Law School

[Aaaron]

What am I missing then? 200k relief for 67k? Where do I sign up? Can a do a few million? 

NOT SERIOUS RECOMMENDATION:

Find some sucker bank to over-appraise your house and lend you more cash than it's worth.
Short sale it in 6 months.
Profit.

[AJK]

What am I missing then? 200k relief for 67k? Where do I sign up? Can a do a few million? 

Two things:

1) people don't expect the bomb *at all*, so having to scrounge up 70k which is payable immediately is both shocking and difficult.

2) you only get the forgiveness after you've paid some variable monthly payment for 20 or 25 years, depending on income. I haven't run the math, but over that course of time,  one could easily pay more than the 200k he or she borrowed, which means you're out 270k.

[Aaaron]

I would assume some sort of refinancing it the most common way to pay it.  20-25 years out you should have equity in something, if not actual cash to write a check.  Then again, I only have 1 tuition..

[ChaimMoskowitz]

I would assume some sort of refinancing it the most common way to pay it.  20-25 years out you should have equity in something, if not actual cash to write a check.  Then again, I only have 1 tuition..

After 20-25 years won't you be making the BIG bucks?

[Aaaron]

After 20-25 years won't you be making the BIG bucks?

You would hope.  I know people that burn out early, or make more investment choices, or just have holes in their pockets and heavy spending habits.  Not everyone saves for a rainy day.

I've never had to really think about all this, fortunately.  Thank you mom and dad.

[henche]

After 20-25 years won't you be making the BIG bucks?

If you are you have to pay it all back...

[ChaimMoskowitz]

If you are you have to pay it all back...

There is always a catch. 

[ChaimMoskowitz]

You would hope.  I know people that burn out early, or make more investment choices, or just have holes in their pockets and heavy spending habits.  Not everyone saves for a rainy day.

I've never had to really think about all this, fortunately.  Thank you mom and dad.

Note to self: Have daughter read this.

[AJK]

You would hope.  I know people that burn out early, or make more investment choices, or just have holes in their pockets and heavy spending habits.  Not everyone saves for a rainy day.

I've never had to really think about all this, fortunately.  Thank you mom and dad.

Oh how fortunate you are.

Reminds me of a story: guy goes out to dinner with his parents after graduating medical school. On the way out of the restaurant, the dad says, "oh, by the way, check your loan balances tomorrow."

Next day he checks to see that his balance went from $300k to... $0.

[Aaaron]

Oh how fortunate you are.

Reminds me of a story: guy goes out to dinner with his parents after graduating medical school. On the way out of the restaurant, the dad says, "oh, by the way, check your loan balances tomorrow."

Next day he checks to see that his balance went from $300k to... $0.

Nice. 

Yeah, I recognize that I'm fortunate and it may not be the norm.  But I also went to state schools through and through to make it more affordable.  If I wanted to go to Columbia or Georgetown my parents would only cover the cost of MD.

On the other end of the story spectrum:  My close law school friend asked her parents to refi one of their summer homes to pay off her debt, and she would pay off the new loan which would have had a MUCH lower interest rate.  Her financial adviser brother convinced them not to in case she died.. 

[GTR]

Absolutely fascinating.

The problem I have with PVing everything is that you don't also have 200k somewhere collecting returns of 5%.  So while the true PV may be lower, you still will have that tax bill and nothing to pay it with. (try telling tuition committee you need to save 5k a year to pay your tax bomb in 25 years.)

If one is contemplating rapid repayment (or even what's termed regular repayment) vs. IBR or some other IDP it is proper to PV the values.  Assuming you borrowed the $ for lawschool (no scholarships) and assuming you will pay it back, you DO have the money.   This is most relevant when asking oneself "should i pay down debt ASAP or reduce my above the line and shoot for forgiveness."  A dollar not spent on aggressively paying down loans IS a dollar you have for investment. 

Sure an ideal view of the situation would take into account peoples inability to view current financial status in relation to some future status, people are really bad at that.  But the fact of the matter is someone who aggressively pays down a graduate loan is very possibly costing themselves 10's or 100's of thousands in the future.  And again, I only mean this to apply to certain "middle of the road" type earners, at least relative to the legal industry.  If at any time you believe that you'll fall out of IBR and trigger normal payments by earning around 175-200k, this isn't the best path since the earlier years of IBR will cause you to pay more interest.  And that person WILL earn more money in the long run.  This is ideal for anyone hanging a shingle (or starting any small business) or someone who is partially financially secure already, or anyone who doesn't mind deferring compensation.

Next i'll introduce my Married Filing Separately module.

[jj1000]

Nice. 

Yeah, I recognize that I'm fortunate and it may not be the norm.  But I also went to state schools through and through to make it more affordable.  If I wanted to go to Columbia or Georgetown my parents would only cover the cost of MD.

On the other end of the story spectrum:  My close law school friend asked her parents to refi one of their summer homes to pay off her debt, and she would pay off the new loan which would have had a MUCH lower interest rate.  Her financial adviser brother convinced them not to in case she died.. 

That's what life insurance is for. All parent loans should be sure the kid has it.

[henche]

If one is contemplating rapid repayment (or even what's termed regular repayment) vs. IBR or some other IDP it is proper to PV the values.  Assuming you borrowed the $ for lawschool (no scholarships) and assuming you will pay it back, you DO have the money.   This is most relevant when asking oneself "should i pay down debt ASAP or reduce my above the line and shoot for forgiveness."  A dollar not spent on aggressively paying down loans IS a dollar you have for investment. 

Sure an ideal view of the situation would take into account peoples inability to view current financial status in relation to some future status, people are really bad at that.  But the fact of the matter is someone who aggressively pays down a graduate loan is very possibly costing themselves 10's or 100's of thousands in the future.  And again, I only mean this to apply to certain "middle of the road" type earners, at least relative to the legal industry.  If at any time you believe that you'll fall out of IBR and trigger normal payments by earning around 175-200k, this isn't the best path since the earlier years of IBR will cause you to pay more interest.  And that person WILL earn more money in the long run.  This is ideal for anyone hanging a shingle (or starting any small business) or someone who is partially financially secure already, or anyone who doesn't mind deferring compensation.

Next i'll introduce my Married Filing Separately module.

Yes, but the IBR guy has no savings and couldn't pay down anyway. The non-iBR route is to work at a high pressure job that pays more.

[skyguy918]

That's what life insurance is for. All parent loans should be sure the kid has it.

I was thinking the same thing, but depending on the details of the loans, it could cost more than the savings of shifting the debt.

[henche]

Nice. 

Yeah, I recognize that I'm fortunate and it may not be the norm.  But I also went to state schools through and through to make it more affordable.  If I wanted to go to Columbia or Georgetown my parents would only cover the cost of MD.

On the other end of the story spectrum:  My close law school friend asked her parents to refi one of their summer homes to pay off her debt, and she would pay off the new loan which would have had a MUCH lower interest rate.  Her financial adviser brother convinced them not to in case she died.. 

Honestly, if they own multiple summer homes without debt, I'd think they'd be willing to take risk that if their daughter died they'd be out 300k. 

If that's what it's like having rich parents, I'm sure glad I don't.

[jj1000]

I was thinking the same thing, but depending on the details of the loans, it could cost more than the savings of shifting the debt.

Your talking under $300 a year on a $200,000 loan. That's a bargain. And not a bad thing to have either.

[jj1000]

Honestly, if they own multiple summer homes without debt, I'd think they'd be willing to take risk that if their daughter died they'd be out 300k. 

If that's what it's like having rich parents, I'm sure glad I don't.

True if they are wealthy. Multiple homes doesn't equal wealth.

How about loaning form a $200k retirement fund your folks have been putting money into the past 25 years... You'd need life insurance on the kid.

[blerbz]

Two things:

1) people don't expect the bomb *at all*, so having to scrounge up 70k which is payable immediately is both shocking and difficult.

2) you only get the forgiveness after you've paid some variable monthly payment for 20 or 25 years, depending on income. I haven't run the math, but over that course of time,  one could easily pay more than the 200k he or she borrowed, which means you're out 270k.

You may be out 270k but that's better than being out 350k+ if paying in full with interest (I'm approximating)

[shiframeir]

Ok what are bonuses gonna be like people? I'm getting tired of waiting for some old fart to decide to just do the same thing someone else did last year.

[CS91]

Ok what are bonuses gonna be like people? I'm getting tired of waiting for some old fart to decide to just do the same thing someone else did last year.

Doubt the scale will go up again. Two years in a row? Nah. I'm waiting until salary news comes out. NY to 190k?