How to use SA Income Forum

[Anonymous User]

Looking for advice from the more financially savvy TLSers here. I took out approximately $64K in student loans for this year (1L), and I was fortunate enough to land a diversity SA position that will pay ~41K over the course of ten weeks. I would like to use whatever is left over after rent/living expenses to help mitigate my debt load after law school: would it be better to throw the money at the loans I've already taken out or to simply take out smaller loans for next year and live off of the remainder of my SA income?

(Apologies if this isn't the appropriate subforum)

[TLSModBot]

Not an expert but I'd at least pay the interest on your loans if you weren't already (as this is tax-deductible).

[180kickflip]

Is that a normal pay level for a 1L SA ?

[zot1]

You could send me the money too.

[First Offense]

$41k for ten weeks? That's pretty significantly over market. Only firm off the top of my head that pays that is Williams and Connolly.

[Anonymous User]

Looking for advice from the more financially savvy TLSers here. I took out approximately $64K in student loans for this year (1L), and I was fortunate enough to land a diversity SA position that will pay ~41K over the course of ten weeks. I would like to use whatever is left over after rent/living expenses to help mitigate my debt load after law school: would it be better to throw the money at the loans I've already taken out or to simply take out smaller loans for next year and live off of the remainder of my SA income?

(Apologies if this isn't the appropriate subforum)

What's the interest rate of your $64k in loans, and what is your anticipated interest rate for future loans? I would deal with whatever interest rate is higher.

Edit: accidental anonymous posting

[Anonymous User]

Double post

[kcdc1]

Question is whether to use remaining $$ (1) pay interest and maybe a bit of principal on last year's loans, or (2) borrow less this year.

Answer depends on the details of your loans and your tax situation. Are the interest rates different? Is there an origination fee for the new loans? How much will the tax deduction for paying interest on current loans save you?

Also consider that the standard deduction for 2015 was $6,300 (and looks to be for 2016 as well). If you claim itemized deductions, you give that up. For example, if the new loans have an origination fee (say 1% of the amount borrowed), but paying down interest on existing loans would result in itemized deductions under $6,300, it's better to avoid the origination fee. Just giving you some ideas to research - you'll have to do the math if you want to optimize for your situation.

[barkschool]

Not an expert but I'd at least pay the interest on your loans if you weren't already (as this is tax-deductible).

I forget, can we straight deduct on the first dollar, or do we have to pay over our standard deduction?

[TLSModBot]

Not an expert but I'd at least pay the interest on your loans if you weren't already (as this is tax-deductible).

I forget, can we straight deduct on the first dollar, or do we have to pay over our standard deduction?

It's an adjustment to income so I think the former.

[Winter is Coming]

You dont have to itemize to take the student loan deduction, its above the line. Capped at like 2500 and has an income phase out that you wont have to worry about only on a SA salary.

Not sure if it makes more sense to cut down on new loans for next year (i.e. Avoid the origination fee for a few grand) or to get that refund.

[Aeon]

OP's income as a summer associate would be low enough to not be phased out of deducting student loan interest, but the maximum reduction to income is capped at $2,500, and there are additional eligibility criteria and rules: https://www.irs.gov/publications/p970/ch04.html. Another consideration is that OP's tax liability will probably be fairly low as is, so the actual tax benefit from reducing income by $2,500 would not be very high. As kcdc1 wrote, it's important to run the numbers and figure things out. It might still make sense to pay down the loans, since that compounding interest can be brutal, but it'd have to be weighted against other potential uses, such as contributing to an IRA, taking out smaller loans for 2L year, etc.

[TLSModBot]

This is all academic anyway because the correct response to OP's question is "just buy a huge pile of blow and the rest will sort itself out"

[Winter is Coming]

This is all academic anyway because the correct response to OP's question is "just buy a huge pile of blow and the rest will sort itself out"

Tcr

[twenty 8]

To OP.... $4,100 a week is substantially above market…. $213k a year. Are you sure you are adding it right? If so, you could easily pay off your loans in three years and live very comfortably with no worries!

[DELG]

Ah yes I remember when I thought I would have SA money left over

[anonnymouse]

To OP.... $4,100 a week is substantially above market…. $213k a year. Are you sure you are adding it right? If so, you could easily pay off your loans in three years and live very comfortably with no worries!

It's a diversity SA. Could be regular SA salary at $31k plus tuition stipend of $10k.

[Anonymous User]

Ah yes I remember when I thought I would have SA money left over

Could you go into more detail? For those of us not moving cities, what would we be spending more money on than we would during the rest of the year? Based on how I'm spending money now, I should end up saving a ton to use towards my 3L expenses.

[Avian]

Ah yes I remember when I thought I would have SA money left over

Could you go into more detail? For those of us not moving cities, what would we be spending more money on than we would during the rest of the year? Based on how I'm spending money now, I should end up saving a ton to use towards my 3L expenses.

Tuition... A lot of people have loans and they use the SA money to pay down their loans/take out fewer loans 2L/3L.

[barkschool]

Ah yes I remember when I thought I would have SA money left over

Could you go into more detail? For those of us not moving cities, what would we be spending more money on than we would during the rest of the year? Based on how I'm spending money now, I should end up saving a ton to use towards my 3L expenses.

Didn't a new mac book come out?

[J9ofDiamonds]

This is all academic anyway because the correct response to OP's question is "just buy a huge pile of blow and the rest will sort itself out"

I was going to say... TCR is mottles and bodels

[2014]

You should pay $2500 toward interest on existing loans for tax reasons and use the rest to avoid grad plus loans going forward as they have a 4.2% origination fee which is a sunk cost of old loans but can be avoided on new ones.

The fees and interest on staffords is lower so still take those out.

[Love With The Coco]

You should pay $2500 toward interest on existing loans for tax reasons and use the rest to avoid grad plus loans going forward as they have a 4.2% origination fee which is a sunk cost of old loans but can be avoided on new ones.

The fees and interest on staffords is lower so still take those out.

Can't you pay towards grad plus loans within 120 days of disbursement and the origination fees and interest related to that principal will be retroactively eliminated?

Thus if you received a disbursement in January, you could drop cash on the grad plus in May and front your May expenses on CC's that you will be able to pay off in June when SA checks are coming in. Under this strategy you profit off of the removed origination/interest from the past year's grad plus loans.

[2014]

You should pay $2500 toward interest on existing loans for tax reasons and use the rest to avoid grad plus loans going forward as they have a 4.2% origination fee which is a sunk cost of old loans but can be avoided on new ones.

The fees and interest on staffords is lower so still take those out.

Can't you pay towards grad plus loans within 120 days of disbursement and the origination fees and interest related to that principal will be retroactively eliminated?

Thus if you received a disbursement in January, you could drop cash on the grad plus in May and front your May expenses on CC's that you will be able to pay off in June when SA checks are coming in. Under this strategy you profit off of the removed origination/interest from the past year's grad plus loans.

If you receive a disbursement in January you would have to make the payment by March to eliminate the origination fee, I don't see how you will have SA money to do that by then. If you are saying take the loan in January, somehow pay off the January with credit cards in March, carry a balance until you get paid which will inevitably not be till June because of payroll shit and then profit by a couple hundred bucks that seems really complicated.

Just consider the past loans sunk costs imo and avoid future ones.

[DELG]

Ah yes I remember when I thought I would have SA money left over

Could you go into more detail? For those of us not moving cities, what would we be spending more money on than we would during the rest of the year? Based on how I'm spending money now, I should end up saving a ton to use towards my 3L expenses.

My only "moving" expenses were flights, and yet all my SA money was gone before I threw any at tuition. Tho I did get a healthy tax return.