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$200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 6:10 pm
by incase2011
If you haven't heard someone advise someone else not to go to X school at sticker because it'll cost too much, that they'll need a minimum of a biglaw salary to pay for it, you haven't had the full TLS forum experience. I'm sure my figures aren't exact; state income taxes and loan stipulations may vary greatly (I linked to the calculator I used, feel free to suggest a better calculator or to post a more realistic figure for a $200k private loan monthly payment).

I just thought this might give everyone a decent idea of the circumstances one would face. It should be noted that this assumes a fixed income and a fixed interest rate for the 10 year term. Income taxes were calculated for a resident of the state of Pennsylvania (an arbitrary state of personal interest to me).

Loan Amount = $200,000
Fixed Interest = 8.5%
Loan Term = 10 years
Payments = 120
Monthly Payment After 3 Years in School = $2,559.65

http://www.finaid.org/calculators/scripts/k-factor.cgi

Annual Salary = $60,000
Monthly Salary = $5,000
Take Home = $3,680.67
Take Home after Loan Payment = $1,121.02

Annual Salary = $80,000
Monthly Salary = $6,666.67
Take Home = $4,785.33
Take Home after Loan Payment = $2,225.68

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:10 pm
by incase2011
For the sake of argument, and since I looked it up anyway, here are the stats for $100k, which seems like the cut-off. With $200k in loans, you could probably do alright for yourself (at least you'll be working toward a good career) assuming you don't lose your job and you're getting decent bonuses every year.

Obviously this isn't the best scenario, but, IMO, you could make it work and use bonuses to help pay off loans. What I'm suggesting is that midlaw should be considered as a potential loan repayment option not simply biglaw. Unless I'm confused by what salary ranges distinguish midlaw and biglaw, which could very easily be the case.

Annual Salary = $100,000
Monthly Salary = $8,333.33
Take Home = $5,854.25
Take Home after Loan Payment = $3,294.35

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:12 pm
by bk1
The reason that midlaw isn't necessarily considered is because it isn't any easier to get than biglaw and is often a rarity. Biglaw salaries vary by market (160k starting in large markets) but I think it can go all the way down to 100-120k for small markets like Cincinnati.

People have varying definitions of biglaw but I usually just mark it as whatever pays the market rate for a given area.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:18 pm
by 09042014
incase2011 wrote:If you haven't heard someone advise someone else not to go to X school at sticker because it'll cost too much, that they'll need a minimum of a biglaw salary to pay for it, you haven't had the full TLS forum experience. I'm sure my figures aren't exact; state income taxes and loan stipulations may vary greatly (I linked to the calculator I used, feel free to suggest a better calculator or to post a more realistic figure for a $200k private loan monthly payment).

I just thought this might give everyone a decent idea of the circumstances one would face. It should be noted that this assumes a fixed income and a fixed interest rate for the 10 year term. Income taxes were calculated for a resident of the state of Pennsylvania (an arbitrary state of personal interest to me).

Loan Amount = $200,000
Fixed Interest = 8.5%
Loan Term = 10 years
Payments = 120
Monthly Payment After 3 Years in School = $2,559.65

http://www.finaid.org/calculators/scripts/k-factor.cgi

Annual Salary = $60,000
Monthly Salary = $5,000
Take Home = $3,680.67
Take Home after Loan Payment = $1,121.02

Annual Salary = $80,000
Monthly Salary = $6,666.67
Take Home = $4,785.33
Take Home after Loan Payment = $2,225.68
So after making 80/year, I'll be able to live on about as much money as I'm living on during school. Sounds like win to me.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:27 pm
by wesker
Either this doesn't take into account IBR, or all the IBR calculators I've used are lying to me :|
Based on the information you have provided, you would probably qualify for IBR. Your monthly payment would be around $550. If your income rises in the future, then your payments might too.

Married: No
Debt: $ 200,000.00
Income: $ 60,000.00
Interest rate: 7.9%
Dependents: 0
http://www.ibrinfo.org/calculator.php


Also, your "fixed interest" rate is high. Grad PLUS loans are 7.9% fixed, and you'll get $20,500 a year at 6.8%. You'll be able to also consolidate these loans and average the interest rate. Regardless, I used the calcuator at 7.9% interest for the entire $200,000.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:27 pm
by FeelTheHeat
I for one appreciate the fact someone actually puts this out there with actual facts and numbers so 0Ls can see it without any TLS opinion and make a decision for themselves.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:28 pm
by bk1
wesker wrote:Either this doesn't take into account IBR, or all the IBR calculators I've used are lying to me :|
This is too short a period for the 25 year IBR.

10 year IBR has to meet certain requirements, iirc (I think things like PI and it might have a salary cap).

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:33 pm
by Anonymous Loser
wesker wrote:Either this doesn't take into account IBR, or all the IBR calculators I've used are lying to me :|
The OP's example also fails to take into account the extended repayment and graduated repayment plans.

It's ridiculous to assume that a borrower earning $60,000 annually with a $200k debt load would elect the standard 10-year repayment plan.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:34 pm
by wesker
bk187 wrote:
wesker wrote:Either this doesn't take into account IBR, or all the IBR calculators I've used are lying to me :|
This is too short a period for the 25 year IBR.

10 year IBR has to meet certain requirements, iirc (I think things like PI and it might have a salary cap).
Not sure what that means, but yeah, if we're talking about debt forgiveness, you'll have to do 10 years in PI or gov't work. However, I was under the assumption that even if you're working the private sector, IBR will still cap your repayments in the same way it would for PI/gov't, you'll just get debt forgiveness after 25 years (provided you haven't paid it off by then).

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:37 pm
by bk1
wesker wrote:Not sure what that means, but yeah, if we're talking about debt forgiveness, you'll have to do 10 years in PI or gov't work. However, I was under the assumption that even if you're working the private sector, IBR will still cap your repayments in the same way it would for PI/gov't, you'll just get debt forgiveness after 25 years (provided you haven't paid it off by then).
It was kind of an awkward way of saying that IBR (that doesn't have the PI stip) is available for a 25 year repayment plan but that OP was only factoring in 10 year repayment plans.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:39 pm
by SrLaw
I still do not understand why anyone in their right mind would ever pay sticker outside of the T14

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:42 pm
by dpk711
SrLaw wrote:I still do not understand why anyone in their right mind would ever pay sticker.
wouldn't you go to H or Y sticker? I hope you understand now.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:43 pm
by wesker
SrLaw wrote:I still do not understand why anyone in their right mind would ever pay sticker.
Sometimes, even with some $$, school can still be very expensive. For example:

COA: $65k ($195k - lets call it $200k for tuition increases)
Scholarship: $60k
Loans: $140k ($200k-$60k)

Total debt going to a good school at half sticker price = $140k

Not everyone has their parents help and a lot of people end up putting themselves through law school.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:45 pm
by damage-inc
Thank you to OP for posting this

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:46 pm
by incase2011
My point was to give a very simple picture of the worst possible scenario. In many cases, a broad figure of $200,000 (I'm thinking of UMiami at sticker) is quoted. I think some of the less desirable New York and Chicago schools maybe get up there too. Also, it's a round number.

In my case, it made my feel better because of the many reasons quoted by other users. A lot of people have told me, "Maybe you shouldn't go to law school look at the loans and think about the salary you'll probably end up making." I painted a rock bottom picture. If anything I'm glad people are discrediting my numbers as overly pessimistic - that's kind of my point.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:50 pm
by bigben
Anonymous Loser wrote:
wesker wrote:Either this doesn't take into account IBR, or all the IBR calculators I've used are lying to me :|
The OP's example also fails to take into account the extended repayment and graduated repayment plans.

It's ridiculous to assume that a borrower earning $60,000 annually with a $200k debt load would elect the standard 10-year repayment plan.
True, but that doesn't make the outlook any rosier. Extending repayment longer than you absolutely must, either through IBR or Extended Repayment, is incredibly foolish when some of your loans are near 8% (unless you are banking on loan forgiveness). Living as cheaply as possible is really the only sensible choice you have in this situation. If you can't even afford the 10 year repayment plan minimums, you are in a really bad situation.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:51 pm
by bigben
wesker wrote:You'll be able to also consolidate these loans and average the interest rate. Regardless, I used the calcuator at 7.9% interest for the entire $200,000.
Why would anyone ever do this? Very foolish. You should leave them unconsolidated and put any extra cash toward the higher interest rate loan.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:51 pm
by incase2011
Oh also, it's definitely the nose to the grindstone, balls to the wall repayment plan haha. You can factor accordingly, but it seems like that would be your mentality if you're going to risk taking on this kind of debt for something intangible.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:52 pm
by Anonymous Loser
incase2011 wrote:My point was to give a very simple picture of the worst possible scenario.
Might as well base your example on private loans fixed at 13.25% if you want get the worst case scenario. Ignoring available lending and repayment programs is somewhat disingenuous.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:53 pm
by Bumi
wesker wrote:Sometimes, even with some $$, school can still be very expensive. For example:

COA: $65k ($195k - lets call it $200k for tuition increases)
Scholarship: $60k
Loans: $140k ($200k-$60k)

Total debt going to a good school at half sticker price = $140k

Not everyone has their parents help and a lot of people end up putting themselves through law school.
This is the math I did before deciding that WUSTL isn't gonna lure me away from the T14.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:54 pm
by Anonymous Loser
bigben wrote:
wesker wrote:You'll be able to also consolidate these loans and average the interest rate. Regardless, I used the calcuator at 7.9% interest for the entire $200,000.
Why would anyone ever do this? Very foolish. You should leave them unconsolidated and put any extra cash toward the higher interest rate loan.
The consolidation rate is a weighted average.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:55 pm
by bigben
Anonymous Loser wrote:
bigben wrote:
wesker wrote:You'll be able to also consolidate these loans and average the interest rate. Regardless, I used the calcuator at 7.9% interest for the entire $200,000.
Why would anyone ever do this? Very foolish. You should leave them unconsolidated and put any extra cash toward the higher interest rate loan.
The consolidation rate is a weighted average.
Exactly...

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:56 pm
by mez06
Anonymous Loser wrote:
wesker wrote:Either this doesn't take into account IBR, or all the IBR calculators I've used are lying to me :|
The OP's example also fails to take into account the extended repayment and graduated repayment plans.

It's ridiculous to assume that a borrower earning $60,000 annually with a $200k debt load would elect the standard 10-year repayment plan.
I don't believe he FAILED to take that in to account. Obviously there are plenty of variances based upon a person's preference that would alter the scope of these calculations. I do credit OP for displaying what is general student on a "typical" plan can expect.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 8:58 pm
by 09042014
Anonymous Loser wrote:
bigben wrote:
wesker wrote:You'll be able to also consolidate these loans and average the interest rate. Regardless, I used the calcuator at 7.9% interest for the entire $200,000.
Why would anyone ever do this? Very foolish. You should leave them unconsolidated and put any extra cash toward the higher interest rate loan.
The consolidation rate is a weighted average.
If you pay down the higher rate, and only pay minimum on the low rate you can save money.

Re: $200,000 in loans - Net Income after taxes and payments

Posted: Wed Mar 09, 2011 9:01 pm
by bigben
Anonymous Loser wrote:
incase2011 wrote:My point was to give a very simple picture of the worst possible scenario.
Might as well base your example on private loans fixed at 13.25% if you want get the worst case scenario. Ignoring available lending and repayment programs is somewhat disingenuous.
It is not disingenuous. OP's analysis is helpful, though of course it is not a complete picture. No analysis of general applicability can be a complete picture.

As I said above, if you cannot even afford the 10 year minimum payments, chances are you are making a very bad investment. Paying high interest for 25 years on an uncertain investment is a very poor financial decision. Loan forgiveness introduces a new wrinkle and deserves its own careful analysis, but your income would have to stay quite low for this to make sense, and you'd have to qualify for the public service forgiveness. I can't imagine the 25 year forgiveness being a good plan in any scenario.

If you think that your income is going to start low and then shoot up dramatically, well... all I can say is a trip to the casino would be a lot less painful.