Live Blogging the 3L "How do I be a grown-up?" Meeting
5:38. Decided to liveblog the private sector meeting
5.39: Jason De Lo*enzo, who is apparently the "3L Adviser" Nix that, GL Adviser is talking
5:39. JDL, the GL adviser, is kinda hot, right?
5:40: We're talking about Law Career Economics, IBR, Targeted Repayment, and Strategic debt reduction and other goals -- I assume by this he means not being miserable
5:41. Did you know, in 1992 average debt was 37K, now 109K -- yeah, that's my debt ...
5:42. People seem to have had a lot of hot dogs at the event before this
5:43. I'd say there's like 40 or so people here, pretty good showing. glad to have Johnica back from YouSeeDeeCee
5:44. We are now talking about IBR -- his slides are going to be available to us and I'll send them out to the 2011 list-serve.
5:46. Joe Ro*e is kind of ridiculously smart
5:47. None of this makes any sense to me -- Oh, Tall*y is talking! He asked if there were tax implications of taking an IBR subsidy. No one knows. WHERE IS GERG*N?!
5:49. Note that IBR applies to subsidized, unsubsidized, and grad plus loans
5:50. This is way above my head right now
5:55. Sorry, spent the last 5 minutes trying to find pictures of this guy on facebook -- successfully I may add
5:56. The most important thing to to w/ IBR is in your first year making sure that your adjustments are based on your actual returns b/c your pay stub is an inaccurate measure of your first year ability to pay. Really, this thing that he's talking about is really great.
5:57. Also, don't get married. What's that? You're gay? You win this round!
5:58. Everyone is laughing now b/c on his most recent slide the max debt they are even considering is 150K
5:58. Sara G* ftw: "I feel like I missed the pre-req for this."
5:59. Oh, note that the little trick at 5:56 only really helpf you for the first two years.
6:01. Oh, sweet, his thing now is talking about how to get rid of our expensive loans first. You're lender will generally put ALL of your loans onto the same cycle -- be SURE to put your high interest ones first.
6:03. Should we invest in stocks? Statistically, the stock market (S&P) has yielded 7.4% since 1940 whereas you get an 8.1% benefit by paying off your loans -- risk averse? Don't invest.
6:05. Should I buy a home? And if I do, what's the difference b/t putting 10% down and 0% down. The premium for putting 0 down used to be TINY, now, it's much higher (stupid financial crisis). It's a difference between $800 a year vs $9K/year now
6:07. Oh heeeey Prof. Bart*ett
6:07. Note that you can get out of IBR payment whenever you want, and you can also go back int it whenever you want.
6:08. So, this dude works for this: http://www.gladvisor.com/ (based on his facebook profile which I totally didn't stalk ...)
6:09: TALL*Y: you are deferring interest in using IBR, but by so doing it is simple interest accrual NOT compound. WOW!
6:15. What about consolidation? If you consolidate, you lose the targeted reductions benefit.
6:15. TALL*Y: how many people in here would want to consolidate? Answer from everyone: ZERO
6:16. And, now the profs: (also, this guy is coming back in April) Now Tall*y: both him and Bobby (heart) had a much lower "real debt burden" (oh, Ta*lor with the party foul)
6:21. Tall*y: at what point do you take a slow route to repay in order to invest? You want the spread to be pretty decent, and that you REALLY want to diversity over time . Variable rates over time even out for those of us who are young (oh great, so all those straight through gunners get to benefit from this ... but then again, they never had a life and never will, so, you win some you lose some)
6:25. Consume things with durable appreciation value -- although if you understand what that means, you're probably fine
6:28. Check our firms 401K program and see if they have matching -- to the extent they have it, use it to the full! And to the max! Note that those contributions also reduce adjusted gross income. Once you don't get matching, it's not necessarily worth doing it in the first few years b/c our taxes are lower now than they may be when we are thinking of taking it out
6:30. Tall*y out, Bobby in: his experiences paying off his loans at Gunders*n. The secret to his success was that he drove a "68 Bel Air. He's also wearing jeans, I think? WORRY ABOUT THE GOLDEN HANDCUFFS! Firms want to make love to you, in that not lovey way. Speaking of lovey, hellllo professor.
6:34. Bobby: house as piggy bank. It's work, but it's worth it. Also, it's WAY easier to get used to new income than to downgrade, so don't upgrade until you actually have the money.
6:36. His first mistake, taxes his first year (he payed a "shit ton"): if you don't own a house you have very little to shelter your income. USE THE MED FLEX PLAN. HAVE BABIES! oh wait, DON'T have babies. Babies ≠ net gain.
6:37. Oh, also, you something about withholdings -- that I really don't understand.
6:38. W4 is your friend -- he changes each month (that's more often than I change my toothbrush, or sheets . . . err).
6:40. But watch out, your tax bill is going to give it to you really hard if you don't stay on top of this game -- a la Tall*y who got stiffed with a 15K tax bill
6:43. Get used to having a real budget ... boring ...
Oh, that's all folks. Hopefully this was helpful. We'll get you the slides and notes from this and from the public sector one. The videos will go up somewhere.
5.39: Jason De Lo*enzo, who is apparently the "3L Adviser" Nix that, GL Adviser is talking
5:39. JDL, the GL adviser, is kinda hot, right?
5:40: We're talking about Law Career Economics, IBR, Targeted Repayment, and Strategic debt reduction and other goals -- I assume by this he means not being miserable
5:41. Did you know, in 1992 average debt was 37K, now 109K -- yeah, that's my debt ...
5:42. People seem to have had a lot of hot dogs at the event before this
5:43. I'd say there's like 40 or so people here, pretty good showing. glad to have Johnica back from YouSeeDeeCee
5:44. We are now talking about IBR -- his slides are going to be available to us and I'll send them out to the 2011 list-serve.
5:46. Joe Ro*e is kind of ridiculously smart
5:47. None of this makes any sense to me -- Oh, Tall*y is talking! He asked if there were tax implications of taking an IBR subsidy. No one knows. WHERE IS GERG*N?!
5:49. Note that IBR applies to subsidized, unsubsidized, and grad plus loans
5:50. This is way above my head right now
5:55. Sorry, spent the last 5 minutes trying to find pictures of this guy on facebook -- successfully I may add
5:56. The most important thing to to w/ IBR is in your first year making sure that your adjustments are based on your actual returns b/c your pay stub is an inaccurate measure of your first year ability to pay. Really, this thing that he's talking about is really great.
5:57. Also, don't get married. What's that? You're gay? You win this round!
5:58. Everyone is laughing now b/c on his most recent slide the max debt they are even considering is 150K
5:58. Sara G* ftw: "I feel like I missed the pre-req for this."
5:59. Oh, note that the little trick at 5:56 only really helpf you for the first two years.
6:01. Oh, sweet, his thing now is talking about how to get rid of our expensive loans first. You're lender will generally put ALL of your loans onto the same cycle -- be SURE to put your high interest ones first.
6:03. Should we invest in stocks? Statistically, the stock market (S&P) has yielded 7.4% since 1940 whereas you get an 8.1% benefit by paying off your loans -- risk averse? Don't invest.
6:05. Should I buy a home? And if I do, what's the difference b/t putting 10% down and 0% down. The premium for putting 0 down used to be TINY, now, it's much higher (stupid financial crisis). It's a difference between $800 a year vs $9K/year now
6:07. Oh heeeey Prof. Bart*ett
6:07. Note that you can get out of IBR payment whenever you want, and you can also go back int it whenever you want.
6:08. So, this dude works for this: http://www.gladvisor.com/ (based on his facebook profile which I totally didn't stalk ...)
6:09: TALL*Y: you are deferring interest in using IBR, but by so doing it is simple interest accrual NOT compound. WOW!
6:15. What about consolidation? If you consolidate, you lose the targeted reductions benefit.
6:15. TALL*Y: how many people in here would want to consolidate? Answer from everyone: ZERO
6:16. And, now the profs: (also, this guy is coming back in April) Now Tall*y: both him and Bobby (heart) had a much lower "real debt burden" (oh, Ta*lor with the party foul)
6:21. Tall*y: at what point do you take a slow route to repay in order to invest? You want the spread to be pretty decent, and that you REALLY want to diversity over time . Variable rates over time even out for those of us who are young (oh great, so all those straight through gunners get to benefit from this ... but then again, they never had a life and never will, so, you win some you lose some)
6:25. Consume things with durable appreciation value -- although if you understand what that means, you're probably fine
6:28. Check our firms 401K program and see if they have matching -- to the extent they have it, use it to the full! And to the max! Note that those contributions also reduce adjusted gross income. Once you don't get matching, it's not necessarily worth doing it in the first few years b/c our taxes are lower now than they may be when we are thinking of taking it out
6:30. Tall*y out, Bobby in: his experiences paying off his loans at Gunders*n. The secret to his success was that he drove a "68 Bel Air. He's also wearing jeans, I think? WORRY ABOUT THE GOLDEN HANDCUFFS! Firms want to make love to you, in that not lovey way. Speaking of lovey, hellllo professor.
6:34. Bobby: house as piggy bank. It's work, but it's worth it. Also, it's WAY easier to get used to new income than to downgrade, so don't upgrade until you actually have the money.
6:36. His first mistake, taxes his first year (he payed a "shit ton"): if you don't own a house you have very little to shelter your income. USE THE MED FLEX PLAN. HAVE BABIES! oh wait, DON'T have babies. Babies ≠ net gain.
6:37. Oh, also, you something about withholdings -- that I really don't understand.
6:38. W4 is your friend -- he changes each month (that's more often than I change my toothbrush, or sheets . . . err).
6:40. But watch out, your tax bill is going to give it to you really hard if you don't stay on top of this game -- a la Tall*y who got stiffed with a 15K tax bill
6:43. Get used to having a real budget ... boring ...
Oh, that's all folks. Hopefully this was helpful. We'll get you the slides and notes from this and from the public sector one. The videos will go up somewhere.
Labels: loans, money, terrible decisions
posted by Petch at 5:37 PM
10 Comments:
he is SO HOT
Durable appreciaion value is not a thing. Therefore the take away point is don't consume anything.
I didn't go to either because I was irritated there wasn't a session for "unemployed" career path. Seriously, I could use some help figuring out my finances and loan repayments.
(Plus I had a time conflict.)
But this stuff sounds really hard to understand. Is the take-away point to not consolidate loans, but try to pay off the high interest ones first? And to hire an accountant?
i would have appreciated some more acknowledgement of those of us who are unemployed and our options.
but this is not to take away from the awesomeness of having such an event in the first place.
12:13,
Consolidation does not make sense if the spread between your interest rates is high. The loss in your ability to target excess payments to a particular loan can be quite large. If you plan to pay only the minimums for the life of the loan, then this is not a big loss.
Consolidation is also less of an issue when the interest rate spread is narrow and most of your loans are at the higher rate anyways. (e.g. a tiny fraction of your loans are at 6.8 and the rest are at 7.9). In such case the advantage of targeting is
Another important takeaway is that the interest that has been accruing on our federal loans does not capitalize until November. It has been accruing in a separate simple interest pool. If we can magically pay the interest off before November (think $5k - $10k) then it won't be folded into the principle.
The final takeaway is that IBR is a pretty good option. It limits your minimum payments to a percentage of your discretionary income. This works out to quite a low payment.
Of course, making this low payment might result in the loan growing because you aren't even paying off the interest. But there is no penalty for paying more than the minimums in any month. The bottom line is that IBR gives you some financial flexibility and margin for error that the Standard Plan does not.
9:52 - Thank you!
Is there a video of this? I am a 2010 grad who needs more info than what Petch is providing.
Very cool Talley et al participated in this!
For the unemployed crowd, how do you guys plan to survive? More Loans? Government welfare? Food Stamps?
I went to this last year, and was pretty excited about to learn that you could target your payments to the high-interest rate loans first. One thing that GL Advisors didn't mention last time (and it sounds like they might not have again), is that Direct Loan Servicing doesn't make it very easy to do this, and isn't at all helpful explaining the potential negative impact that long-term deferral can have your credit score. They gave me lots of conflicting information on that point, so much so that I decided to just bite the bullet and not defer.
That said, you can still put all the loans into the longer repayment, and then apply the difference to your higher-rate loans. If you've got a lot, it can save a couple thousand in the long run. BUT, it's really a pain in the but to do it. Every month, you make an extra online payment. Then you have to wait 5-10 days for the payment to come up as "paid." Then you have to either email or call them to have them apply it to the right loan. After a few different phone calls to them, I haven't figured out a way to get around this tedious process and automate it.
Hopefully that's helpful to some of you thinking about targeted repayment. And if anyone has a better way to do this, please share!
Great post! Thanks for the info, are the webcasts up yet? If so, do you know where?
Thanks
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