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Author Topic: payback time  (Read 4178 times)

yanno

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payback time
« on: April 08, 2007, 11:09:46 AM »
Assuming I borrows the full cost of the 3 years of law school ($180-$200k)at a T14 school and only start paying back the debt after graduation. How many years would be a reasonable estimate of when the loan can be fully paid back? Let's assume I end up working at BigLaw in NY, and try to live as frugally as possible - spending maybe about $20-25k a year for  living expenses.

jacy85

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Re: payback time
« Reply #1 on: April 08, 2007, 11:14:59 AM »
Most loans usually have i think a 20-30 year term.  The payments are calculated and scheduled so that your last payment on 20-30 years from now will pay them off, I believe.  Short terms mean you'll have higher monthly payments.

Drew P. Bottom

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Re: payback time
« Reply #2 on: April 08, 2007, 02:55:07 PM »
Staffords are set up for a 10 year repayment.

Grad PLUS are generally for a 15. You can change the terms for Grad PLUS more easily than Staffords I believe...
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Drew P. Bottom

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Re: payback time
« Reply #3 on: April 08, 2007, 03:10:49 PM »
No, no. Staffords do not (at least for most lenders I believe) have a charge for early repayment. The best thing to do is to read the fine print on a specific lender. I'll supply T.H.E.'s since I'm leaning toward using them.

http://www.northstar.org/Law/repaymentbonus.aspx
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Booyakasha2

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Re: payback time
« Reply #4 on: April 08, 2007, 03:11:49 PM »
Princeton Law 2010

Drew P. Bottom

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Re: payback time
« Reply #5 on: April 08, 2007, 03:22:20 PM »
thanks for the links guys.

According to the loan calculator, I'd be needing to making about 400k a year to pay back 105k in loans. But 10 percent of your gross income would be a small amount to put towards loans, right?

Every time I start to think about loan repayments, it seems clear it'd be really difficult to do it in a short amount of time, especially considering interest.

Difficult yes but well worth it if you can so as to avoid interest. People planning on 30 year repayment plans really don't fathom how much interest they will be paying.
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togbra

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Re: payback time
« Reply #6 on: April 08, 2007, 04:56:28 PM »
http://www.finaid.org/calculators/scripts/loanpayments.cgi

According to the loan calculator, I'd be needing to making about 400k a year to pay back 105k in loans. But 10 percent of your gross income would be a small amount to put towards loans, right?

I think that calculator is bit off on realism, it works better for lower amounts of loans.  For the large loans, write an excel sheet showing how much you are borrowing and the rate.  Figure out how much you owe after graduation.  Estimate a realistic salary and cost of living, and you will find you can pay off way more than the monthly minimum for a 10 year loan if you live like a college student for a few more years. For some people, that may work for other it may not, but I think that is the reality with cost of law school so high.

yanno

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Re: payback time
« Reply #7 on: April 08, 2007, 08:01:00 PM »
Staffords are set up for a 10 year repayment.

Grad PLUS are generally for a 15. You can change the terms for Grad PLUS more easily than Staffords I believe...

Can you expand on this a little? Does this mean you can't pay back a higher amount on the Staffords than is set up originally (10 year plan)?

yanno--20-25k for living/rent in NYC seems really really low to me. I'm estimating closer to 30-40k at least, and that's living pretty frugally too.

So, assuming making 160k a year, after taxes will be about 105k or so (maybe less).

That would leave about 65-70k. So about 2-3 years if you don't save anything, depending on the interest.

Does this seem off?

Most of the people I spoke to at the law schools quote a term of 5 years to pay off the loan (assuming I borrow the full amount), but I was wondering if it was possible to do it in even less time - 5 years of BigLaw is not very appetizing and was looking more at 2 or 2-1/2 years of just eliminating the loan (even at the expense of some savings). Not sure how much the tax rate for a single person making that much money in NYC would net out to, though (at your calculation, it looks like the tax rate is at 34-35%).

yanno

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Re: payback time
« Reply #8 on: April 08, 2007, 08:16:44 PM »
Staffords are set up for a 10 year repayment.

Grad PLUS are generally for a 15. You can change the terms for Grad PLUS more easily than Staffords I believe...

Can you expand on this a little? Does this mean you can't pay back a higher amount on the Staffords than is set up originally (10 year plan)?

yanno--20-25k for living/rent in NYC seems really really low to me. I'm estimating closer to 30-40k at least, and that's living pretty frugally too.

So, assuming making 160k a year, after taxes will be about 105k or so (maybe less).

That would leave about 65-70k. So about 2-3 years if you don't save anything, depending on the interest.

Does this seem off?

Most of the people I spoke to at the law schools quote a term of 5 years to pay off the loan (assuming I borrow the full amount), but I was wondering if it was possible to do it in even less time - 5 years of BigLaw is not very appetizing and was looking more at 2 or 2-1/2 years of just eliminating the loan (even at the expense of some savings). Not sure how much the tax rate for a single person making that much money in NYC would net out to, though (at your calculation, it looks like the tax rate is at 34-35%).

I'd love to be able to get rid of it all in 2-3 years as well, and I think it's possible without living like a complete pauper. So if you're not going out all that often, and are taking advantage of your firm buying you dinner (which means staying late which you'd be doing anyway most likely) and take public transportation and all that, I think it's very doable. Yeah I'd say 35 percent in taxes is about right. City taxes are a female dog, for me (making 115k or so less than this amount) they're much higher than state or federal taxes. But rent in NYC is likely to go up at least a little in the next three years. Most of the people I know who live in Murray Hill (or around there, which is close to where a lot of law firms are) pay about 14-1500 a month for a share. So to live alone right now would be about 2200 for something small. In three years probably more. 

Don't NYC firms pay for a cab ride home as well, after working past a certain hour?

yanno

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Re: payback time
« Reply #9 on: April 08, 2007, 08:21:18 PM »
I think they have towncars, so yeah, you wouldn't have to worry about that. Also, if you live in an area near the firm, you could probably walk to work everyday. I'm not too worried about that part. I just don't know how much reasonably could go to the loans when interest is considered. I think the bulk of money I'd spend after rent would be on suits.

You're absolutely right about the suits - but I think you could deduct those from taxes right, since they are part of office attire and cost quite a bit of money? Also, don't most firms have a business casual dress policy?