C/O 2014 NLJ 250 Numbers Forum

[thebobs1987]

I thought taxes are the same

They are the same except for those making over $400k. Those are back to 1999 tax rates

[JCougar]

Is it real money though? The government is currently making money on student loans, and it does so despite paying for everything up front and taking in payments down the line. The forgiveness at the end of the road is just wiping away a fake receivable that I don't think gets counted anywhere anyway. But I'd be curious to see a better explanation of how they account for this stuff if someone has one.

Well, the first wave of PSLF forgiveness starts in 2017, so even if they are using gimmick accounting like what you assert, that's a bunch of people who will not be providing a revenue stream moving forward. And that number will grow each year.

[Johann]

I thought taxes are the same

They are the same except for those making over $400k. Those are back to 1999 tax rates

There are new phase outs for deductions for 200k earners, new investment tax of 3.8% on capital gains for earners over 250k, new medicar .9% tax on earners over 200k. Add it all up and top earners are now paying 6% more in taxes effectively per year. Effective tax rate at about 33.8% for top earner. Capital gains rates also went up to 20% for earners over 400k. And that rate is all but guaranteed to go up to 24.8% in the next 2 years. NYC and Illinois taxes have both gone up as well and I believe cali too

[bearsfan23]

I thought taxes are the same

They are the same except for those making over $400k. Those are back to 1999 tax rates

There are new phase outs for deductions for 200k earners, new investment tax of 3.8% on capital gains for earners over 250k, new medicar .9% tax on earners over 200k. Add it all up and top earners are now paying 6% more in taxes effectively per year. Effective tax rate at about 33.8% for top earner. Capital gains rates also went up to 20% for earners over 400k. And that rate is all but guaranteed to go up to 24.8% in the next 2 years. NYC and Illinois taxes have both gone up as well and I believe cali too

Actually, Illinois's income tax has recently decreased:

Illinois Personal Income Tax rate is increased from 3% to 5% between January 1, 2011 and December 31, 2014. The rate will revert to 3.75% (originally proposed at 4%) from January 1, 2015 to December 31, 2024. The rate will then reduce to 3.25% (originally proposed at 3.5%) starting on January 1, 2025.

Nice try though

[JCougar]

Actually, Illinois's income tax has recently decreased:

Illinois Personal Income Tax rate is increased from 3% to 5% between January 1, 2011 and December 31, 2014. The rate will revert to 3.75% (originally proposed at 4%) from January 1, 2015 to December 31, 2024. The rate will then reduce to 3.25% (originally proposed at 3.5%) starting on January 1, 2025.

Nice try though

You do realize that going from 3% to 3.75% is still an increase, right?

[Johann]

Actually, Illinois's income tax has recently decreased:

Illinois Personal Income Tax rate is increased from 3% to 5% between January 1, 2011 and December 31, 2014. The rate will revert to 3.75% (originally proposed at 4%) from January 1, 2015 to December 31, 2024. The rate will then reduce to 3.25% (originally proposed at 3.5%) starting on January 1, 2025.

Nice try though

You do realize that going from 3% to 3.75% is still an increase, right?

Lol, wrecked. The amount of confirmation bias in this industry people will tell themselves to convince themselves that they invested smartly in the legal education is astounding.

[Cobretti]

Actually, Illinois's income tax has recently decreased:

Illinois Personal Income Tax rate is increased from 3% to 5% between January 1, 2011 and December 31, 2014. The rate will revert to 3.75% (originally proposed at 4%) from January 1, 2015 to December 31, 2024. The rate will then reduce to 3.25% (originally proposed at 3.5%) starting on January 1, 2025.

Nice try though

You do realize that going from 3% to 3.75% is still an increase, right?

Lol, wrecked. The amount of confirmation bias in this industry people will tell themselves to convince themselves that they invested smartly in the legal education is astounding.

berates bearsfan23 for confirmation bias

argues higher taxes that affect every industry equally support his premise that now is a bad time to invest in legal education

[Johann]

Even though you aren't a lawyer, so you're advise is basically worth a 7 year old child's wanting to pursue law, I'll respond before you end up realizing the investment pay out is pretty shitty: The federal taxes only affect jobs paying more than 200/250k. I think theres a sweet spot in the 40 hour/week job that pays 100-150k.

I'm fine financially. That was never the core issue. The core issue to me is giving visibility into the profession to people who want to find a financially secure career that lets you enjoy life - whether that be traveling, family time, enjoying your work, finding your work meaningful and contributing to society etc. Because biglaw is not enjoyable and does not contribute to society in the sense that you find your job important and allows less family time or traveling, it's crucial to pin down the exact dollar takehome per hour of investment. So higher taxes something to consider if you are debating between pursuing a consulting gig that is 45 hours a week and pays 80k or so. As is a 3 year degree.
I've advocated for plenty of people on this board to pursue law school and I'm not really a doom and gloom guy. I just want people to see law for what it is. It's not a get rich quick scheme. You lose a lot for 3 years and then when you do make money, you are taxed like you are the richest man in a room of 50 people despite having a debt burden greater than the other 49 combined. If you could find a sweet spot making 60k in a 40 hour gig with room to ladder up to 100k, then you are living the same as a 4th year associate repaying significant debt per hour of work after taxes.

[gaddockteeg]

Even though you aren't a lawyer, so you're advise is basically worth a 7 year old child's wanting to pursue law, I'll respond before you end up realizing the investment pay out is pretty shitty: The federal taxes only affect jobs paying more than 200/250k. I think theres a sweet spot in the 40 hour/week job that pays 100-150k.

I'm fine financially. That was never the core issue. The core issue to me is giving visibility into the profession to people who want to find a financially secure career that lets you enjoy life - whether that be traveling, family time, enjoying your work, finding your work meaningful and contributing to society etc. Because biglaw is not enjoyable and does not contribute to society in the sense that you find your job important and allows less family time or traveling, it's crucial to pin down the exact dollar takehome per hour of investment. So higher taxes something to consider if you are debating between pursuing a consulting gig that is 45 hours a week and pays 80k or so. As is a 3 year degree.
I've advocated for plenty of people on this board to pursue law school and I'm not really a doom and gloom guy. I just want people to see law for what it is. It's not a get rich quick scheme. You lose a lot for 3 years and then when you do make money, you are taxed like you are the richest man in a room of 50 people despite having a debt burden greater than the other 49 combined. If you could find a sweet spot making 60k in a 40 hour gig with room to ladder up to 100k, then you are living the same as a 4th year associate repaying significant debt per hour of work after taxes.

This was a really good post

[bearsfan23]

Even though you aren't a lawyer, so you're advise is basically worth a 7 year old child's wanting to pursue law, I'll respond before you end up realizing the investment pay out is pretty shitty: The federal taxes only affect jobs paying more than 200/250k. I think theres a sweet spot in the 40 hour/week job that pays 100-150k.

I'm fine financially. That was never the core issue. The core issue to me is giving visibility into the profession to people who want to find a financially secure career that lets you enjoy life - whether that be traveling, family time, enjoying your work, finding your work meaningful and contributing to society etc. Because biglaw is not enjoyable and does not contribute to society in the sense that you find your job important and allows less family time or traveling, it's crucial to pin down the exact dollar takehome per hour of investment. So higher taxes something to consider if you are debating between pursuing a consulting gig that is 45 hours a week and pays 80k or so. As is a 3 year degree.
I've advocated for plenty of people on this board to pursue law school and I'm not really a doom and gloom guy. I just want people to see law for what it is. It's not a get rich quick scheme. You lose a lot for 3 years and then when you do make money, you are taxed like you are the richest man in a room of 50 people despite having a debt burden greater than the other 49 combined. If you could find a sweet spot making 60k in a 40 hour gig with room to ladder up to 100k, then you are living the same as a 4th year associate repaying significant debt per hour of work after taxes.

LOL, you're probably the most bitter person in the entire legal profession, and given that you're a K-JD, the fact that you think you can compare BigLaw to any other job is fucking bullshit.

Please explain to me where these entry-level 40/hour a week jobs that pay $100-150k are in ANY other profession?

[TLSModBot]

I don't think he said 'entry-level jobs at 100-150', but entry-level or lower level jobs at 60K which have raise/promotion potential to 100K. I came from such a job before law school, in consulting.

The broad point, and a good one, is that if you've never had a job before law school, you don't really know the opportunity cost of what you're missing out on. If you're K-JD, secured in a BigLaw job that you actually plan on staying at for a while, and have extremely low debt due to scholarship/savings/family wealth/found pirate treasure, chances are you're missing out on very little. The vast majority of us do not fit in that set of 3 criteria, so the warning is very fair..

[UVAIce]

When rates start going up in the near future and the government's borrowing costs rise there is a good chance that they take a good hard look at loan forgiveness. I know the government is already losing money due to the large number of individuals enrolling in IBR (https://www.insidehighered.com/news/201 ... -9-billion). It's fine to forgive some folks when the government's cost of borrowing money is only ~2%. Oh, and when rates go up in the next 12 months Grad Plus loans are going to be far more expensive (be thankful they are capped at 10.5%). I still think that the 4%+ origination fee on those loans is just completely outrageous.

That all being said, law school was an awesome investment for me. Unlike a lot of people on these boards, I neither come from a family or background that screams six figure salary and vacation home. I might say something different in 5-6 years, but I don't think so. I do feel, however, that I am in a slightly unique situation for a person going into big law.

BTW, I think student loan debt is completely overblown at the moment for folks that are employed in good paying jobs. We freak out over the interest rates right now because we are in a historically low rate environment; this will simply not continue to be reality. Interest rates will rise and there will be better places to put your mother rather than in your "high" interest student loans. Our debt just really sucks because for the last few years the economy has been ho-hum and we have flirted with deflation more than a few times. Once the labor market tightens up some and things getting humming along you'll see rates rise at law firms and salaries go up.

[Tiago Splitter]

When rates start going up in the near future and the government's borrowing costs rise there is a good chance that they take a good hard look at loan forgiveness. I know the government is already losing money due to the large number of individuals enrolling in IBR (https://www.insidehighered.com/news/201 ... -9-billion).

The government makes money on student loans.

http://www.usatoday.com/story/news/nati ... t/3696009/

[UVAIce]

When rates start going up in the near future and the government's borrowing costs rise there is a good chance that they take a good hard look at loan forgiveness. I know the government is already losing money due to the large number of individuals enrolling in IBR (https://www.insidehighered.com/news/201 ... -9-billion).

The government makes money on student loans.

http://www.usatoday.com/story/news/nati ... t/3696009/

Yes, but loan forgiveness programs are cutting into the amount of money they are making. It's not a net loss, just a loss in profitability (as implied in the fact that they are losing out on money due to loan forgiveness, not student loans in general). And as rates rise (cost of capital increases) the government will make less on the student loans it issues unless it also raises the rates on new borrowers. And let's not get started about what could happen the next time we go into a recession (thank you business cycle).

Also, from the same article you posted, it matters how you account for the costs of student loans:

"This summer, Congress directed the Government Accountability Office to conduct a study on the true cost of the federal student loan programs.value accounting," which they say does a better job of factoring in the cost of collecting delinquent or defaulted loans and looking at the risk taken by the government when it lends out money. They say there is actually little to no profit."

[Tiago Splitter]

Definitely doesn't change my view at all but I guess we'll see when the first PSLF forgiveness starts in 2017. I assume the CBO accounted for actual forgiveness (IBR/PAYE aren't forgiveness, they just keep people from defaulting) when it estimated $127 billion in profits over the next ten years. But like I said we'll just have to wait and see

[UVAIce]

Is it real money though? The government is currently making money on student loans, and it does so despite paying for everything up front and taking in payments down the line. The forgiveness at the end of the road is just wiping away a fake receivable that I don't think gets counted anywhere anyway. But I'd be curious to see a better explanation of how they account for this stuff if someone has one.

Well, the first wave of PSLF forgiveness starts in 2017, so even if they are using gimmick accounting like what you assert, that's a bunch of people who will not be providing a revenue stream moving forward. And that number will grow each year.

Here is a nice article on the accounting of student loans: http://www.bostonglobe.com/news/nation/ ... story.html

They've long used a standard that likely underestimates the risk of default on student loans, which has allowed them to charge lower interest rates for student loans (i.e. the product looks less risky than what it actually is). I do find it slightly humorous that Warren wants a relaxed risk assessment on student loans, but wants to hammer banks. I'm not an expert on this, but a lot of this has to do with when they actually have to write off a student loan (take a loss) rather than continue to pretend that the money might be collected when it won't(receivable). And yeah, loan forgiveness wipes out the receivable, but that "receivable" is a part of future predicted profits, so you have to account it as a loss on your books since beforehand you were telling the world you were going to get the money.

[UVAIce]

Definitely doesn't change my view at all but I guess we'll see when the first PSLF forgiveness starts in 2017. I assume the CBO accounted for actual forgiveness (IBR/PAYE aren't forgiveness, they just keep people from defaulting) when it estimated $127 billion in profits over the next ten years. But like I said we'll just have to wait and see

Or only $5 billion in profits over ten years when using the accounting everyone else uses!

[Tiago Splitter]

Definitely doesn't change my view at all but I guess we'll see when the first PSLF forgiveness starts in 2017. I assume the CBO accounted for actual forgiveness (IBR/PAYE aren't forgiveness, they just keep people from defaulting) when it estimated $127 billion in profits over the next ten years. But like I said we'll just have to wait and see

Or only $5 billion in profits over ten years when using the accounting everyone else uses!

Like I said it doesn't really matter. If the government loses money on student loans people will start to freak out, probably not for many years after it starts but eventually there will be some freak outs. But we both agree the government isn't losing money on student loans and until that happens there isn't going to be much impetus for change. I mean right now we've got the Queen of government handouts to college professors, Elizabeth Warren, saying the government is making way too much money off of these things and should actually be providing more favorable terms. As long as her ilk can push that argument I wouldn't count on any big changes.

To your other point I'm also no expert but I don't know why the government wouldn't be budgeting for PSLF forgiveness in its current ten year projections.

[Informative]

Should this thread be a sticky?

[03152016]

Should this thread be a sticky?

509 employment disclosures are out soon, which will make this info much less useful

[Informative]

Should this thread be a sticky?

509 employment disclosures are out soon, which will make this info much less useful

What?

[03152016]

Should this thread be a sticky?

509 employment disclosures are out soon, which will make this info much less useful

What?

what part do you not understand
do you not know what 509 disclosures are, or do you not understand why that makes this info much less useful

[smaug]

Should this thread be a sticky?

509 employment disclosures are out soon, which will make this info much less useful

What?

what part do you not understand
do you not know what 509 disclosures are, or do you not understand why that makes this info much less useful

[wiz]

Smaug doing work ITT.

[Yukos]

Jesus Christ this is the worst thread in the history of TLS. It somehow got worse after Brut stopped posting.