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kingsstudent

Paying back significant debt

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Posted (edited)

Hey people!

I'm looking over my finances and things aren't looking very good if I'm being honest. Im already 45k in debt from my undergrad and will likely spend another 100K from a LOC throughout law school (After talking to the bank I should get something like 145k in LOC). This seems a lot higher than the average amount people are in debt for. Is it still going to be possible to pay this back realistically? Anyone in the same boat or have any idea how much the monthly payments are going to be like?

Any input would be appreciated!

 

 

Edited by kingsstudent

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Posted (edited)

I don't know how much your monthly payments will be, but to me, that's a high enough debt level that I would spend some time thinking seriously about whether law is the best move at this time. To put it in perspective, even if you graduate and move directly into a Bay Street position, you're going to be putting a significant chunk of your salary into servicing this debt for a long time. If you don't make it to Bay, it will be an even tougher slog. This is assuming you even want to pursue a Big Law position, in the first place. 

 

Edited by spicyfoodftw
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Yikes. Those are big numbers. 10 years ago law school would have cost about the same as what you paid for your undergrad.  It's unfortunate.

$145k is a lot. There's no way around that, but I wouldn't let that be the determining factor in whether or not I went to law school. A career spent doing something you don't like, or wondering what if is a crappy way to live. I do think the potential debt load should prompt you to think long and hard about how badly you actually want to go to law school, and what that debt will mean as far as your lifestyle afterwards. At least for the first several years. You should also think about ways to save money during school and think about your realistic income potential once you graduate so you can plot a realistic timeline for repayment. If you don't end up on Bay Street or Bay Street adjacent, how much will you realistically make in the job market you want to enter, what sort of lifestyle are you okay with, and what is your realistic goal for being debt-free.

I'm carrying some hefty debt from school. I'm paying it back little by little. I can't imagine myself doing anything else for a career, so the medium-term pain is worth the long term gain. 

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@TheAEGIS what do you think a manageable amount of debt is for the average person coming out of law school ?

 

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On 5/14/2019 at 4:23 PM, spicyfoodftw said:

I don't know how much your monthly payments will be, but to me, that's a high enough debt level that I would spend some time thinking seriously about whether law is the best move at this time. To put it in perspective, even if you graduate and move directly into a Bay Street position, you're going to be putting a significant chunk of your salary into servicing this debt for a long time. If you don't make it to Bay, it will be an even tougher slog. This is assuming you even want to pursue a Big Law position, in the first place.  

 

If you make it to Bay and make around $100k right away, you don't think it's reasonable to put aside about $30k a year for the debt? Yes I know there's income tax and yes you'd have to live frugally but it really dosen't seem that bad?

I don't think it's crazy to aim at paying it off in about 5-7 years, but maybe I'm underestimating living costs in Toronto.

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@Smorr53 I don't know if I can answer that in a useful way...

If someone is spending 90% of their after-tax income on debt repayment, and they've never missed a payment and will be debt-free in 5 years, they're technically "managing" their debt, but I'd argue that that's no way to live. That said, more and more of us are being pushed closer to such extremes thanks to rising tuition costs. 

Personally, I think "manageable debt" should be an amount a person scan repay in 3 years without having to spend more than 40% of their after-tax income. Manageable debt isn't scary debt. And 145k in debt is scary. Very very scary. 

So, I say this very tentatively, but I imagine that in most circumstances, law students would have few issues paying off 40 - 50k in student loans over 3 years. 

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36 minutes ago, thedraper said:

If you make it to Bay and make around $100k right away, you don't think it's reasonable to put aside about $30k a year for the debt? Yes I know there's income tax and yes you'd have to live frugally but it really dosen't seem that bad?

I don't think it's crazy to aim at paying it off in about 5-7 years, but maybe I'm underestimating living costs in Toronto.

It's entirely reasonable on a Bay St. salary. 

105k/Year starting is a 75K net in first year (It's actually more once you take into account the tuition tax credits). Then lockstep raises. If you live frugally you can definitely make Toronto work on 40K net and put 35K/year against debt. It gets easier if you're double income, less easy if you have kids.

Even on smaller salaries you can service the debt, but it's not going to be super comfortable.  
 

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15 minutes ago, TheAEGIS said:

So, I say this very tentatively, but I imagine that in most circumstances, law students would have few issues paying off 40 - 50k in student loans over 3 years. 

I would imagine that most law students have much more than that in debt no?

I couldn't even imagine only using that much credit. Law school must only be for the wealthy in your world.

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@thedraper  Keep in mind that most students will not 'make it to Bay'.  Planning on accruing an amount of debt based on the idea that one will, is beyond foolish. That type of debt will affect your life in many ways for all those years. Do you really want to live like a student for three years of law school, a year of articling, then an additional 5-7 years? And that's assuming that you could pay it off that quickly. I've seen grads struggle with less debt than is being stated here, affecting their ability to buy a car, a condo/home, pay for insurance, or a vacation, and if you plan to start a family, well, the expenses will continue to add up. 

Think long and hard before putting yourself in such a position. 

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1 hour ago, thedraper said:

If you make it to Bay and make around $100k right away, you don't think it's reasonable to put aside about $30k a year for the debt? Yes I know there's income tax and yes you'd have to live frugally but it really dosen't seem that bad?

I don't think it's crazy to aim at paying it off in about 5-7 years, but maybe I'm underestimating living costs in Toronto.

Sure, that could work. But again, that's a best case scenario assuming someone a) makes it to Bay or Bay-adjacent, and b) enjoys the wok and firm long enough to stick it out for that period of time in order take advantage of the lockstep.

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18 minutes ago, erinl2 said:

@thedraper  Keep in mind that most students will not 'make it to Bay'.  Planning on accruing an amount of debt based on the idea that one will, is beyond foolish. That type of debt will affect your life in many ways for all those years. Do you really want to live like a student for three years of law school, a year of articling, then an additional 5-7 years? And that's assuming that you could pay it off that quickly. I've seen grads struggle with less debt than is being stated here, affecting their ability to buy a car, a condo/home, pay for insurance, or a vacation, and if you plan to start a family, well, the expenses will continue to add up.  

Think long and hard before putting yourself in such a position.  

Of course I've thought about those things, but I have none of them now anyway so what does it matter to me? That may be too harshly stated but just so you get where I'm coming from.

What I'm baffled at is the idea that some law students will only have 40-50k in debt. Let's assume tuition of $20k... you would need around 50-60k in cash sitting around before you even start school. That's not the situation of most I'd imagine.

1 minute ago, spicyfoodftw said:

Sure, that could work. But again, that's a best case scenario assuming someone a) makes it to Bay or Bay-adjacent, and b) enjoys the wok and firm long enough to stick it out for that period of time in order take advantage of the lockstep.

Fair enough. If bay is your goal and you fail and can land a job elsewhere making around 70k I don't think it's that unreasonable to manage the debt in that scenario.

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Posted (edited)
6 minutes ago, thedraper said:

Of course I've thought about those things, but I have none of them now anyway so what does it matter to me? That may be too harshly stated but just so you get where I'm coming from.

What I'm baffled at is the idea that some law students will only have 40-50k in debt. Let's assume tuition of $20k... you would need around 50-60k in cash sitting around before you even start school. That's not the situation of most I'd imagine.

Fair enough. If bay is your goal and you fail and can land a job elsewhere making around 70k I don't think it's that unreasonable to manage the debt in that scenario.

70k before tax? After business expenses? That would be about 50-ish in your pocket I think? From which you also have to pay living expenses. Depending on whether you have a spouse/kids and what your spouse’s income is, and where you live, that could make things pretty tight. It might not be too bad in a small rural area. 

 

34 minutes ago, thedraper said:

I would imagine that most law students have much more than that in debt no?

I couldn't even imagine only using that much credit. Law school must only be for the wealthy in your world.

I think it increasingly is only for the wealthy with the way tuition is going.

Edited by providence
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Posted (edited)
7 minutes ago, providence said:

70k before tax? After business expenses? That would be about 50-ish in your pocket I think? From which you also have to pay living expenses. Depending on whether you have a spouse/kids and what your spouse’s income is, and where you live, that could make things pretty tight. It might not be too bad in a small rural area.  

Well the assumption for me is no spouse or kids. And if I didn't end up on Bay Street I'd move back home which would make living costs more than reasonable. I still think I could put $20k a year toward debt.

In regards to business expenses I'm not talking about running my own place, so I'd imagine that's not much of a concern (no idea though).

 

7 minutes ago, providence said:

I think it increasingly is only for the wealthy with the way tuition is going.

I guess so, which is slightly sad. But I don't think the reality is that only the wealthy are going, which is my point. I seriously, seriously doubt most law grads only have 40-50 in debt.

Edited by thedraper

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15 minutes ago, thedraper said:

I would imagine that most law students have much more than that in debt no?

I couldn't even imagine only using that much credit. Law school must only be for the wealthy in your world.

How on earth did you get this from what I wrote?

I said that more of us are being pushed closer to spending 90% of our after-tax income on student debt to be debt free in 5-7 years which I consider extreme. And that I think the ideal for "manageable" debt would be in the 40-50k range - not that this is where a student needs to be to make law school worthwhile or something.

Where does any of that imply that law school should only be for the wealthy? You're reading in your own assumptions to my statements.

Students who are not rich usually have to pay back a lot more than 50k. That's certainly the position I'm in. And I'm managing that. But logically, a person can manage way more debt if the lender simply extends the repayment period. You'd pay a lot more in interest, but your payments would be "manageable". That means "manageable" is a malleable term that will vary by individual circumstances. If you're willing to repay your student loans for 20 years at say 35% of your after tax income, you could probably "manage" a debt load equivalent to what you'd pay for a condo in downtown Toronto. Doesn't mean that this is what I think a "manageable" debt load should be for a law student. And debt can significantly affect other areas of your life as well. 

Look, as students who want to practice law, we will "manage" whatever debt load we have to because we don't have a choice if we want in.  But there are points at which the potential debt is so great that I would urge extreme caution and careful deliberation before agreeing to it. To me, that figure is around 90k.  Conversely, there are also points where the debt is generally reasonable and on average manageable given the prospects of the average student. I think that figure is around 40-50k. The fact that the average student may carry more debt than this has no impact on my assessment.

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1 minute ago, thedraper said:

Well the assumption for me is no spouse or kids. And if I didn't end up on Bay Street I'd move back home which would make living costs more than reasonable. I still think I could put $20k a year toward debt.

 

I guess so, which is slightly sad. But I don't think the reality is that only the wealthy are going, which is my point. I seriously, seriously doubt most law grads only have 40-50 in debt.

You’d want to live with your parents as a professional in your late 20s or beyond in order to pay debt? I’d call that unreasonable. 

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Just now, providence said:

You’d want to live with your parents as a professional in your late 20s or beyond in order to pay debt? I’d call that unreasonable. 

By move home I mean my hometown, not at my parents house.

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English Common Law Law Schools by Tuition (as of 2014, but appear to be fairly accurate still)

Victoria $9,029  
Manitoba $9,311  
New Brunswick $9,837  
Alberta $10,221  
UBC $11,448  
Saskatchewan $12,015  
Calgary $12,315  
Dalhousie $13,500

 

The solution is to not go to a school in Ontario. Going to UVIC, my tuition was very similar to what my undergrad degree cost. If you managed to pay your own way through undergrad then you can do law school too. There are benefits to commiseration but not if they lead to irrational despair. 

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2 hours ago, BabyRhinoRainbow said:
Victoria $9,029  
Manitoba $9,311  
New Brunswick $9,837  
Alberta $10,221  
UBC $11,448  
Saskatchewan $12,015  
Calgary $12,315  
Dalhousie $13,500

 

Wow what a difference. Didn't realize it had gotten this bad.

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22 hours ago, TheAEGIS said:

 

Wow what a difference. Didn't realize it had gotten this bad.

U of A is around 13k now and I doubt it's going to move much. Going to law school in Ontario is borderline cost-prohibitive. The people that attend school out west and end up in markets like Vancouver, Calgary (and to some extent Edmonton) aren't having nearly as much difficulty paying off their student loans. I can only imagine the difference in lifestyle of someone who went to UVic and works on Bay vs someone who went to U of T in the same position.

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On 5/16/2019 at 8:56 AM, thedraper said:

What I'm baffled at is the idea that some law students will only have 40-50k in debt. Let's assume tuition of $20k... you would need around 50-60k in cash sitting around before you even start school. That's not the situation of most I'd imagine.

I can tell you for damn sure I'd never have gone to school if I was going to come out of it with close to that level of debt. My working budget going in was a total expense of about $60k, some of which would be covered for everyone by working, and for some by bursaries, scholarships, savings.

 

I know some of the Ontario schools have insane tuition, but nobody in western Canada is paying your tuition assumption. The closest is 10% below (TRU), and many of the schools are half that.

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