Income Based Repayments - Do Federal Loans really matter that much? Forum
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tonysoprano86
- Posts: 2
- Joined: Tue Apr 24, 2018 8:37 pm
Income Based Repayments - Do Federal Loans really matter that much?
Okay 0L here. Without going into specifics I have a significant amount of undergrad and graduate debt. I don't make much. I am currently on income based repayments. My debt total is around $125k. If I don't get a great deal and have to borrow another $100k plus I am going to have $230k in loans. Let's say I end up at a small firm making $65k. Okay, so worst case scenario I am on IBR for 25 years, and I just save for the tax bomb. Is that really that bad? Even when my income rises (if it does) my debt will far exceed my income so I can stay on it. Or I could do PSFL and do public service somewhere for 10 years, then the slate is wiped clean. I already make under $40k. Now I hope I get scholarships, T-14, and a Big Law job. But I am just saying, if I end up at Cooley and working at a small private practice doing personal injury. It's not like my entire life is over is it? Now of course if I could do things over I would definitely make some adjustments. But honestly, should I really worry about the debt since IBR is available.
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cavalier1138
- Posts: 8007
- Joined: Fri Mar 25, 2016 8:01 pm
Re: Income Based Repayments - Do Federal Loans really matter that much?
You're making a few assumptions about law school and debt that are giving you a much rosier view of your career track and life after school:
First, the worst outcome from Cooley (or a comparable school) isn't working at a small private practice, it's not practicing at all. "But wait," you might say, "I'd still have better income as a paralegal." Great. Nothing's preventing you from being a paralegal now.
You're also assuming that you can save enough to pay off the tax bomb in 25 years, but that's a big assumption. With over $200k in loans--and this is a low-end estimate, because $100k for law school means you got a good scholarship offer--you're facing a pretty massive tax bill. The most likely scenario is that you end up entering a payment plan with the IRS, extending your indebtedness by an additional few years.
On a related note, you're seriously underestimating the impact of carrying over $200k in loans for that long. You likely won't be able to buy a house, car, etc. for the next 25 years. You'll be in your 50s before you can actually have real savings. It's a pretty miserable proposition.
Finally, you've consigned yourself to some sort of flip-of-the-coin scenario. You "hope" you get scholarships and/or admission to a top school. But whether you can get those results is in your control. So instead of convincing yourself that it would be ok to attend a shitty school and spending the next 2.5 decades being in a state of financial paralysis, why not just take steps to prevent that outcome altogether?
First, the worst outcome from Cooley (or a comparable school) isn't working at a small private practice, it's not practicing at all. "But wait," you might say, "I'd still have better income as a paralegal." Great. Nothing's preventing you from being a paralegal now.
You're also assuming that you can save enough to pay off the tax bomb in 25 years, but that's a big assumption. With over $200k in loans--and this is a low-end estimate, because $100k for law school means you got a good scholarship offer--you're facing a pretty massive tax bill. The most likely scenario is that you end up entering a payment plan with the IRS, extending your indebtedness by an additional few years.
On a related note, you're seriously underestimating the impact of carrying over $200k in loans for that long. You likely won't be able to buy a house, car, etc. for the next 25 years. You'll be in your 50s before you can actually have real savings. It's a pretty miserable proposition.
Finally, you've consigned yourself to some sort of flip-of-the-coin scenario. You "hope" you get scholarships and/or admission to a top school. But whether you can get those results is in your control. So instead of convincing yourself that it would be ok to attend a shitty school and spending the next 2.5 decades being in a state of financial paralysis, why not just take steps to prevent that outcome altogether?
