Student Loans!

Re: Student Loans!

• hoffse member

  

  August 2014

  love1229 said:

  How do/did you deal with accruing interest for student loans? I just checked my balance, and I already have over $67 in interest. It was $48 on Monday.  

  My interest rates are 6.21% and 7.21% through federal loans...I paid it now but money is tight being in my second year of law school and working 2 pt jobs and being in school FT. 

  This is more of an "I'm overwhelmed and in my second law school plus I just want to be debt free" rant than anything but how did you cope? I'm planning on paying interest as I can so that it stays as low as possible but I just don't know how no one else appears to be worried about student loans at school! Obviously my loans are my business and everyone else's are theirs but it is so stressful! 

  Does anyone have any advice for staying calm and frugal while in school with amounting loans? FYI -My SL debt currently is about $56,000. I received a loan from family for my first year for about $28,000 and currently owe the government $28,000. I was lucky and received my undergraduate education 100% paid for by my parents. I'm working 2 part time jobs, about 15-20 hrs per week.

  Thanks everyone! 

  I'm a lawyer.  My H is about to start his law practice on Tuesday - he took the bar last month.

  
  

  We let our interest accrue while in school.  The interest on federal loans typically does not compound (or capitalize) until after the grace period expires.  That's pretty unique as far as loans go, so we decided to let it do its thing.  H's grace period expires in November, and that's when his loans enter repayment.  

  
  

  Our rates are lower than yours, but we compensated for the debt in other ways while we were in school.  For example, we took advantage of the free pizza the Lexis and Westlaw reps would bring for lunch, we did not go out very often, and we sold our books back on Amazon, etc.  It's amazing how much money students will pay for marked up textbooks.

  
  

  I had two part-time jobs in law school and H had one part-time job.  We basically used that money to subsidize our living expenses so that we could borrow less instead of paying back interest.

  
  

  Finally, if you land a firm job during your 2L summer, you ought to do pretty well.  Our market pays summer associates $1300/week pre-tax.  It's mid-sized.  The larger cities often pay more, the smaller cities pay less.  We both banked that money and again used it to lower the amount we had to borrow during our third year.

  
  

  So I guess my advice is don't worry about the interest - just try to borrow less.  The lower your principal is, the less interest you have accruing.

  
  

  The real key is finding a job after graduation.  If you do, the debt you are describing should be entirely manageable.  Truly, $50,000-$100,000 is not very much money for a law degree these days.  H and I have some of the highest student loan debt of anybody who posts on these boards.  Objectively, it's a breathtaking amount of money that goes out the door each month for loans.  But I mean, our incomes can support it, and we don't really think about it that much because it's manageable.

  
  

  Good luck with your second year and OCI.  2L is the toughest year by far.

  

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• hoffse member

  

  August 2014

  A couple other thoughts: just like anything else, spending as little as possible is one of the best things you can do.  Right now, you need 2 good suits: one for OCI and one for any call-backs. During your 2L summer you might need 2 more suits if you are at a silk stocking firm - H was, I was not. But odds are, you can get away with just 2-4 suits while in school if you buy ones that are generic (black, navy - nothing with a unique cut or color). 

  
  

  If you know you need a more professional wardrobe, keep your eyes open during sales, etc.  Give yourself plenty of lead-time to shop.  I would absolutely NOT be buying casual clothes while you are in school at this point.  Trust me, once you graduate and start working you will hardly ever wear them.  I've purged about half my casual wardrobe at this point, because there's no reason to take up all that space in my closet.

  
  

  Pack your lunch (or attend the free lunches that student groups and Lexis/Westlaw host), coupon for groceries, cut cable, make sure you have a roommate, etc.  Basically, live cheap.  In H's final year he borrowed about $5,000 more than we thought he would need, just to have as a buffer.  He and I were living in two cities and paying two rents, two utility bills, two of everything.  So while I subsidized as much of his stuff as I could, school expenses and general living expenses (rent, etc.) still came out of his loan money.  He managed to spend so little that we wound up with $10,000 leftover at graduation.  We used that to "pay back" some of his loans.  You don't want to run into an issue with borrowing too little in case you have an emergency, but anything that's left I would pay back once you start to work.  Please don't blow it on a bar trip.  

  
  

  Also keep in mind that the bar exam is about a $5,000 experience these days.  It might even be a bit more than that depending on the state where you sit.  But with the bar exam course, the application fees, the laptop fees, the hotel for those few days, etc. we spent about $5,000 on each of us.  That's something that a lot of students lose track of as they are going into their 3L year.

  

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• uncreatedsnow member

  

  August 2014

  I second everything Hoffse said.
  
  I would save up every penny you can toward next semester's tuition and borrow less rather than throw what you can toward the interest.
  
  Less Principal=Less Interest and you can still throw money toward your interest during your grace period if you have it and want/need to before it capitalizes.
  
  
  

  #GetItTogether2013

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• love1229 member

  

  August 2014

  Thank you!!

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• Xstatic3333 member

  

  August 2014

  uncreatedsnow said:

  I second everything Hoffse said.
  
  I would save up every penny you can toward next semester's tuition and borrow less rather than throw what you can toward the interest.
  
  Less Principal=Less Interest and you can still throw money toward your interest during your grace period if you have it and want/need to before it capitalizes.
  
  
  

  This! I'll also add that I'd keep a good amount of liquid savings while in school to avoid needing PLUS loans or taking on CC debt for living expenses. I racked up most of my old CC debt for routine living expenses while in school (so dumb!) You can always throw it at the loans once you're done and have graduated.

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• RosieC18 member

  

  August 2014

  Law school loans are big and scary, but I would actually argue that it's better to take out more (low interest) and not work during the year. Even at a t-14 school your grades/class rank matter a LOT in hiring. Especially if you're interested in going to a firm/big law, the increased likelihood of finding a job is worth the extra loans, in my opinion. Unless you're already on law review/on track for Coif, I'd be really hesitant to spend 15-20 hours a week doing something other than studying. Even if your job is law related, firms really only care about class rank/gpa.
  
  If you want to go into something less lucrative than big law (I did) this calculus might change. But you might also have a shot at loan forgiveness through your school, so look into that. I took out loans for all 3 years, kept $50k in an index fund and paid a big chunk of them off immediately after graduation. I was still in the era of subsidized loans, but even so I got way more than 6.55% interest on that money while I was in school. I also got around 2k from my school as loan forgiveness before I paid them off.
  
  I just doubt that whatever you're earning with your pt jobs is making up for lost earning power after graduation, especially since you can prepay SL with no penalty so you can really cut down your effective interest rate by living frugally after school and throwing extra payments at them. If you're at a school (general "you" here) where even the top students aren't finding lucrative jobs, then by all means, focus on minimizing debt, but otherwise that seems like a short-sighted trade-off.

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• hoffse member

  

  August 2014 edited August 2014

  I think it depends on what the job is.  One of my "jobs" was being a Lexis rep.  I literally sat at a table in the library and got paid $10/hour to answer student questions.  In 2 years I answered a grand total of 5 questions and basically got paid to study.  Oh, and I filled the printer with paper.  That was the other component of my "job."

  
  

  My second job was also on campus, tutoring students at our writing center.  But I worked Sunday nights when - frankly - I wasn't studying anyway.  I really enjoyed that job, and it counted as a hobby for me.  It's important to make time for things you enjoy also.

  
  

  I do agree that your grades matter a lot, though.  Class rank matters too if your schools ranks.  Mine did not, which benefited the students during the job hunt because firms couldn't weed us out that way. I will say that grades/rank are most important in just getting through the door.  Once you're in the door we rarely talk about grades when deciding who to hire... just whether that candidate is going to be a good fit.  The girl who wore a teal tube dress and bright yellow knee-high boots to her interview was not going to be a good fit (true story, that happened).

  
  

  Be careful with Biglaw.  Yes you make good money, but you are effectively working two jobs, often around 80 hours/week.  So hour for hour you are actually earning less than the students who go to mid-size firms and your life is truly miserable.  My old law school roommate makes about $35-$40K/year more than I do at a Biglaw firm in Atlanta.  But she also sleeps in her office on a fairly regular basis.  I get into the office around 8:30 and I leave by 5:30 or 6.  Our difference in salaries isn't nearly big enough to make me consider having a life like she has right now.  H and I have both had opportunities to go to Biglaw, and neither of us took them.

  

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• RosieC18 member

  

  August 2014

  Yeah, I'm in no way pushing the big-law life. I'm in government and am happy with $100k less in salary and a true 40h week. I also really like the work I do. For me, totally worth it but not everyone feels that way. This decision is very individual and you have to do what you feel comfortable with. I would just think long and hard about what interviews you think you'll get with your grades, how having that time to study could impact those grades, and what that will mean for future pay.

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• love1229 member

  

  August 2014

  Thanks!!! I really appreciate the advice!

  
  

  I work for a very small firm right now. I think that Biglaw could be exciting/scary/rewarding, but maybe not for me. I want the 9-5 lifestyle and know it comes at a reduced rate than Biglaw. I have worked at a few firms of different sizes and I definitely prefer a small office...I know the earnings aren't as high but I like where I'm at now. It gets kind of crazy sometimes but I would be content with where I'm at when I'm licensed. I want to pay off my loans asap and give my (future) kids a good childhood like I had. 

  
  

  That is a good idea to save and reduce principal so that interest isn't so high, which seems pretty obvious now. I'm saving as much as I can per paycheck after expenses (transportation - car and train to city, groceries, etc) so that I can do that. It's hard when I don't work that much and school consumes my life. Luckily I have awesome family support and my fiance handles all household expenses. 

  
  

  Did you all take out federal or private loans? I'm new to student loans and do not mean to sound naive but would appreciate any other advice you have about loans. 7.21 and 6.21% are a little high for my liking. 

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• RosieC18 member

  

  August 2014

  Mine were all federal, and I'd stick with those if you can. They usually have better rates, and I believe better deferrals etc. You also may qualify for federal loan forgiveness if it still exists 10-20 years out. 

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• love1229 member

  

  August 2014

  Thanks again. That was the reason why I chose federal loans. 

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