BigLaw Folks--What is your loan repayment strategy? Forum

[Anonymous User]

For those of you heading into BigLaw this fall or already in BigLaw, how quickly are you planning to repay your debt? I'm starting in the fall and am trying to figure out what is the most optimal strategy for paying back my loans. Are you trying to repay your loans quickly (within 3-4 years) or are you going to try and maintain the 10-year repayment plan and try and build up a good chunk of savings?

[TigerBeer]

Pay them down asap.

ITE there won't be many investments that earn a higher rate of return than the interest rate on your loans. Saving doesn't make sense, 1% rate on savings accounts is garbage.

Any investment that does earn a higher rate than the interest on your loans will probably take lots of time to research and manage, and will probably be really risky.

otoh, people with astronomically high debt amounts seem to get lucky pretty often and have a large portion of it forgiven or reduced. It would be a shame to have paid off all your loans right before the federal government decides to impose a moratorium on interest for student loans. I personally don't think the US is going to make a recovery like that any time soon, so I'm paying mine off.

[spaghetti day]

ITE there won't be many investments that earn a higher rate of return than the interest rate on your loans. Saving doesn't make sense, 1% rate on savings accounts is garbage.

True. However, you need to have enough cash in savings to keep afloat if you lose your job. I'd shoot for at least 3-6 months of expenses saved in cash.

[Anonymous User]

ITE there won't be many investments that earn a higher rate of return than the interest rate on your loans. Saving doesn't make sense, 1% rate on savings accounts is garbage.

True. However, you need to have enough cash in savings to keep afloat if you lose your job. I'd shoot for at least 3-6 months of expenses saved in cash.

Unless things really take a turn for the worse, no one is at risk of being laid off right after starting. You'll be able to guess when it's coming, or at least when there is a risk (clear, sustained financial collapse). You should be spending as much of your income as possible paying off your loans. Ideal, IMO, would be to have them all paid off within two or three years, which is completely doable (although you'll be living like a student for the whole time). After that, you can save money and spend it as you will. Additionally, having money saved won't help you much if you get laid off and are still six figures in debt.

[rayiner]

ITE there won't be many investments that earn a higher rate of return than the interest rate on your loans. Saving doesn't make sense, 1% rate on savings accounts is garbage.

True. However, you need to have enough cash in savings to keep afloat if you lose your job. I'd shoot for at least 3-6 months of expenses saved in cash.

Unless things really take a turn for the worse, no one is at risk of being laid off right after starting. You'll be able to guess when it's coming, or at least when there is a risk (clear, sustained financial collapse). You should be spending as much of your income as possible paying off your loans. Ideal, IMO, would be to have them all paid off within two or three years, which is completely doable (although you'll be living like a student for the whole time). After that, you can save money and spend it as you will. Additionally, having money saved won't help you much if you get laid off and are still six figures in debt.

If I got laid off I'd rather be sitting on a ton of cash than less debt.

[Cavalier]

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[daesonesb]

Yeah, I'm in the boat that you pay them off at a normal rate, and have some kind of savings/investment account where you put your extra dough. With biglaw, if you can save even a quarter of your after tax income each year, you are going to have savings above 100k within 4 years or so.

Having a lot of savings gives you a cushion in case you lose your job. You can live off of it, and still make loan payments, all while looking for something else.

Not to mention, as long as you are paying your loans down so that you are knocking a bit of the principal off all the time, you may very well find as time goes on that you are making more off of interest with what you've saved than you are paying on whats left of your loans (assuming that your savings will eventually eclipse the size of your loan debt).

This is just what I would ideally do if I had my hands on a biglaw salary.

[SpiteFence]

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