Michigan 2014 - 365K debt - What now? Forum

[patogordo]

Just for fun. The calculator states that if I took a 40K nonPSLF job on PAYE I would pay just over 80K in loan payments over 20 years and would be forgiven over 800K….WOW

yea. if you did 20-year extended repayment plan you'd be paying $2778 a month and you'd pay $667k total. with PAYE you pay $80k (saving you like $2500 a month!) + a $320k tax bomb that you can pay by saving $1k/month. it's a free $1500/month for 20 years.

but PSLF is still a way better deal if you're interested in public interest work.

[A. Nony Mouse]

Honestly, these programs are all new enough, I think everyone's still trying to figure out how they work.

[DebtMuch]

After speaking with a few financial types I have actually found that the best financial strategy (of course assuming I can keep these jobs) would look something like this:

Year 1 Big Law at IBR/PAYE: Income would be based on 2rd year law school and SA at about 40K. Make minim payments of about 300/month and save all the cash.

Year 2 Big Law at IBR/PAYE: Income would be based on 3rd year law school and first few months practicing after the bar at about 55K. Make min payments of about 500/month and save all cash.

Year 3 go into 10 year public forgiveness type job, immediately apply for an adjusted income based on my first paycheck in that job reflect the PI pay instead of Big Law pay and hope to keep such job for ten years.

Year 13. All loans forgiven via PI with no Tax Bomb but the save case of 2 years of IBR min payments based on 55K or less when making 160/170…..

Seems to be an interesting strategy.

[anyriotgirl]

After speaking with a few financial types I have actually found that the best financial strategy (of course assuming I can keep these jobs) would look something like this:

Year 1 Big Law at IBR/PAYE: Income would be based on 2rd year law school and SA at about 40K. Make minim payments of about 300/month and save all the cash.

Year 2 Big Law at IBR/PAYE: Income would be based on 3rd year law school and first few months practicing after the bar at about 55K. Make min payments of about 500/month and save all cash.

Year 3 go into 10 year public forgiveness type job, immediately apply for an adjusted income based on my first paycheck in that job reflect the PI pay instead of Big Law pay and hope to keep such job for ten years.

Year 13. All loans forgiven via PI with no Tax Bomb but the save case of 2 years of IBR min payments based on 55K or less when making 160/170…..

Seems to be an interesting strategy.

don't forget about interest capitalization

[DebtMuch]

But why would I care about interest capitalization if I were planning for the full PI forgiveness at year 13? Wouldn't I actually have absolutely no reason to care and thus make minimum payments?

[anyriotgirl]

Year 3 go into 10 year public forgiveness type job, immediately apply for an adjusted income based on my first paycheck in that job reflect the PI pay instead of Big Law pay and hope to keep such job for ten years.

[DebtMuch]

Right. Am I missing something? With the assumption of having any PI job that qualifies for ten years there is absolutely no incentive to pay more than the minimum? That was the simple question.

[84651846190]

Just for fun. The calculator states that if I took a 40K nonPSLF job on PAYE I would pay just over 80K in loan payments over 20 years and would be forgiven over 800K….WOW

This will be the end of our country some day.

[patogordo]

haha yea writing down toxic debt after 20 years how can an institution ever survive such tomfoolery!

[84651846190]

haha yea writing down toxic debt after 20 years how can an institution ever survive such tomfoolery!

Well, if you draw the incentives out to their logical conclusions, there is no reason institutions of higher learning wouldn't start charging literally whatever they want. Eventually, everyone will be on PAYE/IBR and the government will be handing over 90%+ of loan payments to colleges/universities on the backs of taxpayers.

[anyriotgirl]

Right. Am I missing something? With the assumption of having any PI job that qualifies for ten years there is absolutely no incentive to pay more than the minimum? That was the simple question.

the problem is a lot of PI jobs are really competitive, and nonprofit orgs/government departments have their budgets cut all the time. It could take you more than ten years. I know that wouldn't be the worst ever, but it is a thing to consider, especially if through some stroke of misfortune you are in and out of PI jobs for 20 years and happen to be out when the end of PAYE hits. The government could get rid of this program. They probably won't, but as huge loan balances start to reach forgiveness territory, and the government figures out what figuring millions of dollars in debt does to its balance sheets it could decide that it needs to be reevaluated.

If you do have a stable PI job, yes, correct, zero reason to pay more than the minimum.

I don't know anything about your life, but with all those degrees I would hazard to guess that you're approaching 30. PI jobs are not lucrative, and you probably want to do normal adult human things like get a house and have some kids or whatever in the not so distant future. On a PI salary, it's gonna be rough. (Of course, it will be rough on a big law salary too with all that debt, but there's something to be said for cashflow).

[patogordo]

haha yea writing down toxic debt after 20 years how can an institution ever survive such tomfoolery!

Well, if you draw the incentives out to their logical conclusions, there is no reason institutions of higher learning wouldn't start charging literally whatever they want. Eventually, everyone will be on PAYE/IBR and the government will be handing over 90%+ of loan payments to colleges/universities on the backs of taxpayers.

wait, that's your argument? you know there is more than one law school, right? you think students will become completely price insensitive bc "lol i can just do earn jack shit until i'm 50 and then enter indentured servitude to the irs and never retire lol what's money?"

[anyriotgirl]

haha yea writing down toxic debt after 20 years how can an institution ever survive such tomfoolery!

Well, if you draw the incentives out to their logical conclusions, there is no reason institutions of higher learning wouldn't start charging literally whatever they want. Eventually, everyone will be on PAYE/IBR and the government will be handing over 90%+ of loan payments to colleges/universities on the backs of taxpayers.

wait, that's your argument? you know there is more than one law school, right? you think students will become completely price insensitive bc "lol i can just do earn jack shit until i'm 50 and then enter indentured servitude to the irs and never retire lol what's money?"

quick, everyone! to galt's gulch!

[84651846190]

haha yea writing down toxic debt after 20 years how can an institution ever survive such tomfoolery!

Well, if you draw the incentives out to their logical conclusions, there is no reason institutions of higher learning wouldn't start charging literally whatever they want. Eventually, everyone will be on PAYE/IBR and the government will be handing over 90%+ of loan payments to colleges/universities on the backs of taxpayers.

wait, that's your argument? you know there is more than one law school, right? you think students will become completely price insensitive bc "lol i can just do earn jack shit until i'm 50 and then enter indentured servitude to the irs and never retire lol what's money?"

That seems to be what at least one person is celebrating in this thread. Shit, I've seen people with biglaw in this forum gleefully announcing their intention to use PAYE/IBR. Think about that. These are people who make literally the most money possible out of law school. If they are signing up for PAYE/IBR, what do you think that foretells for people at TTTs who don't get biglaw? Why wouldn't they all hop on PAYE/IBR? It's better to be an indentured servant for 20 years than your entire life.

I personally don't get why someone would put themselves in a situation where they'd have to use PAYE/IBR (except for PI). But I guess it might make sense financially after you've been a complete fucking retard about going to law school in the first place.

I suppose one justifiable exception might be someone who definitely wants to do PI: Rationally, they are going to use the best loan repayment program they can get and really couldn't care less whether tuition is 1,000,000 per year or 45,000 per year. I really don't have a problem with this. I think we *should* subsidize the education of people set on doing PI.

It doesn't make sense to me at all, however, why PAYE/IBR is available to people doing biglaw of all things. You're paying greedy Boomer administrators and profs to produce slaves for Boomer biglaw partners.

[Tiago Splitter]

As long as the government continues to make student loan forgiveness taxable it won't really be out much money. PSLF people will continue to get an incredible deal but everyone else will just get a bit of an interest rate discount. For example, if OP made 60k a year for 20 years he'd only pay 84k towards his loans but then the tax bill on the forgiven 800k will be something like another 350k.

The system obviously needs fixing because there's no reason to enrich the law school scam, but I don't think the government is going to be motivated by financial concerns. The other problem is that we continue to see the average student loan balance quoted as about 30k, so no one is really worrying about the guy with 365k (rich doctor!!1!) or having to forgive 30k under PAYE when even a poor will pay that off in 20 years.

[84651846190]

As long as the government continues to make student loan forgiveness taxable it won't really be out much money. PSLF people will continue to get an incredible deal but everyone else will just get a bit of an interest rate discount. For example, if OP made 60k a year for 20 years he'd only pay 84k towards his loans but then the tax bill on the forgiven 800k will be something like another 350k.

Taxed at ~44%? Sorry, I'm not a tax guy. I have people who handle that shit for me.

[Tiago Splitter]

As long as the government continues to make student loan forgiveness taxable it won't really be out much money. PSLF people will continue to get an incredible deal but everyone else will just get a bit of an interest rate discount. For example, if OP made 60k a year for 20 years he'd only pay 84k towards his loans but then the tax bill on the forgiven 800k will be something like another 350k.

Taxed at ~44%? Sorry, I'm not a tax guy. I have people who handle that shit for me.

It's taxed as ordinary income. 800k kicks you into a pretty high bracket.

[84651846190]

As long as the government continues to make student loan forgiveness taxable it won't really be out much money. PSLF people will continue to get an incredible deal but everyone else will just get a bit of an interest rate discount. For example, if OP made 60k a year for 20 years he'd only pay 84k towards his loans but then the tax bill on the forgiven 800k will be something like another 350k.

Taxed at ~44%? Sorry, I'm not a tax guy. I have people who handle that shit for me.

It's taxed as ordinary income. 800k kicks you into a pretty high bracket.

Ah, makes sense. Even so, I wasn't really worried about the government going insolvent or anything, at least not any time soon. I was more worried about the misapplication of societal resources to enrich Boomers who are going to spend your federal tax dollars to build 450 million dollar badminton practice facilities with retractable domes, just because they can.

[anyriotgirl]

Ah, makes sense. Even so, I wasn't really worried about the government going insolvent or anything, at least not any time soon. I was more worried about the misapplication of societal resources to enrich Boomers who are going to spend your federal tax dollars to build 450 million dollar badminton practice facilities with retractable domes, just because they can.

boomer hate, always TCR (not sarcasm, I gleefully await the Great Boomer Dieoff)

[DebtMuch]

As long as the government continues to make student loan forgiveness taxable it won't really be out much money. PSLF people will continue to get an incredible deal but everyone else will just get a bit of an interest rate discount. For example, if OP made 60k a year for 20 years he'd only pay 84k towards his loans but then the tax bill on the forgiven 800k will be something like another 350k.

Taxed at ~44%? Sorry, I'm not a tax guy. I have people who handle that shit for me.

It's taxed as ordinary income. 800k kicks you into a pretty high bracket.

HIGHLY speculative. Likely it will only be taxed on assets and very much differentiated from ordinary income. I can guarantee any good lawyer or tax person will not have this taxed at ordinary income (unless they are NYC partner at 2 million plus--it would also already be paid off). The method of taxation for this is completely unknown. But it will very likely be much less than 44% and likely to be more in line with assets--but please inform me if you know otherwise.

[patogordo]

As long as the government continues to make student loan forgiveness taxable it won't really be out much money. PSLF people will continue to get an incredible deal but everyone else will just get a bit of an interest rate discount. For example, if OP made 60k a year for 20 years he'd only pay 84k towards his loans but then the tax bill on the forgiven 800k will be something like another 350k.

Taxed at ~44%? Sorry, I'm not a tax guy. I have people who handle that shit for me.

It's taxed as ordinary income. 800k kicks you into a pretty high bracket.

HIGHLY speculative. Likely it will only be taxed on assets and very much differentiated from ordinary income. I can guarantee any good lawyer or tax person will not have this taxed at ordinary income (unless they are NYC partner at 2 million plus--it would also already be paid off). The method of taxation for this is completely unknown. But it will very likely be much less than 44% and likely to be more in line with assets--but please inform me if you know otherwise.

are you a time traveler from 2006? taxation of cancelled debts is a pretty well-defined field nowadays.

[Tiago Splitter]

It's true that forgiven debt is taxed only to the point of solvency, but if your plan is to get the last laugh on the government by being functionally insolvent when you're 50 a new plan might be in order.

[84651846190]

It's true that forgiven debt is taxed only to the point of solvency, but if your plan is to get the last laugh on the government by being functionally insolvent when you're 50 a new plan might be in order.

[MistakenGenius]

Post removed.

[splitsplat]

Just for fun. The calculator states that if I took a 40K nonPSLF job on PAYE I would pay just over 80K in loan payments over 20 years and would be forgiven over 800K….WOW

not to mention, depending on your school- they might also help may a portion of your payments