IBR (Income-Based Repayment) - A Boon or Bane?...A Big Trap? Forum

ksllaw · Post by **ksllaw** » Mon Sep 17, 2012 2:52 am

http://www.youtube.com/watch?v=r_9l8TTl5q0

Watching Brian Tamanaha discuss his new book, Failing Law Schools , on YouTube. In it, he mentions how IBR can have some really negative consequences (starting around the 10:48 mark):

"Let me back up and say one more thing about debt, because these critics respond by saying, 'Well, you're ignoring the benefit of income based repayment.' Income-based repayment is a program in which the federal government links your monthly loan payments to your income. So if you earn less, then you owe less. Now that sounds like an attractive option. Unfortunately, it has quite significant negative consequences attached to it. Essentially, what it means is that your loan balance will balloon very quickly, because you're not paying even the interest on a monthly basis on that debt. And after three years that will begin to compound.

So, what essentially it means is that for over two decades you'll live with this debt - a debt for which many people on IBR - will actually be getting larger. And that debt will be factored into your credit score, which means you may be denied a home mortgage or car loans - or if you do get loans you'll pay a much higher interest rate. And the reason I need to raise this is because many law schools are now selling IBR. And IBR, while well-meaning, creates distortions in the economic signals. And the distortion is that someone who essentially is not meeting the terms of the loan will nevertheless be in good standing. So, we have an economic signal that things are working out when in reality they're not. ..."

Is IBR a boon or a bane to law grads? Is there ever a good time to utilize IBR?

What are people's experiences with it?

ksllaw · Post by **ksllaw** » Mon Sep 17, 2012 3:15 am

Just realized this thread might be better off in the general "Law School FAQ" area. Not sure it's really a financial aid topic, since we're talking about repayment phase. But also maybe not a law student/graduate topic either.

sunynp · Post by **sunynp** » Mon Sep 17, 2012 3:31 am

My personal opinion is that IBR is the method of last resort to keep people from killing themselves because of their insurmountable debt. I think planning to use IBR to pay off your loans is a huge mistake. I think people should drop out of school if it looks like they won't get the job they need to repay the debt that they are incurring to go to law school. IBR wasn't designed to be a 20 or 25 year repayment plan, but that is what seems to be happening in some cases.

If a law grad with massive debt gets into a bad situation, loses a job or something unexpected happens, then IBR is a good backstop. The purpose was to give people some relief because they have no other recourse. I think it succeeds in that, but it would be better to allow people to walk away from their debt in many more instances than are currently allowed.

I think the availability of IBR may make it almost impossible to get changes to the bankruptcy code to allow students to discharge debt.

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 3:37 am

I think that IBR is used more an option for undergrad dropouts.

cinephile · Post by **cinephile** » Mon Sep 17, 2012 6:59 am

We had this individual financial advising thing recently with our financial aid office and they really did try to sell me on IBR. It's pretty terrible.

Tom Joad · Post by **Tom Joad** » Mon Sep 17, 2012 7:06 am

You guys understand the IBR tax bombs as well, right?

That is probably the worst part.

Gorki · Post by **Gorki** » Mon Sep 17, 2012 10:21 am

cinephile wrote:We had this individual financial advising thing recently with our financial aid office and they really did try to sell me on IBR. It's pretty terrible.

I can not believe schools are trying to sell students on IBR. Haven't these soulless institutions taken enough from their life source?

sunynp · Post by **sunynp** » Mon Sep 17, 2012 11:07 am

Campos had a blog post awhile back discussing how George Washington was promoting IBR to students.
http://insidethelawschoolscam.blogspot. ... s.html?m=1

--LinkRemoved--

Note the comments on the interview scathing Herman for advocating IBR and the blog for publishing the interview.

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 12:32 pm

Tom Joad wrote:You guys understand the IBR tax bombs as well, right?

That is probably the worst part.

After 25 years most lawyers will have made enough to have paid it off anyways. The handful that joined the peacecorps(or whatever) will be low enough income that they will be viewed under the indigent exception of debt forgiveness (pay nothing or close to it on taxes as a result). You could give a million dollars of debt forgiveness to the homeless former pro-sports player who has lived off of foodstamps and welfare for the last decade. It won't hurt him any.

Some lawyers,doctors,etc will benefit by being able to make lower payments without being in default for the first few years while establishing themselves, but I doubt many will endup going to full 25 with it and have much left to discharge at that point. Heck, after 25 years of practice even a Concord grad should be doing ok.

It appears to be meant mostly more to take care of the undergrad dropouts that no longer can discharge it in bankruptcy.

sunynp · Post by **sunynp** » Mon Sep 17, 2012 12:51 pm

jurisprudence2012 wrote:
Tom Joad wrote:You guys understand the IBR tax bombs as well, right?

That is probably the worst part.
After 25 years most lawyers will have made enough to have paid it off anyways. The handful that joined the peacecorps(or whatever) will be low enough income that they will be viewed under the indigent exception of debt forgiveness (pay nothing or close to it on taxes as a result). You could give a million dollars of debt forgiveness to the homeless former pro-sports player who has lived off of foodstamps and welfare for the last decade. It won't hurt him any.

Some lawyers,doctors,etc will benefit by being able to make lower payments without being in default for the first few years while establishing themselves, but I doubt many will endup going to full 25 with it and have much left to discharge at that point. Heck, after 25 years of practice even a Concord grad should be doing ok.

It appears to be meant mostly more to take care of the undergrad dropouts that no longer can discharge it in bankruptcy.

Why would you assume that after 25 years people will be doing ok? Many law grads are never going to practice law at any time in their lives. Maybe some of the people who don't get jobs within a year or two of graduating will manage to hang a shingle and keep going for 25 years, but most won't.

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 1:06 pm

sunynp wrote:
jurisprudence2012 wrote:
Tom Joad wrote:You guys understand the IBR tax bombs as well, right?

That is probably the worst part.
After 25 years most lawyers will have made enough to have paid it off anyways. The handful that joined the peacecorps(or whatever) will be low enough income that they will be viewed under the indigent exception of debt forgiveness (pay nothing or close to it on taxes as a result). You could give a million dollars of debt forgiveness to the homeless former pro-sports player who has lived off of foodstamps and welfare for the last decade. It won't hurt him any.

Some lawyers,doctors,etc will benefit by being able to make lower payments without being in default for the first few years while establishing themselves, but I doubt many will endup going to full 25 with it and have much left to discharge at that point. Heck, after 25 years of practice even a Concord grad should be doing ok.

It appears to be meant mostly more to take care of the undergrad dropouts that no longer can discharge it in bankruptcy.

Why would you assume that after 25 years people will be doing ok? Many law grads are never going to practice law at any time in their lives. Maybe some of the people who don't get jobs within a year or two of graduating will manage to hang a shingle and keep going for 25 years, but most won't.

If you can't make it as a lawyer after 25 years, and havn't found other decent paying work by then either with a JD, at that point the issue is with you. And you probably fit into the too poor to have it hurt your taxes much catagory too. 25years is a lifetime. Most want to be retired by then.

IAFG · Post by **IAFG** » Mon Sep 17, 2012 1:29 pm

Blaming individuals is a retarded approach to looking at large scale problems.

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 1:35 pm

IAFG wrote:Blaming individuals is a retarded approach to looking at large scale problems.

perhaps, but I don't expect a large scale problem is my point. Most lawyers won't max it out (if they use it at all) and those who do have any left over either won't have much left to discharge after the two and a half decades or will be low enough income that they won't get taxed much on it due to their indigency.

perhaps the only real exception would be the person who lives in their dads mcmansion for 25 years without working but still having tons of money in a trust fund........then again, screw that guy. His daddy will pay his taxbill too.

IAFG · Post by **IAFG** » Mon Sep 17, 2012 1:39 pm

jurisprudence2012 wrote:
IAFG wrote:Blaming individuals is a retarded approach to looking at large scale problems.
perhaps, but I don't expect a large scale problem is my point. Most lawyers won't max it out (if they use it at all) and those who do have any left over either won't have much left to discharge after the two and a half decades or will be low enough income that they won't get taxed much on it due to their indigency.

perhaps the only real exception would be the person who lives in their dads mcmansion for 25 years without working but still having tons of money in a trust fund........then again, screw that guy. His daddy will pay his taxbill too.

Do you know anything at all about the number of law grads, their salary distribution and their debt load?!

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 1:40 pm

IAFG wrote:
jurisprudence2012 wrote:
IAFG wrote:Blaming individuals is a retarded approach to looking at large scale problems.
perhaps, but I don't expect a large scale problem is my point. Most lawyers won't max it out (if they use it at all) and those who do have any left over either won't have much left to discharge after the two and a half decades or will be low enough income that they won't get taxed much on it due to their indigency.

perhaps the only real exception would be the person who lives in their dads mcmansion for 25 years without working but still having tons of money in a trust fund........then again, screw that guy. His daddy will pay his taxbill too.
Do you know anything at all about the number of law grads, their salary distribution and their debt load?!

enlighten me.

Gorki · Post by **Gorki** » Mon Sep 17, 2012 1:44 pm

jurisprudence2012 wrote:
IAFG wrote:
jurisprudence2012 wrote:
IAFG wrote:Blaming individuals is a retarded approach to looking at large scale problems.
perhaps, but I don't expect a large scale problem is my point. Most lawyers won't max it out (if they use it at all) and those who do have any left over either won't have much left to discharge after the two and a half decades or will be low enough income that they won't get taxed much on it due to their indigency.

perhaps the only real exception would be the person who lives in their dads mcmansion for 25 years without working but still having tons of money in a trust fund........then again, screw that guy. His daddy will pay his taxbill too.
Do you know anything at all about the number of law grads, their salary distribution and their debt load?!
enlighten me.

/facepalm

You realize a majority of law grads will suffer more for having a JD? That JD will keep them from these supposedly abundant other jobs, b/c employers will hire a fresh UG grad on the cheap w/o worry the lawyer will bail or demand more $$. Outside of the select big and mid law positions, attorneys do not make much at all. In many cases they will make as much as a fresh UG grad, but with all their UG loans having accrued interest for 3 long years + all LS debt.

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 1:50 pm

[/quote]

/facepalm

You realize a majority of law grads will suffer more for having a JD? That JD will keep them from these supposedly abundant other jobs, b/c employers will hire a fresh UG grad on the cheap w/o worry the lawyer will bail or demand more $$. Outside of the select big and mid law positions, attorneys do not make much at all. In many cases they will make as much as a fresh UG grad, but with all their UG loans having accrued interest for 3 long years + all LS debt.[/quote]

Urban Legend. If true, quit.

WhiteyCakes · Post by **WhiteyCakes** » Mon Sep 17, 2012 1:52 pm

jurisprudence2012 wrote:

/facepalm

You realize a majority of law grads will suffer more for having a JD? That JD will keep them from these supposedly abundant other jobs, b/c employers will hire a fresh UG grad on the cheap w/o worry the lawyer will bail or demand more $$. Outside of the select big and mid law positions, attorneys do not make much at all. In many cases they will make as much as a fresh UG grad, but with all their UG loans having accrued interest for 3 long years + all LS debt.[/quote]

Urban Legend. If true, quit.[/quote]

Stop feeding the troll

20130312 · Post by **20130312** » Mon Sep 17, 2012 1:57 pm

Tamanaha wrote:after three years that will begin to compound.

wut

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 1:58 pm

WhiteyCakes wrote:
jurisprudence2012 wrote:
/facepalm

You realize a majority of law grads will suffer more for having a JD? That JD will keep them from these supposedly abundant other jobs, b/c employers will hire a fresh UG grad on the cheap w/o worry the lawyer will bail or demand more $$. Outside of the select big and mid law positions, attorneys do not make much at all. In many cases they will make as much as a fresh UG grad, but with all their UG loans having accrued interest for 3 long years + all LS debt.

Urban Legend. If true, quit.[/quote]

Stop feeding the troll[/quote]

think hard, and try to think of one time in your life an employer said you were too qualified. Then ask yourself what the job was and if you really wanted it.

people want to believe in the boogy-man, and yet they still want to sleep with the lights turned out.........."I will never get a job and a JD will hurt me, but I want to increase my lsat to get a JD"

WhiteyCakes · Post by **WhiteyCakes** » Mon Sep 17, 2012 2:00 pm

This thread has been successfully hijacked

jurisprudence2012 · Post by **jurisprudence2012** » Mon Sep 17, 2012 2:02 pm

WhiteyCakes wrote:This thread has been successfully hijacked

by reality. your welcome. now go back to putting the cotton in your ears son. Thinking for yourself is bad for copy&paste drones.

sunynp · Post by **sunynp** » Mon Sep 17, 2012 2:05 pm

HEre are BLS predictions for the number of lawyers jobs of all types for the next 10 years

http://insidethelawschoolscam.blogspot. ... r-day.html
http://insidethelawschoolscam.blogspot. ... m-bls.html

Here is a post about the "versatility" of the law degree
http://insidethelawschoolscam.blogspot. ... egree.html

And some analysis of 2011 jobs:
http://lawschooltuitionbubble.wordpress ... rsatility/

This data is discussed in a lot of other places but i don't feel like looking them all up for you. Read more of this blog if you want some insight into the plight of a large number of law grads.
Because the news about the law schools massaging every number they possibly can, particularly any number having to do with employment and salary, is becoming more widely known, the number of LSAT takers and law school applications has dropped significantly over the past two years or so.
If you want more jobs data, look at Law school transparency, find rayiner's underemployment thread for the T14 and read the OCI threads posted here for the past couple of years. The information is out there, you just have to look for it a little bit.

Getting back on topic, a number of law grads will need IBR to make their payments for a significant period of time.

Rahviveh · Post by **Rahviveh** » Mon Sep 17, 2012 2:06 pm

sunynp wrote:Campos had a blog post awhile back discussing how George Washington was promoting IBR to students.
http://insidethelawschoolscam.blogspot. ... s.html?m=1

--LinkRemoved--

Note the comments on the interview scathing Herman for advocating IBR and the blog for publishing the interview.

One of the comments suggested including % of students on IBR or default in the rankings. Would this be a pretty good indicator of how many students get poor outcomes? Seems like something the schools should ask in the surveys (or are they already doing it?)

SuperCerealBrah · Post by **SuperCerealBrah** » Mon Sep 17, 2012 3:08 pm

sunynp wrote:HEre are BLS predictions for the number of lawyers jobs of all types for the next 10 years

http://insidethelawschoolscam.blogspot. ... r-day.html
http://insidethelawschoolscam.blogspot. ... m-bls.html

Here is a post about the "versatility" of the law degree
http://insidethelawschoolscam.blogspot. ... egree.html

And some analysis of 2011 jobs:
http://lawschooltuitionbubble.wordpress ... rsatility/

This data is discussed in a lot of other places but i don't feel like looking them all up for you. Read more of this blog if you want some insight into the plight of a large number of law grads.
Because the news about the law schools massaging every number they possibly can, particularly any number having to do with employment and salary, is becoming more widely known, the number of LSAT takers and law school applications has dropped significantly over the past two years or so.
If you want more jobs data, look at Law school transparency, find rayiner's underemployment thread for the T14 and read the OCI threads posted here for the past couple of years. The information is out there, you just have to look for it a little bit.

Getting back on topic, a number of law grads will need IBR to make their payments for a significant period of time.

nvm, it looks like that jurisprudence guy is a troll (bruss).

IBR (Income-Based Repayment) - A Boon or Bane?...A Big Trap? Forum

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