automatic payments from that account. No discipline needed.

It's not like you have to live in poverty to get your loans to a manageable level. You can pay down your loans to manageable levels in five years and still live like you're making $70k+bonus. Unless your alternative was finance, consulting, or engineering, you'll be living better than you would have without law school even with the debt burden.

As for people making it to their fifth year, I think you have to take the attrition statistics in context. Most of those numbers stating that 80% of people leave big law by year 6 are from 2002-2006. Those people had dramatically lower debt loads, were paying lower interest rates, and the economy was good so they had much better opportunities outside big law. Those people weren't leaving because firms pushed them out as third years just as they had learned the ropes--firms were paying $45-55k bonuses to second-third years to keep them from leaving.

Are there people who are going to get Lathamed, or stealthed as second years? Sure. That's a risk. But the vast majority of people, even during the financial collapse, did not get Lathamed or stealthed. The vast majority of people leave because they want to. You might have a hard time understanding why they do if they didn't get pushed out, but you seem to have this idea that everyone has $270k+ of debt. The average debt load for this year's graduating class is under $140k at every T14. These people have small enough loan payments that they can afford to leave big law for the kinds of exits that pop up at years 2-3.

Somewhere in this thread someone claimed that debt of $225,000 couldn't be repaid in 5 years. I was agreeing that it could be done but I only know a couple of people who had managed to maintain a very frugal budget. Honestly, most people at my firm seem to splurge on stuff because they are tired or want a treat for themselves or just aren't that disciplined to maintain a strict budget. Maybe they see all this money coming in and they get tired of not spending more of it?

I'm glad not everyone owes $225,000. I know some people on here owe even more than that, but I'm sure you are right that most people have less.

[rayiner]

Honestly, most people at my firm seem to splurge on stuff because they are tired or want a treat for themselves or just aren't that disciplined to maintain a strict budget. Maybe they see all this money coming in and they get tired of not spending more of it?

I'm glad not everyone owes $225,000. I know some people on here owe even more than that, but I'm sure you are right that most people have less.

The point is that you have to evaluate the behavior you see amongst other associates at your firm in the context of their probable situation. The average associate at your firm probably graduated several years ago. Tuitions were lower, there is a good chance they had a 1L SA, etc. Average debt levels for C/O 2009 was probably in the $100-120k range. You have to view the splurging, the exits after a few years, etc, in the context of those debt levels. You don't see people keeping very frugal budgets because by and large most of them don't need to.

You also have to consider how people estimate their future earning power. In my experience, most associates have a higher estimation of their post big-law earning power than folks in C/O 2009-C/O 2012. Some folks here seem to be convinced that what awaits you after big law is waiting tables. Without getting into that debate, most associates don't think that and thus spend in line with those estimations.