Law School Discussion

Nine Years of Discussion
;

Author Topic: Early Loan Repayment on a NYC salary  (Read 1812 times)

bass

  • Sr. Citizen
  • ****
  • Posts: 2951
  • Retired
    • View Profile
Early Loan Repayment on a NYC salary
« on: July 09, 2006, 12:27:41 PM »
So I was just looking through salaries by year for NYC (http://www.infirmation.com/shared/search/payscale-compare.tcl?city=New%20York) and thinking about paying off these ridiculous student loans.

I did some calculations for 100K in debt consolidated at 6.5%.

I calculated how much after taxes (Federal, State, and FICA--I didn't do NYC, but I also didn't factor in ANY deductions, not even standard ones) these salaries make, and then I figured out how much salary remains for loans paid off in 4 years.  Here's what I got by year:

81610.35125   88800.35125   98850.35125   112250.3513 (paid off)

2 questions: 1) Does this calculation make sense and 2) Is this a reasonable salary for NYC to live on?

Caveats: I know I didn't factor in bonuses (which I hear range from 5 to 40K), Social Security, Medical benefits, etc.  This is a rough calculation.

If these calculations are correct, they seem to indicate that students at schools that feed into these firms shouldn't be afraid of loans.  The fifth year, you stop paying them and take home roughly 155K after taxes.

WeeSqueak

  • Sr. Citizen
  • ****
  • Posts: 1357
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #1 on: July 09, 2006, 12:35:34 PM »
Either I don't understand you calculations or you're not taking enough out for tax because I think your numbers are high. 

If in your 5th year you make $210,000 (the max salary I found on the list) and you pay only 40% in tax, which is low based on what my parents paid this past year -- all those things you didn't account for really add up, you would only take home 126,000 not 155,000

queencruella

  • Sr. Citizen
  • ****
  • Posts: 4213
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #2 on: July 09, 2006, 12:37:34 PM »
I know people who live in NYC with $30-60K salaries and they do fine. I think there are a lot of people on this board who have unrealistic expectations of what you need to live in NYC or other big cities. Are you going to be able to live by yourself in a nice Manhattan apartment immediately? Probably not. I think the real issue is to think about what you'd likely be making had you not gone to law school, and for most people with liberal arts degrees, it's probably quite a bit less than the starting NYC salary.

chewy06

  • Sr. Citizen
  • ****
  • Posts: 518
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #3 on: July 09, 2006, 12:39:45 PM »
Don't forget that the interest you pay on your loans is tax deductible.

bass

  • Sr. Citizen
  • ****
  • Posts: 2951
  • Retired
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #4 on: July 09, 2006, 12:40:58 PM »
Either I don't understand you calculations or you're not taking enough out for tax because I think your numbers are high. 

If in your 5th year you make $210,000 (the max salary I found on the list) and you pay only 40% in tax, which is low based on what my parents paid this past year -- all those things you didn't account for really add up, you would only take home 126,000 not 155,000

Here's how I did the tax calculations:
Salary
- NY Tax (7.375 of gross)
- FICA (roughly 7.5 of gross)
- Federal (differs by year, since you move up in brackets.  First year, e.g., is $15107.50+28% of everything over 74200)
---------
= after tax income

Again, I didn't factor in ANY deductions.  I did skip out on the NYC tax.  Let me look that up...

bass

  • Sr. Citizen
  • ****
  • Posts: 2951
  • Retired
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #5 on: July 09, 2006, 12:45:36 PM »
Alright, I added in NYC tax according to the rates I found here:
http://www.nyc.gov/html/dof/html/pdf/05pdf/pit_rates.pdf

The bottom lines change to:

76438.75125   83263.95125   92766.75125   105437.1513

Again, I factored in NO deductions (which only seem to apply for federal tax, but federal tax is the biggest chunk of tax by far).

The interest deduction is a good point.

What I especially like about this scheme is that you only pay about 14K in interest.

bass

  • Sr. Citizen
  • ****
  • Posts: 2951
  • Retired
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #6 on: July 09, 2006, 12:48:37 PM »
Either I don't understand you calculations or you're not taking enough out for tax because I think your numbers are high. 

If in your 5th year you make $210,000 (the max salary I found on the list) and you pay only 40% in tax, which is low based on what my parents paid this past year -- all those things you didn't account for really add up, you would only take home 126,000 not 155,000

With the NYC tax added, it's 146,566.

Am I missing any sources of taxes?  I did them all according to the rates provided by the people who tax you.  It adds up to about 30% (for 210K in income) tax, when it's all said and done.

WeeSqueak

  • Sr. Citizen
  • ****
  • Posts: 1357
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #7 on: July 09, 2006, 02:29:07 PM »
I guess I was thinking of 2 things -- 1) a lot of the large firms withold a portion of your "salary" and you get it when you hit your billable hours target.  It can be as much as $25,000 at some firms and 2) you usually have to contribute to medical and dental insurance, which correctly isn't a tax but its not like you aren't going to pay it and that adds up, especially if you're married and want to include your significant other.  Oh and don't forget about a contribution to a 401k or something else because pretty much everyone does that.

But just on taxes I think you are correct about salary.  I was just thinking about the other things that are essentially mandatory and can easily equal 10% plus.

bass

  • Sr. Citizen
  • ****
  • Posts: 2951
  • Retired
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #8 on: July 09, 2006, 04:57:32 PM »
I guess I was thinking of 2 things -- 1) a lot of the large firms withold a portion of your "salary" and you get it when you hit your billable hours target.  It can be as much as $25,000 at some firms and 2) you usually have to contribute to medical and dental insurance, which correctly isn't a tax but its not like you aren't going to pay it and that adds up, especially if you're married and want to include your significant other.  Oh and don't forget about a contribution to a 401k or something else because pretty much everyone does that.

But just on taxes I think you are correct about salary.  I was just thinking about the other things that are essentially mandatory and can easily equal 10% plus.

I think you're right on all points.  401K's and medical stuff is expensive.

On the other hand, I factored in $0 in bonuses, which at top firms are sizeable (and taxable...).

Special Agent Dana Scully

  • LSD Obsessed
  • *****
  • Posts: 8991
  • aka MCB
    • View Profile
Re: Early Loan Repayment on a NYC salary
« Reply #9 on: July 09, 2006, 08:31:24 PM »
I know people who live in NYC with $30-60K salaries and they do fine. I think there are a lot of people on this board who have unrealistic expectations of what you need to live in NYC or other big cities. Are you going to be able to live by yourself in a nice Manhattan apartment immediately? Probably not. I think the real issue is to think about what you'd likely be making had you not gone to law school, and for most people with liberal arts degrees, it's probably quite a bit less than the starting NYC salary.

I'm one of those people...well my mom is actually.  And we live fine...though we do live in Brooklyn.  However, when you live in NY making that type of money, you really can't do a lot of the things that people with money can do on a regular basis. 

I read somewhere that to live comfortably in NYC (meaning able to go out to restaurants frequently and all those type of things) that one has to make $500,000 AFTER tax.
Columbia 3L