Money matters... Forum

[radgrad]

especially for those of us interested in public interest, but for everyone else too, I'm sure.


My big issue is this: if you're interested in public interest, does it make more sense to go to the school that gave you some mad $$, or the school with the best LRAP?

For example, Columbia's LRAP is great. if you make under 50k, you pay nothing that year in loans. for every dollar you make over, you pay 34.5% (i think) of that dollar. so a person making 60k pays $3450 a year, or about $290 a month. Which is honestly pennies. (is my math right? bueller?). SO even if they've got 200k in debt, it's all gone in 10 years.

But let's say the same person gets a lot of financial aid at another decent school... Cornell, Michigan, Georgetown... whatever. And this school has a crappier LRAP. (I don't know the numbers here, but let's say a person making 60k is going to pay like 400k a month). Even if the $$ made law school MUCH cheaper, wouldn't the person end up paying more per month?

Not that this has happened to me or anything... sadly i don't have schools knockin on my door and throwing benjamins at me (that's how they offer financial aid, right?). But it's a thought that just occurred to me- and though the math seems to make sense, I intuitively feel like less $$ in loans is *always* a good thing.

Am I crazy? Or just bad at math? Or on to something...


ALSO i want to calculate this out for real. Does anyone know what the interest rates on our law school loans will be? I did a bit of research and found this: http://www.edfed.com/resources/calculators.php . It seems to suggest that federal loans are 5%-8%. Anyone have a better estimate than that?

[wired]

But let's say the same person gets a lot of financial aid at another decent school... Cornell, Michigan, Georgetown... whatever. And this school has a crappier LRAP. (I don't know the numbers here, but let's say a person making 60k is going to pay like 400k a month). Even if the $$ made law school MUCH cheaper, wouldn't the person end up paying more per month?

Not that this has happened to me or anything... sadly i don't have schools knockin on my door and throwing benjamins at me (that's how they offer financial aid, right?). But it's a thought that just occurred to me- and though the math seems to make sense, I intuitively feel like less $$ in loans is *always* a good thing.

Am I crazy? Or just bad at math? Or on to something...


ALSO i want to calculate this out for real. Does anyone know what the interest rates on our law school loans will be? I did a bit of research and found this: http://www.edfed.com/resources/calculators.php . It seems to suggest that federal loans are 5%-8%. Anyone have a better estimate than that?

Well, if they did pay 400k per month, they would have all of their debt paid off in a month and would probably be establishing their children's acceptances pretty quickly. If you meant $400, I see your dilemma.

It depends on your risk aversion. LRAPs change and are not guaranteed. For instance, Columbia could modify their LRAP program during someone's 3L, in which case the student is left with the check. Similarly, someone may discover they want to work in a non-qualifying position and the LRAP would not kick in. A scholarship is guaranteed free money.

However, you are right, if EVERYTHING works EXACTLY how you set it up, they could end up paying more per month than another student.

[finalaspects]

paying $290 a month for 10 years amounts to only paying back $34,800. if you owed 200k, $165,200 + interest would be forgiven by LRAP?

if that's true that unbelievable...

[wakefield]

But let's say the same person gets a lot of financial aid at another decent school... Cornell, Michigan, Georgetown... whatever. And this school has a crappier LRAP. (I don't know the numbers here, but let's say a person making 60k is going to pay like 400k a month). Even if the $$ made law school MUCH cheaper, wouldn't the person end up paying more per month?

Not that this has happened to me or anything... sadly i don't have schools knockin on my door and throwing benjamins at me (that's how they offer financial aid, right?). But it's a thought that just occurred to me- and though the math seems to make sense, I intuitively feel like less $$ in loans is *always* a good thing.

Am I crazy? Or just bad at math? Or on to something...


ALSO i want to calculate this out for real. Does anyone know what the interest rates on our law school loans will be? I did a bit of research and found this: http://www.edfed.com/resources/calculators.php . It seems to suggest that federal loans are 5%-8%. Anyone have a better estimate than that?

Well, if they did pay 400k per month, they would have all of their debt paid off in a month and would probably be establishing their children's acceptances pretty quickly. If you meant $400, I see your dilemma.

It depends on your risk aversion. LRAPs change and are not guaranteed. For instance, Columbia could modify their LRAP program during someone's 3L, in which case the student is left with the check. Similarly, someone may discover they want to work in a non-qualifying position and the LRAP would not kick in. A scholarship is guaranteed free money.

However, you are right, if EVERYTHING works EXACTLY how you set it up, they could end up paying more per month than another student.

The only thing is that scholarships aren't always guaranteed. I think generally the higher ranked the school is, the more likely you are to hold on to your scholarship.

[radgrad]

paying $290 a month for 10 years amounts to only paying back $34,800. if you owed 200k, $165,200 + interest would be forgiven by LRAP?

if that's true that unbelievable...

it *is* unbelievable, isn't it? but by that math, you're also committing to earning 60k for the first 10 years of your career- arguably some of your best earning years. I think the benefit becomes less significant as you go up the pay ladder. For example, if you're making 100k, you're paying 17,500 a year in loans. (35% of 50,000). In this scenario, you'd end up paying like 175k for law school.

and interesting points above about both scholarships and LRAPs being subject to change. i guess this is true, but i don't know how to begin taking that into consideration.

[wakefield]

paying $290 a month for 10 years amounts to only paying back $34,800. if you owed 200k, $165,200 + interest would be forgiven by LRAP?

if that's true that unbelievable...

it *is* unbelievable, isn't it? but by that math, you're also committing to earning 60k for the first 10 years of your career- arguably some of your best earning years. I think the benefit becomes less significant as you go up the pay ladder. For example, if you're making 100k, you're paying 17,500 a year in loans. (35% of 50,000). In this scenario, you'd end up paying like 175k for law school.

and interesting points above about both scholarships and LRAPs being subject to change. i guess this is true, but i don't know how to begin taking that into consideration.

I'm wrestling with the same decision, and I think the bottom line is that there isn't an easy or right answer. :/ Another possibility is a good school with a decent (easier to keep?) scholarship, not relying on a full ride or LRAP. If it comes down to T14 LRAP, TTT full ride, or T30 half price....I don't know what I'll do.

(so many typos on this friday afternoon...oops.)

[darknightbegins]

paying $290 a month for 10 years amounts to only paying back $34,800. if you owed 200k, $165,200 + interest would be forgiven by LRAP?

if that's true that unbelievable...

it *is* unbelievable, isn't it? but by that math, you're also committing to earning 60k for the first 10 years of your career- arguably some of your best earning years. I think the benefit becomes less significant as you go up the pay ladder. For example, if you're making 100k, you're paying 17,500 a year in loans. (35% of 50,000). In this scenario, you'd end up paying like 175k for law school.

and interesting points above about both scholarships and LRAPs being subject to change. i guess this is true, but i don't know how to begin taking that into consideration.

I'm wrestling with the same decision, and I think the bottom line is that there isn't an easy or right answer. :/ Another possibility is a good school with a decent (easier to keep?) scholarship, not relying on a full ride or LRAP. If it comes down to T14 LRAP, TTT full ride, or T30 half price....I don't know what I'll do.

(so many typos on this friday afternoon...oops.)

I'd take the t30 half price.

[ogman05]

Opportuniy Cost is what really matters people. Add up your particular situation and what you want to do with the next ten years after law school and the rest of your life and make the decision for yourself. Everyone will be different.

[WrappedUpInBooks]

Yah, this is definitely a tough one. I am currently weighing Michigan with $$ againt NYU/Columbia (the whole NYU vs. Columbia question being a whole other issue..), and am also interested in PI, and possibly prestige PI (fingers crossed!)

With Michigan I would have $90k in debt, with NYU/columbia I would have about $180K in debt but amazing LRAP and a better name, which could help with prestige jobs.

What to do?? Right now I'm still giving the other schools the chance to throw some money at me as well

[ozarkhack]

With IBR you might as well go to the best school you can, probably even if it's at sticker. IBR caps monthly payments based on income, not total debt. There does seem to be a qualifying threshold, but in the above scenario, IBR would mean the same monthly payment regardless of $90K or $180K in debt. And after 120 monthly payments, the ENTIRE debt is forgiven (this assumes govt/PI).

If you make $55K, you're gonna be paying $485 in either debt scenario. That's a lot of money, but it's not bad — it's certainly not $1,200/month or whatever it'd be without IBR. And my understanding (subject to being entirely wrong) is that you can use IBR to drop your payments to that $485 per month, then use LRAP to cover a hefty chunk of that, if not all, depending on your particular LRAP. Very very nice.

[scribelaw]

With IBR you might as well go to the best school you can, probably even if it's at sticker. IBR caps monthly payments based on income, not total debt. There does seem to be a qualifying threshold, but in the above scenario, IBR would mean the same monthly payment regardless of $90K or $180K in debt. And after 120 monthly payments, the ENTIRE debt is forgiven (this assumes govt/PI).

If you make $55K, you're gonna be paying $485 in either debt scenario. That's a lot of money, but it's not bad — it's certainly not $1,200/month or whatever it'd be without IBR. And my understanding (subject to being entirely wrong) is that you can use IBR to drop your payments to that $485 per month, then use LRAP to cover a hefty chunk of that, if not all, depending on your particular LRAP. Very very nice.

This.

Also, even if you pay sticker, you are vastly better off in a PI career with Columbia or NYU using their awesome LRAP program than you would be at a T30 even with a hefty scholarship. Not only will your job opportunties be far better, but your monthly loan payments will be a lot less.

[finalaspects]

what's IBR? (sorry im not too financial terms savvy)

[ozarkhack]

There's plenty of threads on TLS about it.

It's Income-Based Repayment. Anyone can do to repay federally subsidized loans. If PI for 10 years (doesn't have to be continuous), the rest of debt is then forgiven. For all other work, the debt is wiped away only after 25 years. Probably not the wisest in that case.

Also: http://www.finaid.org/loans/ibr.phtml

And: http://www.ibrinfo.org/

[radgrad]

I think the bottom line is that there isn't an easy or right answer. :/

ughgh i was worried about that!

I'm going to have a stat major friend of mine help me map out some scenarios... like School X, with LRAP, no scholly, making 60k a year, vs. School Y, scholly, LRAP, making 60k with a 2% raise each year, vs. School Z... (etc)

Any idea what interest rates I should have him use? I did a bit of research, and 6.8% seems pretty standard for Stafford loans...