Well I got a job and tried to put my money away
But I got debts that no honest man can pay
So I drew what I had from the Central Trust
And I bought us two tickets on that Coast City bus
Bruce Springsteen, Atlantic City
Part of the function of this blog is confessional, so I will begin with a confession. When, five weeks ago, some of the first comments on this blog referred to IBR I did not know what those initials stood for. How ridiculous is that? And how sobering is it to consider that if someone like me didn't know, how many law faculty at this moment do you suppose are even aware of the existence of Income Based Repayment? (I"m pretty sure all the deans know what it is though).
The reason I didn't know is because as an upper class person who has never been in any real danger of defaulting on a debt (and who didn't take Bankruptcy in law school -- ah life's little ironies . . .) I had no real idea what happens when people can't pay their debts. So, even though I have for some time now been well aware that a huge percentage of law graduates have been graduating with educational debt loads they cannot possibly service based on the jobs (if any) they acquire subsequently, I hadn't inquired into what happens next. What happens next for an increasingly large number of them is the Income Based Repayment program, which to the best of my still-sketchy knowledge works like this (corrections are welcome in comments of course):
After the expiration of the grace period for the repayment of a graduate's federally guaranteed loans (this includes all educational loans issued directly by the federal government, as well as private educational loans issued before the summer of 2010, but not since then) graduates whose monthly debt load from eligible loans is above a certain percentage of their adjusted gross income can opt to enter the IBR program. The program allows them to pay less than the 25-year amortized payments than would otherwise be due on their loans. During their first three years in the program, the government pays whatever portion of the interest on the subsidized portion of the loans the debtor isn't paying (the subsidized federal loans are limited to $8000 per year at present). The rest of the interest not paid by the debtor accrues, increasing the principal debt accordingly. If the debtor stays eligible for the program for 25 years (the debtor will not be eligible in years, if any, in which his or her AGI is too high) then at the end of that period the debt is forgiven, although the forgiven debt is treated as income by the IRS. (It appears this debt can in turn be discharged after three years if the debtor then files for Chapter 7 bankruptcy).
In what follows I'll offer some (very tentative) thoughts about what all this means for graduates, taxpayers, law schools, and prospective law students.
First, graduates. Going into IBR would appear to mean that debtors, as long as they're in the program -- and of course the longer someone is in the program the harder it becomes to get out -- are accruing an ever-larger unsecured debt that will make it difficult or impossible for them to obtain many other types of credit, in particular home loans, car loans, and some types of unsecured consumer credit. Given that we have a heavily credit-based economy, this would seem to pose huge practical problems, as well as a major psychological burden, for people in IBR. (Here's a family law hypo: If you go into IBR then get married, does the accruing portion of your educational debts still count as marital property even if you always file separate income tax returns in order not to have your spouse's income count in the calculation in re eligibility?).
Second, taxpayers. Obviously taxpayers pick up the tab for IBR, both for defaulting government-guaranteed private loans and for government issued loans that aren't repaid in full. How big of a problem is this going to be in the context of our many other current fiscal difficulties? Total outstanding student loan debt is about to hit one trillion dollars, which for context is more than the total outstanding credit card debt in this country. In addition there are apparently various financial derivatives floating around which are securitized by private student loan debt. As we saw in the housing crisis, these kinds of financial instruments can have a multiplier effect as regards the solvency of the institutions that hold them. Whether this could be a problem as far as the higher education tuition bubble goes strikes me -- as should be obvious I know nothing about this sub-topic -- as a question which might well merit some attention from the smartest guys in the room, before we have another bad accident or two. Even if student loan debt poses no danger along these lines, it would seem plausible that having an entire generation of quasi-indentured servants in thrall to their educational loans for a quarter century (this has been reduced to 20 years starting in 2014) is not a good thing in purely economic terms, without even getting to questions of inter-generational justice. That fact might provide a lever for politicizing the issue of student debt in general, and law student debt in particular, in ways that resonate outside the academy.
Third, law schools. It seems probable that the existence of IBR is already playing an important role in keeping a lot of law schools open. How many graduates of the class of 2011 will be eligible for IBR when the initial grace period on their loans expires in a few months? No one, as far as I know, has tried to figure out the answer to this question, so I'm going to give it a shot. Here are some preliminary numbers that ought to sober up even law school administrators who are still intoxicated by their own rhetoric about what a wonderful thing legal education really is in America today. The phony NALP stats claim that the median "starting salary" for the class of 2010 was $63K. We all know this is a serious exaggeration, as it's based on the self-reported salaries of the of 2010 grads who were employed full-time and reported their salaries (this group includes far less than half of all 2010 grads). But lets mainline some Prozac and treat these numbers as real. How much federal or federally guaranteed educational debt (not just law school debt) do you have to have to be eligible for IBR with an AGI of $63K (the reported salary numbers are higher than what AGI will be but this is close enough for government work)? The answer, for an unmarried graduate with no dependents living in the lower 48 is $50,690. If we adjust the median salary to a far more realistic but still extremely optimistic estimate of $50K, people become eligible for IBR with a total educational debt load of $36,570. Drop it to 40K (which is finally something like a realistic estimate of the true number in my view) and you're eligible with a total educational debt of $25,800.
How many graduates in the class of 2011 have educational debt of at least $26K and $37K and $51K? Nobody knows anything like the exact number, but it's not too difficult to extrapolate a rough guess. Look at these figures, then tack on (conservatively) another 10% for average undergrad debt, and another 5% to 10% for the effects of rising tuition in terms of principal and interest on the classes of 2010 and 2011. Then consider that somebody with $150K in educational debt is eligible for IBR if he or she has an AGI of $158K. Given the true employment/salary numbers, this means that almost everyone who graduated from most lower tier schools in 2011 is going to be eligible for IBR. A huge percentage of upper tier grads will be in this boat as well. And since there's a strong lag effect with rising tuition, this tide is just starting to come in. The class of 2014 is going to graduate with much, much larger debt loads than the class of 2010 (the latest class for which figures are available). How many people working inside of law schools are thinking about any of this yet?
Finally, prospective law students. An interesting question is the extent to which prospective students are taking into account the existence of IBR when deciding whether to enroll. Such students are in effect buying what they already understand is a six-figure lottery ticket, which is very unlikely to pay off -- although being human beings they will overestimate the chances it will pay off in their particular case -- with the understanding that the possible price for buying this ticket is 25 years of servitude. Several commenters have suggested that this is or at least is becoming a common mindset. My purely seat of the pants guess is that I think this is still probably quite unusual. If prospective law students know very little about the real employment numbers, does it seem likely they're up to speed on the intricacies of IBR? On the other hand, maybe a lot of them have already taken on enough undergrad debt that they're far more knowledgeable than the average law professor about this grim subject.
This post is already too long, but there are a bunch more issues I haven't even touched on, such as the fact that IBR could go away tomorrow (or more realistically in 2013 if we become the United States of Texas). Anyway this is an extremely rich subject which almost literally hasn't even been mentioned yet in any of the ten thousand law review articles that are published every year (I checked). I would suggest that some of you junior faculty who are just beginning to wonder if your jobs are even going to exist ten years from now might want to start looking into this, instead of coming up with another theory of how to interpret the equal protection clause.
One additional thought: IBR could function as a very simple measure for whether law school is a good investment. If going to law school throws you into 25 years of debt slavery to the US government then the answer would clearly seem to be no. A key piece of achieving law school transparency then becomes, how many graduates of the class of X are eligible for IBR? The feds could force the ABA to force law schools to cough this very easily obtainable information up, as a minimum prerequisite to keeping the gravy train running.
Monday, September 12, 2011
The Lottery in Babylon
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I was kind of dubious about whether cancelling IBR would really solve the law school problem because I doubt students go into law school thinking that they'll have to use it. However, thinking about it, I have to agree. Put simply, banks will not lend money if they do not stand a reasonable chance of getting it back. If the government cancels IBR, banks will be a lot more careful about lending money to students.ReplyDelete
I know I always talk about the situation in the UK, but it is worth looking at what has happened over the last few years to the "professional development loans" which used to be offered by High Street banks and building societies. Essentially, since the economic situation worsened, and since competition for places with law firms has increased, banks have simply stopped lending money to would-be law students. The result will be an inevitable decrease in people attending law schools, more people self-funding via savings, parental assistance, and part-time work, and an eventual increase in the amount given in training contracts from law firms to trainees. See here:
This is what would be happening in the US if it weren't for IBR. It would be painful for would-be lawyers who cannot pay their way, but in the end it would be better than debt-slavery in non-law jobs.
Put simply: cancel IBR and other government assistance going forward, and the banks will pull the plug on the law school scam.
Cancelling IBR won't be sufficient. The government must also treat student loan debt as no worse than any other type of debt. Student loan debt must be dischargeable in bankruptcy. The current system of putting all the risk of student loan borrowing on the borrower is morally indefensible, and inconsistent with the basic principal of a "fresh start" underlying our bankruptcy system. On a more practical level it ensures that banks have virtually no incentive to take care with how much money they dole out.ReplyDelete
One thing I remain confused about, do IBR payments, by definition, fail to cover even the interest? Do IBR balances always grow? Or is that just in the worst cases?ReplyDelete
4 years UG debt ($250k)+ 3 years law school debt ($250k) + no jobs + no forecast of jobs + 25 years for IBR + economy that manufactures *no thing* = epic civilization fail.ReplyDelete
"To enter IBR, you have to have enough debt relative to your income to qualify for a reduced payment. That means it would take more than 15 percent of whatever you earn above 150% of poverty level to pay off your loans on a standard 10-year payment plan." (Thanks, IBRInfo.)ReplyDelete
For argument's sake, let's say you're a recently married law graduate, ready to face the world with your spouse. The federal poverty level in 2011 is $14,710. 150% of that is $22,605. Let's also assume that you owe $100,000 to the Department of Education, all of it eligible for IBR, for your time in law school. Lastly, let's assume that you're earning an AGI of $63,000, which itself is above the NALP's median starting salary for a 2010 graduate (presumably listed as a pretax figure).
On a 10-year repayment timeline, that law school debt requires $1,150.80 a month, or $13,809.60 a year. That's 21% of your AGI, and 33% of your AGI minus 150% of the federal poverty level. Until you're earning more than $100,000, you're eligible for IBR.
This was not discussed with me in any detail until my exit counseling from Financial Aid, although in their defense the program didn't exist until 2009.
7:44 is right. If student loans were dischargeable, then that element of risk will have to be considered by the banks before allowing for loans for law schools. Since law school is a losing game for most, then this move will serve to limit the money available to schools. Thus, the schools will either have to figure how to lower tuition or close. Maybe they will look to foreigners to fill their seats as has been suggested here.ReplyDelete
In IBR, your balance will continue to grow and grow and grow as you cannot cover even the interest of the loan.
On another note, I truly hope the country wakes up and realizes how awful a Perry presidency would be. I would seriously consider leaving after medical school and residency. I know that I am not alone here as I have met JDs who are thinking of leaving America too.ReplyDelete
FORAP thanks for the comparative perspective, which is something we need a lot more of in regard to this entire subject. 7:44, as of last year new private educational loans are no longer guaranteed by the government (all the guaranteed lending going forward is by the government), but there's still a huge amout of previously existing government-guaranteed private educational debt out there.ReplyDelete
The effect on students is understated. There is a huge difference between walking into a Nissan dealership to buy a Sentra when (a) you make $50,000 and have $5,000 of credit card debt and (b) you make $50,000 and have $200,000 of IBR debt (which shows up on your credit report).ReplyDelete
"Then consider that somebody with $150K in educational debt is eligible for IBR if he or she has an AGI of $158K. Given the true employment/salary numbers, this means that almost everyone who graduated from most lower tier schools in 2011 is going to be eligible for IBR."ReplyDelete
Yup. IBR is basically a federal entitlement for 20 somethings. Not a very generous entitlement, since it's a nondischargeable loan, but an entitlement nonetheless.
I fear that because the program is new, and because it seems to cover everybody, it won't necessarily be clear to people that this means tuition is too high. It will loook more like a bailout of students due to the crap economy.ReplyDelete
As somebody (maybe Lawprof) mentioned earlier, it would be nice if "percentage of graduates eligible for IBR" were a known statistic for each school, as this really boils the situation down to a single, objective figure, great for comparison between schools and between past and present classes. Not nearly as useful if the program starts and every school has 100% eligibility.
"One additional thought: IBR could function as a very simple measure for whether law school is a good investment. If going to law school throws you into 25 years of debt slavery to the US government then the answer would clearly seem to be no. A key piece of achieving law school transparency then becomes, how many graduates of the class of X are eligible for IBR? "ReplyDelete
This is an EXCELLENT point. Through IBR applications, the federal government knows which schools are bad investments. They should start releasing this information to the public.
8:31. Yes I think we can all agree that the government needs to release their data on IBR.ReplyDelete
FYI to all, very interesting (both in terms of drama and in terms of legal analysis) news in the Cooley lawsuit:ReplyDelete
Not trolling and not trying to be callous (really), but I'm trying to understand something... While I agree with many of the concerns Prof Campos has expressed in this blog, the numbers in today's post don't really add up to me.ReplyDelete
I graduated in the early 1990s with ~$106,000 in law school debt (this and all other figures in my comment are in nominal dollars -- i.e., not adjusted for inflation). Interest rates on these loans ranged from about 8.25% to 12%, depending on their source. I clerked a year then went to work for a large firm in DC. My starting salary was $78k plus a $10k clerkship bonus (which was then at or near top of market for that city). My wife is also a lawyer and her financial situation was essentially identical, including her loan balances.
We paid as much as we could toward our loans every month and paid them off in about five years. We didn't live luxuriously, but we weren't hurting either. We didn't buy a house until the loans were paid, but we took vacations, wen't out to dinner on weekends, etc.
None of this pertains those who are unemployed or seriously underemployed. But today's post suggests IBR is available for someone with $150k in debt and an AGI of $158k. Really? My wife and I paid off $215k in debt in five years with a family AGI at approximately that level. (And we went in-house after 3 years, which lowered our earnings.) Does anyone with a realistic debt load really need to yoke themselves to IBR if they earn $150k+?
Ok, you can start flaming me now... But maybe someone will explain why the numbers in today's post add up.
Looks like some shinnanagans were going down at the University of Illinois' College of Law with regards to their stats. Jones Day has been brought into the mix too. Not exactly a TTT law school.ReplyDelete
"IBR is basically a federal entitlement for 20 somethings."ReplyDelete
Those 20 somethings are the 50 somethings of tomorrow. This will have a dramatic effect on the buying power of those effected. I think the phrase is "the hollowing out of the middle class."
It evokes the hopelessness of the movie "children of men." Not yet "the Road," but we're getting there.
If the person in your example really has an AGI of $158,000 with an IBR-eligible debt of $150,000, then he is probably ineligible unless he has a wife and/or several children. However, it is true that he's on the cusp of eligibility with $20,714.40 in annual payments on a 10-year schedule with 6.8% interest, which is 14.8% of his AGI minus 150% of the federal poverty level. If he earned $140,000, he'd be eligible (but IBR's help would be negligible).
8:43, keep in mind that the availability of IBR for somebody making $158K a year is almost purely a theoretical issue. I listed the income limits of the program (somebody making that with that debt load would be kicked off as soon as they got a raise). The problem is that for every grad with $150K in debt and job with a fancy firm there are 10 or 20 grads with $150K in debt making $40K. That's the crisis. That you and your wife were making a combined $250K a year in present dollars in the early 90s and could therefore by exercising some self-discipline pay your debt off quickly has very limited relevance to this issue as a practical matter.ReplyDelete
8:43 again -- thanks LawProf. And I absolutely get that the problem is dire for those who are unemployed or earning much less than the reported "medians." But the numbers you use in your post had me scratching my head... I appreciate the clarification.ReplyDelete
Morse Code, most of that $150K debt is going to be at 7.9% not 6.8%, since it will be funded via GRADPLUS. That kicks up the income level for marginal eligibility.ReplyDelete
"Going into IBR would appear to mean that debtors, as long as they're in the program -- and of course the longer someone is in the program the harder it becomes to get out -- are accruing an ever-larger unsecured debt..."ReplyDelete
This would only be the case if your lowered amount was less than the interest payment on your loans. For some people that may be the case, but I'd imagine most people on IBR are simply paying back less capital each month.
"IBR is basically a federal entitlement for 20 somethings."ReplyDelete
No. They don't get the money. The schools get the money up front. If IBR wasn't there, the loans wouldn't be made. It's an entitlement for the schools and it allows them to keep their doors open.
BL1Y, check out the numbers in this post. I very much doubt that most people on IBR are just paying a lesser amount of principal. http://lawschooltuitionbubble.wordpress.com/2011/09/05/a-hypothetical-class-of-2014-law-student%E2%80%99s-journey-into-debt/ReplyDelete
"Put simply: cancel IBR and other government assistance going forward, and the banks will pull the plug on the law school scam."ReplyDelete
No. IBR is one of the few reasonable changes to this system. I see it as a first step to allowing the loans to be discharged through bankruptcy. Between those two points hopefully the interest accruing on these loans will be adjusted. Also, and this is my main point, it is one of the few ways for us to screw the money lenders back. I won't list the methods here but with a little creativity you can easily defraud the fraudsters using IBR creatively.
"IBR is basically a federal entitlement for 20 somethings."
Wow, I feel so special. Some entitlement....I get to accrue credit crushing interest on a 6 figure loan for decades! Yaaay! Edububble is right, if anything it can be viewed as an entitlement for law schools and previous private loan creditors.
...also, for all the questions about IBR and who is eligible and how the numbers play out - here is an IBR payment calculator;ReplyDelete
"No. They don't get the money. The schools get the money up front. If IBR wasn't there, the loans wouldn't be made. It's an entitlement for the schools and it allows them to keep their doors open."ReplyDelete
Students are not completely innocent here.
"Wow, I feel so special. Some entitlement....I get to accrue credit crushing interest on a 6 figure loan for decades! Yaaay! Edububble is right, if anything it can be viewed as an entitlement for law schools and previous private loan creditors."ReplyDelete
What other options did you have besides school? Walmart?
Keep in mind that IBR is available for all higher education. That's why the law schools' fraudulent career placement statistics are such a problem. If they were honest, you wouldn't have gone to law school. You would have gone to some other school. But since law schools lie, you can't make this informed choice.ReplyDelete
"Students are not completely innocent here."ReplyDelete
"What other options did you have besides school? Walmart?"
I really hope this isn't a law professor.
I think it's a fair, but perhaps harsh, critique of some law students. When they apply to law school what goes on in their minds is, "finally! i get to move out of my parents' home and have a life. I'm maxing out my student loan living expenses. Party time."ReplyDelete
See e.g. http://temporaryattorney.blogspot.com/2007/05/imelda-marcos-law-students.html
Then when they graduate it's all http://www.youtube.com/watch?v=xNzBgR0UoYo
Not all, obviously, but some.
"What other options did you have besides school? Walmart?"ReplyDelete
No LawProf, this is the mindset of a rightwing economic illiterate.
What other choice did I have, fuckhead? Well let's see.....I was hoping I had a choice to educate myself at a tuition rate not inflated into a bubble by people who profited off that bubble handsomely. Also, outright lies about employment stats would have been nice too.
Finally, shithead, I went to a top tier law school and received a partial scholarship so I didn't have to indebt myself to the level of most people. For that scholarship I chose to go to a lower ranked school, a choice I wouldn't have hd to make if it wasn't for the tuition bubble that dopes like you do nothing about but blame the victims. Finally, Im directly employed by Biglaw - think whiteshoe - and if I'm complaining about it all then what about the poor sap who can't even get a demeaning temp job?
And yea, I'm highly annoyed at many of the students who didn't take the time I did in choosing schools and looking at the debt. But the entire situation hurts all of us. The market for law employment wouldn't be so shitty and student debt wouldn't be so astronomical if it wasn't for all the greedy little pigs at the trough taking advantage of the situation. My focus is on making those pigs pay a price and not on some poor TTT sap.
But nice try.
To the On the Waterfront clip, I think it is important to hear the beginning of the dialogue, and the context. Terry's brother, his flesh and blood, duped him into a life of marginalized poverty:
Charlie: Look, kid, I - how much you weigh, son? When you weighed one hundred and sixty-eight pounds you were beautiful. You coulda been another Billy Conn, and that skunk we got you for a manager, he brought you along too fast.
Terry: It wasn't him, Charley, it was you. Remember that night in the Garden you came down to my dressing room and you said, "Kid, this ain't your night. We're going for the price on Wilson." You remember that? "This ain't your night"! My night! I coulda taken Wilson apart! So what happens? He gets the title shot outdoors on the ballpark and what do I get? A one-way ticket to Palooka-ville! You was my brother, Charley, you shoulda looked out for me a little bit. You shoulda taken care of me just a little bit so I wouldn't have to take them dives for the short-end money.
Charlie: Oh I had some bets down for you. You saw some money.
Terry: You don't understand. I coulda had class. I coulda been a contender. I coulda been somebody, instead of a bum, which is what I am, let's face it. It was you, Charley.
Law Professors are generally Charley. With notable exception (e.g., Prof. Campos).
Don't forget that loans disbursed after July 2014 will be eligible for the new IBR plan which requires payments only be 10% of income above 150% federal poverty level. These loans will also be discharged after 20 years instead of 25. With these changes and a moribund economy still awaiting graduates it seems that IBR will be the payment plan of choice for the vast majority of graduates.ReplyDelete
I think it is more instructive to look at just how much income one has to make while taking on $210k in debt to be ineligible for IBR. Assuming a 6.8% interest rate that is a monthly payment of $2,416 for 10 years. Currently, 150% of federal poverty level for a single person is $16,335. One year of loan payments ($2,416*12) is $28,992. So at what level would 15% of your income above $16,335 (150% FPL) equal a years payment of loans ($28,992)? It comes out to an astounding $209,613. Remember this is AGI, so deduct 16-20k for 401k/IRA and $5,800 for standard deduction. That would push us to $231,000 being eligible for IBR. Of course this persons IBR payment would just be the same as the 10 year plan because they are at the limits of the program, but under the new 10% guidelines their monthly payment would be $1606, stretching repayment far past 10 years.
Right now no one is talking about IBR, but in a few years when people start running these numbers and seeing people abuse the program the talk of cuts and limited eligibility for the program will begin. It will only take a few stories of successful doctors using the non-profit 10 year discharge to rile up the masses.
Edububble is spot on. The blind govt to student loan "no questions asked" is a subsidy to the law schools. Students are no longer price sensitive towards tuition (if I may be overly simplistic here). In turn schools raise their tuition with paper-thin justifications... And a new crop of students is at the door loan on hand.ReplyDelete
The analogy that seems most fitting is the zero-down loans of our housing bubble. "No skin in the game" leads to out if control pricing.
"It will only take a few stories of successful doctors using the non-profit 10 year discharge to rile up the masses."ReplyDelete
Fraud begets fraud.
Wal-Mart might not have been such a bad alternative. I'm the guy who spent some time in another comment thread talking about my friend who found a very succesful career starting as a pizza delivery boy. Not every well-paying career track starts with expensive professional school (or even expensive school period). There are still employers out there that have positions both low and high and who will promote a person from one to the other because they do a good job. I'm sure a number of Wal-Mart store managers make more money than the law school losers on this site, and I'm sure lots of Wal-Mart store employees find themselves promoted out of the store and into corporate HQ. This would be especially likely to happen to highly intelligent and industrious people who quickly and easily distinguish themselves.ReplyDelete
I'm a little confused about the example of someone earning $158k being eligible for IBR. I entered in a salary of $127k into the direct loan site's IBR calculator (that is actually my gross salary, but I don't have my tax return in front of me), along with my current government debt of approx. $139k, and it informed me that I "do not meet the partial financial hardship to be eligible for IBR." Would I be eligible if I had a little more government debt (not that I'm planning to get any, but just for purposes of analysis). Does anyone know what the income cutoff for eligibility is? And before everyone jumps down my throat for being comparatively "rich," I am a government lawyer with 10 years in practice. Pay frozen for the next two years, while rent, food, and everything else keeps going up. Oh, and I live in NYC and have $30k in private loans, neither of which is of course figured in to the IBR eligibility calculation. Of course I am lucky to have this job, and I'm not complaining. I have deep sympathy for all the new grads who can't find jobs. I only wish there was real help available to all of us debt slaves.ReplyDelete
9:49, I know that Terry got screwed in the movie. But the law students who claim they are like Terry did not necessarily get screwed.ReplyDelete
"Don't forget that loans disbursed after July 2014 will be eligible for the new IBR plan which requires payments only be 10% of income above 150% federal poverty level. These loans will also be discharged after 20 years instead of 25."ReplyDelete
Pretty much anyone can IBR under this rule. This is an entitlement to 20 something educated crowd, no doubt. It's not as generous as the entitlements given to manual laborers (see massive stimulus spending on "shovel ready" jobs, each of which has been estimated to cost about $200,000 for a few years of work) or the entitlements given to retirees (which will number 80 million soon and will drain the federal budget of 3-4 trillion per year) -- it's no where near as generous as those entitlements, not even close, but it's an entitlement.
Well said 10:04. Good calculation.ReplyDelete
Why would anyone at the upper limits of IBR try to scam the program? It doesn't make financial sense. You're paying less in the short term and none of it is tax deductible if you're making over $100K (I think the cutoff might is $80 or $90K). It's unlikely you'll be able to leverage the money into a better investment than the 7-8% of interest you're either paying or accruing. Finally, after 20 years when the debt is discharged you're going to be on the hook for the taxable income. With that kind of salary the IRS will definitely come after you.ReplyDelete
Yes, they got screwed by people they thought they could trust. Generally, if they didn't understand the consequences of their actions, that misunderstanding was willfully not corrected by Law Professors and Administrators.
Are you making some kind of "Cadillac driving welfare queen argument" here?
Are you a law professor?
"Scam the program?"ReplyDelete
lol. As I said in a prior thread, as a class students whose entitlement is a meager nondischargeable loan for education, are exceptionally responsible and somewhat pathetic citizens.
They're being Ned Flanders in a world of Homer Simpsons. Other groups are raping the federal government by extorting huge handouts (not loans; handouts) and here you have some 20 something being acquiesced with a nondischargeable loan from the government. The educated crowd is, yet again, the meek and nerdy group in a population of inconsiderate brutes. If 20 something educated types had any balls they, like laugh at the government's offer of a nondischargeable loan. They would demand cash handouts like welfare, stimulus jobs, social security/medicaid like the manual labor poor and retirees get.
I know a family in the inner city. The mother collects welfare and free medical care for the kids. The husband performs manual labor, none of the income from which is reported. They're probably getting at least $40,000 per year cash from the government? They drive an Escalade by the way (Escalades aren't necessarily super expensive though). The government will never cut out these entitlements because if they did, these people would probably riot and cause much more damage than the cost of the handout. Do you think they would be dumb enough to take a loan to study for three years? Hell no. That's for nerds. If this family isn't part of the ruling capital class they will essentially extort from that class. There are so many other forms of government handouts, from Wall Street (most of whose loans were paid back, to be fair), to retirees and so on. To compare the behavior of student loan borrowers to these groups reminds me of a comparison of that super considerate and pathetic nerd in highschool, as compared to the jocks. Or in comparing Ned Flanders to Homer Simpson.
No, IBR is not a scam at all. It's a meager entitlement that is a great deal for the government and capitalist power structure.
10:37, Did you see the link I provided to Imelda Marcos Law Students? Yes, some students were defrauded by deceptive career placement statistics. Yes that's true. But not all. Some students saw an entitlement and took it.ReplyDelete
Oy vey. Cue the right-wing morons who view an insurance program like social security as a ponzi scheme. Don't you have old ladies to beat up somewhere?ReplyDelete
I didn't say it was a Ponzi scheme (although it probably is). I said it was a handout of approximately $50,000 per year (SS & medicare) as opposed to a nondischargeable loan of approximately $60k per year.ReplyDelete
The olds have you so hypnotized with their lobbying that you don't realize that in about 10 years $3 to $4 TRILLION of the government's money will be HANDED to them EVERY YEAR.
That's how you get an entitlement. Or welfare. Or $450 billion for manual labor stimulus jobs, see Obama's jobs plan. IBR is pathetic in comparison to these things.
I saw it. It looks like a farce. Some are that stupid, and Law School took their money because they had a pulse and could sit still long enough to do poorly on the LSAT. Sucker born every minute and all.
You didn't answer my question: are you a law professor?
Is it a scam if a doctor who borrows $300,0000 then begins 3 years of residency and works at a non-profit hospital for 7 years has their loans discharged tax free? It's easy to imagine such scenarios where the program will really benefit people who do not need it at all. With the 10 year non-profit discharge it would not be surprising to see people (labor) that have power over their employers set up contracts that defer their income past the 10 year window. I see no problem with the discharge of illegitimate debt anyways, but this issue will come up.ReplyDelete
It's not a farce. It happens all the time.
I prefer to ignore your question. Whenever people act like a lawyer questioning me on the witness stand, I like to remind them that they have no such power. So go wallow in your powerlessness as you wonder whether I am a law professor (lol) or not.
The imelda marcos law student link was great and demonstrates how long the long school scam has been going on. That comment thread looked a lot like the ones on this blog, 'cept it was written in 2007. Of course, the original scamblog post was written by Half-Sigma in 2004:ReplyDelete
It was more to highlight that the only reason to pursue that line of reasoning would be to rationalize predatory behavior.
Those law student, they've got it coming. What do I care what happens to them.
Now I must depart, someone else is wrong on the internet:
"It was more to highlight that the only reason to pursue that line of reasoning would be to rationalize predatory behavior."ReplyDelete
I'm glad you have figured out the maximum number of reasons people are allowed to have when asking a question.
No one has mentioned the loan forgiveness that one is given after working 10 years for a non-profit. This can used in conjunction with IBR, meaning that you can pay the low IBR payments for 10 years and have your loans forgiven by virtue of working for a non-profit. I know of people, who now work for universities and, yes, law schools, (both non-profits) who will have their debt forgiven in 10 years in lieu of both programs. Granted, this means that everyone who wants to fast-track IBR would have to work for a non-profit or the federal government, but that remains one of the unmentioned possibilities that I have seen.ReplyDelete
Nonprofit and government jobs, unfortunately, are about as hard to get as biglaw in this market.ReplyDelete
Any update on whether you have discharge of debt taxable income when the loan gets forgiven? We never resolved that question.
I don't think it has to be a law related nonprofit job.ReplyDelete
10 year non-profit discharge is not counted as taxable income.ReplyDelete
Actually, you might want to check on whether the IRS treats the discharged debt as income. This is the first time I've read that forgiven debt on federally guaranteed loans is treated as income. On the other hand, I've repeatedly read and heard that when federally guaranteed loans are discharged after 10 or 25 years (depending on whether you're in the public or private sector, respectively), the discharged amount is not treated as income.ReplyDelete
I suspect you simply made an assumption based on your fuzzy memories of tax law back in the dark-ages when you attended law school yourself, but if you did in fact read it somewhere, I'd like to know where. Especially since I'm looking down that barrel in some number of years myself.
Sadly, many of my friends have gone to work for the very schools that defrauded them---only to take advantage of the school's non-profit status to utilize the 10-year loan forgiveness program. It will at the very least shave off 15 years of payments, but it will definitely leave much more taxable income at the end of those 10 years. One of my friends estimates that he will have over 200K forgiven under the 10 year non-profit forgiveness plan. Mind you, this is because he also simultaneously enrolled in IBR and subject to the IBR payment.ReplyDelete
While the fact that all of this has to be undertaken to ward off debt is catastrophic, I mention this only because it might provide a temporary "band-aid" or tool to help those of you out there, who desire some method of tackling the debt quickly.
You are correct about it not having to be a law-related, non-profit job. Both of my friends handle administrative and policy-type work within the different departments they work in at their respective universities.ReplyDelete
Does it have to be 10 years of nonprofit, or can you do say 5 years of nonprofit and 12.5 years of for profit? (i.e. 50% of the 10 year rule and 50% of the 25 year rule?)ReplyDelete
I have a question about IBR. I understand that the interest from a private loan accrues while in IBR, but gov't subsidized loan interest does not accrue. Does the private loan interest that has accrued get paid by the government to the lender at the end of IBR, or is it discharged and the private lender gets nothing or only the principal back?ReplyDelete
An over-simplified example for illustration only: Let's say that Student has $100k in private loans and enters IBR. After 25 years of IBR, the private loan balance has grown to $175k. What does the private lender get? (1) Nothing; (2) the gov't pays them $100k, the principal amount; (3) the gov't pays the private lender the full amount owed, $175k.
I guess what I'm trying to get at is - What is the risk to the private lender under IBR? If they can charge a burdensome interest rate knowing that the student can't meet his loan payments and the gov't will ultimately pay off the balance in the end, isn't this a hand-out to the lending industry?
12:31, going forward IBR loans don't come from private lenders. They come directly from the government.ReplyDelete
"No. IBR is one of the few reasonable changes to this system. I see it as a first step to allowing the loans to be discharged through bankruptcy. Between those two points hopefully the interest accruing on these loans will be adjusted. Also, and this is my main point, it is one of the few ways for us to screw the money lenders back. I won't list the methods here but with a little creativity you can easily defraud the fraudsters using IBR creatively."ReplyDelete
Basic question: without IBR, would banks be loaning the sums currently being made available to law school students, at least outside of the top schools? Or would they be cutting back like they are in the UK?
Sure, you want some pay-back against the lenders, and US bankruptcy law would make it relatively painless, but this is no long-term answer.
The notion that banks would lend six figures of unsecured debt to law students under current conditions is absurd.
Cue the right-wing morons who view an insurance program like social security as a ponzi scheme.ReplyDelete
An interesting post on this issue at Marginal Revolution today:
I think it's important that we separate criticism of IBR from criticism of fraudulent career placement stats.ReplyDelete
If schools would be honest about the prospects of their graduates, then IBR would work because students would enter programs that will result in jobs.
However, when schools lie about the value of their degree this prevents students from making an informed decision and they get the wrong education.
The ability to get rid of the loans in BR will help law students but it will probably hurt everyone else. Banks will make loans in smaller amounts but with significantly higher interest rates. That would make a state school inaccessible or incredibly more expensive for those who borrow modest amounts for undergrad.ReplyDelete
This is basically socialized law school. You get into law school and the government pays for it up front. For the next 20 years you basically pay a higher tax rate (in interest payments back to the government).ReplyDelete
Federal student loans are supposed to make higher education more affordable. Federal student loans are not making higher education more affordable; they are making it less affordable.
This is economics 101. When you flood a sector with lots of cash and/or cheap capital, prices go up.
This is exactly what the government did to housing prices through the use of Fannie/Freddie and the home mortgage interest deduction.
@11:47am Yes, it has to be 10 years of non-profit work. It can, however, be cumulative, meaning your period at non-profits should add up to 10 years rather than it be a solid block of uninterrupted non-profit work for 10 years.ReplyDelete
This will have a dramatic effect on the buying power of those effected. I think the phrase is "the hollowing out of the middle class."ReplyDelete
This can't be said enough. While you can certainly survive by buying a "new" $2000 used clunker car every two years, and you can live in an apartment your whole adult life (as does seemingly everyone in NYC), these insane debt loads are going to have a huge "drag" multiplier on the economy.
We always like to talk about how "one dollar spent on XXXXXX boosts the economy by $5" but what about the corollary - "one dollar removed from the system costs the economy $5".
And while the "no kids" part sounds a little dystopian, I don't think it's that outlandish. The sort of educated professionals who go to law school don't tend to be the "knocked up at 17 and gonna have that baby in high school" sort. Professionals tend to delay starting families, and a part of the delay is about establishing oneself financially. I have no doubt that there are people out there who would like to start families but just can't do it because they're too strapped. There's something deeply tragic about that.
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This is a great post. Every bit of it. As for IBR being an entitlement program, I suppose that's true if you're primarily looking at the government expenditure in terms of eating the debt after 25 years, but the benefit that's conveyed is pretty much only the avoidance of complete personal financial disaster, so from that perspective it's pretty perverse. That also assumes that having an ever-increased six-figure debt on your credit history for pretty much your entire productive life doesn't mean you're basically suffering most of the same personal consequences you would even without IBR anyway.ReplyDelete
There is no psychological burden any more if one simply sticks a gun in his or her mouth and blows his or her fucking brains out.ReplyDelete
Jesus God man, lives have been destroyed by many of you inhumane academic monsters.
THAT is the forest, and all you lick spittles want to talk about are the trees.
You really think it's the same as without IBR? Your wages aren't garnished and the amount you have to pay per month is extremely modest. On a $45K salary you're only paying $360 a month. That leaves plenty of money to have a fair quality of life. Whatever problems you experience will more likely be the result of your low income than your high leverage.
tsmonk - oooh, bad tax math makes my eyes bleed. The standard deduction comes out after AGI is calculated, not before. The AGI deductions most likely to be relevant are for paying into an IRA and for paying student loan interest.ReplyDelete
I'm getting increasingly tired of the classism on these comment threads. Poor-little-me rantings about 'manual labour types' don't exactly raise any sympathy, especially not if you also believe that all poor people are on 'welfare' (do you even know how TANF and other forms of public assistance work?) or magically keep their income off the books (so why is US median household income so low if all the poor people aren't included in that figure?) But in your world, we're all either on IBR or are welfare queens in our big shiny whateverthehell-car-brand-you-pulled-out-of-your-ass. Reagan's dead, so maybe it's time for you to stop repeating his spiels word-for-word.
3:18 - compared to median household income, $45k is not 'low', especially not as a starting salary. Open your eyes a little wider.ReplyDelete
*3.59, sorry. Was looking at your comment when I should've been looking at your byline.ReplyDelete
I didn't mean low relative to other people. I mean if you can't buy what you want making $45K it's because of your income is not high enough to qualify for whatever it is you want, not because of your leverage.
My comment was specifically with respect to calling IBR an entitlement program.
10:42: you could have saved us all an awful lot of TL;DR "welfare queen" nonsense if you'd just typed out the n-word a couple dozen times to get it out of your system.ReplyDelete
lol @ 4:51ReplyDelete
I don't understand the mentality of not calling out welfare and other expensive entitlements, in a thread devoted to the relatively modest IBR entitlement. It's very simple:ReplyDelete
Welfare types get $30k or $40k? (including healthcare) from the government. Some get much more.
Manual labor "shovel ready job" stimulus types get roughly $200k per job, a job that lasts a few years. Obama's plan will hand them $450 billion.
Retirees get about $50k per year in SS & Medicare.
All of the above GET that money. It's handed to them. It's not a loan.
IBR students get a loan of about $60k per year, for three years, in nondischargeable debt. After which the lives of many are not much better than welfare and social security types, even though these kids have to WORK for their meager $30k to $50k wage.
You don't see that there are groups sucking far more out of the government teat?
How are you calculating $30-$40K for "welfare types"?ReplyDelete
What do you think a welfare mother with two children, foodstamps, rent payments, living expense payments and free medical care gets?ReplyDelete
The max TANF grant per month would be around $400-$500. Rent is going to vary depending on the program and what her share is which depends on how much income she has. The mother doesn't get insurance, the children do.ReplyDelete
First, it's not one person receiving the benefits, it's three so divide your 30-40 by three. Second, the majority of the benefits go towards the children who are certainly more deserving of welfare than you.
How many law grads defer having kids until they can afford them? Kids are a costly luxury that they can't have.ReplyDelete
So $500 per month TANF, plus $300 per month food stamps, plus $600 per month medical care for a family with children, plus $1000 per month rental assistance = $2,400 per month. Multiply it by 12 and you get $29k per year. Also, I'm low on my estimates as rent and food and medical insurance probably cost more. That's $29k per year handed to that family which is a far bigger dent in the taxpayer than a loan.
TANF includes food stamps....ReplyDelete
Well someone must know the answer of what welfare costs for the average family.ReplyDelete
The point is most of the cost of the benefit goes towards the children. Even assuming the mother blows all the cash money on drugs the high cost items (medical insurance, housing assistance) benefit the children. It's a bad comparison.ReplyDelete
I would also note that law grads can clean up by getting all these benefits plus IBR if things are really so bad.
Lawprof, thank you for your writing.ReplyDelete
Just thought I'd add a few notes, as a man of the people.
(1) You underestimate the effect that a low credit score has on a consumer. It also adversely impacts fundamental necessities such as the ability to qualify for rent, affordable vehicle insurance, and affordable homeowner's insurance. Credit card companies can also unilaterally modify their interest rate and terms based on ANY negative mark on your credit score, regardless of the past payment history with that particular company.
(2) If the balance on IBR is taxable (there's a good comment above questioning whether this is indeed true; I honestly don't know either), tax debt is very difficult to discharge in Chapter 7. You're correct about the three year period, but it's based on the tax filing date. So, no tax debt is currently dischargeable from tax years 2008, 2009, or 2010. Tax debt from 2008 will not be dischargeable until after the 2011 tax return due date, presumably April 16th, 2012. Also, if a tax lien is filed - which can and does happen within 3 years if Debtors do not pay - the debt is never dischargeable in a bankruptcy proceeding. The IRS can secure its debt to ALL of your real AND personal property. There are other barriers as well that are too numerous to discuss.
(3) I meet with at least 15-20 new Debtors a week, many of whom have student loan debt. I would say that very few of them have heard of IBR. Granted, the program is in its infancy. Complaining that students are using IBR to hedge their bets for a three-year law school vacation seems absurd. How many 20-something students contemplate IBR as a factor in deciding to go to law school? The majority of these kids have no idea what they're signing up for, as I can validate with my own experience. On the contrary, I'm sure that almost all of them will be familiar with IBR options six months after law school is completed.
Please keep posting daily as this is presently my favorite blog spot.
Don't feed the troll. Ignore it long enough and it'll go away.
"The point is most of the cost of the benefit goes towards the children. Even assuming the mother blows all the cash money on drugs the high cost items (medical insurance, housing assistance) benefit the children. It's a bad comparison."ReplyDelete
I just explained to you that the vast majority of young people don't have kids, because they can't afford them. Children are a luxury and a costly one. One group of citizens figured out how to afford this luxury by getting handouts from the government (even though they work and earn untaxed income under the books). Another group of citizens was responsible and chose not to have children, even if they wanted them. Again, it's Ned Flanders vs. Homer Simpson.
"I would also note that law grads can clean up by getting all these benefits plus IBR if things are really so bad."ReplyDelete
They could, but they don't. They move back in with parents or get miserable jobs and live shitty lives to get by. Again, it's called being relatively responsible citizens.
"Among some of the largest and better-known operators, the default rate at the University of Phoenix chain rose from 12.8 to 18.8 percent and at ITT Technical Institute it jumped from 10.9 percent to 22.6 percent."ReplyDelete
Next year when we go from a two-year to three-year cohort default the default rate will go from about 8% to 12%. And that's still only a three year cohort default. This is with IBR, which doesn't accept every kind of student loan.
Those default rates are being miscalculated. The media spreads disinformation because they are too lazy to look up the definition of "default" used in those statistics. It's very hard to default according to the DOE definition, even if you miss a number of payments in a row and do so repeatedly. Under the DOE definition, IBR isn't default even if you pay zero.ReplyDelete
If DOE is issuing the loans, DOE determines what is a default...ReplyDelete
True, but if the term "default" is being used to measure the quality of the loans, then we can't use a ridiculous definition.ReplyDelete
Backwards...but otherwise correct.ReplyDelete
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I can't abide this nonsense.ReplyDelete
I wonder what the old requirements were for forbearance and deferment periods on student loans. As mentioned elsewhere until next year we're calculating default by looking only at the percentage of graduates who are in default (however metaphysically people here want to define the concept) at the two-year mark after repayment begins. I guess my question, therefore, is what "repayment" means. Kind of esoteric, I know, but if it used to commence, say, a certain number of months after graduation (and ignoring further education and in-school forbearance/deferments for present purposes), regardless of whether you picked up a hardship or unemployment forbearance or something, then how long could you drag that out? My understanding is that you could pretty much use that to paper over the two year snapshot of debtors in default. Put more simply, if you can take more than two years of forbearance and deferment (plus you're not in default really if you just don't pay for up to 180 days, so that buys you 6 more months), then the default rate being reported to the government - even on this "ridiculous" definition of default - must have been wildly incorrect, no?
I read that as long as you paid like $1 every six months you were not in default. One of the older grads could tell us for sure, but that's how ridiculous the definition was. Forbearance and deferments (that you could get for three years due to unemployment and/or economic hardship) were not defaults either.ReplyDelete
IBR is a government program, right?ReplyDelete
Can't you just FOIA whomever runs the program seeking statistics on the population that takes advantage of the program (e.g., Annual Income, Indebtedness, Undergraduate and Graduate Institution)?
With clean data, and excel, you could shed a great deal of light on this program.
Tax law is complicated but Google makes it so much easier than 40 years ago when I was in law school.ReplyDelete
IBR forgiveness is taxable income. As other posters have noted, the major escape from this debt is to do IBR and get a federal or state or non profit job and qualify for Public Service Loan Forgiveness. In 2008, The IRS has officially determined that PSLF discharge of IBR debt for direct loans is NOT TAXABLE.
Rather than cite just one Rev ruling, here is a mini treatise by a Treasury official spelling it all out to Congress
"Can't you just FOIA whomever runs the program seeking statistics on the population that takes advantage of the program (e.g., Annual Income, Indebtedness, Undergraduate and Graduate Institution)?"ReplyDelete
Oh good point.
"The IRS has officially determined that PSLF discharge of IBR debt for direct loans is NOT TAXABLE."ReplyDelete
Does that mean that the 25 year non public service discharge is taxable?!?!?!
"Wal-Mart might not have been such a bad alternative. I'm the guy who spent some time in another comment thread talking about my friend who found a very succesful career starting as a pizza delivery boy. Not every well-paying career track starts with expensive professional school (or even expensive school period). There are still employers out there that have positions both low and high and who will promote a person from one to the other because they do a good job. I'm sure a number of Wal-Mart store managers make more money than the law school losers on this site, and I'm sure lots of Wal-Mart store employees find themselves promoted out of the store and into corporate HQ. This would be especially likely to happen to highly intelligent and industrious people who quickly and easily distinguish themselves."ReplyDelete
This is a really good point. I'm a 2010 graduate of a bottom tier law school, actually had a job lined up which was taken away before it began, and am now going solo and barely scraping by. (Attention law schools: New solo's are NOT full-time employed; most of us are struggling.)
Looking back on my adult life, I've excelled and quickly advanced in every shitty job I've had. I was actually a manager of a fast food restaurant at 17 (ten years ago). I was literally the boss of a number of people who were two or even three times my age.
If I hadn't gone to law school... I wouldn't be rich, but I would in all likelihood have a salaried supervisory position doing SOMETHING, and I'd probably be debt-free. Instead I owe well over $100K without any economic security.
Yeah, law school was an awesome idea.
And 7:54: Yes. The 25-year non-public service discharge is a taxable event. Only the 10-year public service one is tax-free.ReplyDelete
Crazy question, but just curious: Could one create their own non-profit(which is relatively easy) and essentially "run" it for 10 years while simultaneously being employed elsewhere? I know it would be exploiting the non-profit status to get rid of debt, but has anyone looked into that possibility?ReplyDelete
Thank you LawProf for sharing this story. I look at the comments today on the blog, and lack of empathy showed by many of people in this profession is truly sad and disheartening. I am a recent graduate, and have been an avid reader of this blog. However, while I have appreciated LawProfs insights, the comments on this blog make me realize my own situation is not going to get better anytime soon. It is not because of my efforts at Job searching, (I send on average 6 to 10 resumes a day. I also go to court to observe trials, and self-study two different subject areas of law that I did not take classes in Law School, but are popular in the local market). On average I put in about an 11 hour day or more to this search. I also deliver resumes door to door, blanketing an area town once a week. The problem which I am sensing is a trend that my JD might be a liability for nonlawyer positions in the legal field and elsewhere. Twice in the past two days I was rejected for a paralegal or law assistant position because I had a JD. I have applied for close to 45 others and not heard back. Both firms, when I contacted them, told me it was their policy of not hiring lawyers for paralegal or legal assistant positions. While I do not fault the firm, and they are free to do as they please, it puts me in a difficult position. I can't say for sure if this is the case with each of my applications, but this may be the start of a new trend.ReplyDelete
I have 3 grand left to my name (i cashed out my 401K to pay for bar), a $1500 bill student loan bill due in November (285 if I go on IBR), and no possible way to return to my old career in IT.
I have spent the afternoon trying to plot my next plan of attack.
I graduate in the top 17 percentile of my class and dedicated everything I had to attend Law School. I did this as a mid-career shift. I sold my condo, and gave up my life (friends and Family) for three years. While many people work hard in Law School, I can honestly say I worked pretty much worked bell to bell hours 7 days a week for 3 years.
I went to lawschool, because my last career was ruined by lawyers due to no fault of my own through legal bullying. I wanted to learn how to defend myself to prevent this situation from happening to me again. I worked between 60 to 80 hours a week for 45K a year in my last career(as a side note-this has always been my typical work week).
The legal bullying took the form of a non-compete came out in my fourth year at the company after it merged with a competitor. At a 6 PM meeting we were told to signed it and have it mailed in by the time we arived at work, or else ( fired). The non-compete lasted for 3 years and covered the places I had worked, and prevented me from interfering with the companies profits stream. In my situation, that amounted to the entire United States since my job was 100% travel and essentially ended my career upon leaving. I knew as I signed it that it was not enforceable. I had no time off to consult legal counsel, but even if I did at the time, it was a mute point. The cost of the law suit to prove it's unenforceability made its legality a mute point. My yearly salary was too much to qualify for free legal services, but too little after mortgage, carpayment, and school loans,to make hiring a lawyer an option, assuming I could get the time off to consult with them.ReplyDelete
The company began a series of layoffs shortly after forcing everyone to sign. I survived the continuous layoffs and I entered Law School. But within 6 months after I left, 90% of the people I knew at the company were gone. I heard of friends being fired for driving 67 in a 65 in their company car. (The company installed GPS trackers that monitored the car speed, location, and performance)
I take my knocks and move on. I recognized this decision was going to put me in my debt, and I own it. But lets face it, the rules of unemployment have changed. The rules of the workforce my parents were brought up on, and the rules that applied as little as five years ago, do not apply today. I have to work hard to stay positive and make the conscious choice daily, if not hourly.
While I knew the legal market might be rough, I did not realize that the JD would become a liability. Tommorrow, I am debating removing my degree(s) from my resume. I watched my sister, who was unemployed 3 years, remove her college experience to get hired at Belks. The first three times she applied there, she never heard back from them. On a whim, she removed her college degree from her resume, applied a fourth time and was working within two weeks.
When this is the state of the economy, you can play blame the victim games all you like. But before you throw darts, please remember, that there are real people on the other side. We played by the rules were told. Work hard, spend frugally, and invest in education when needed. There are many like me, who just worked hard and want to be left alone, and be comfortable- not rich. We did not make poor choices, and we don't necessary work for money alone. Law School in 2008 (the year 2011 was entering) was not a bad option. Several Economic news story listed law as one of the few professions that was not hit by the recession. In addition, from 2003 to 2008, my friends who were lawyers and Doctors were essentially the only one I knew who were getting beyond the cost of Living raise.
I have worked for many things. MOney, does not motivate me that mcuh, and I am not seeking financial rewards out of life. With that said, I also recognize that it is a necesary evil. I need to pay for rent, medications, and food. I want to have enough left over to fill my car with gas without worry, get a cup of coffee when I am thirsty, pay my bills (and I live cheaply), and get my girlfiend cheap flowers once a week. If I am being overly selfish, then your the one with issues not me. I've worked hard, and will continue to, but please becareful with your darts.
IBR = Int'l Bear Rendezvous, right? http://www.bearrendezvous.com/ReplyDelete
3:34? "if" you go on IBR?ReplyDelete
So many of us are in this boat, it's downright scary. I've got around 70K from undergrad, another 70K for my masters, and another 180K for law school. You would think with 3 degrees, it would be enough to rake in the big bucks. I'm lucky to have a stable job as a government investigator, but i'll max out well below what a first year lawyer would make in a big firm.ReplyDelete
Most of my loans are private. They expect (depending on which threat letter i get) between 1400 and 1800 per MONTH. That's more than one entire paycheck, and a good chunk of a 2nd. I drive a used trailblazer, live in a semi-rural community, and *shuffles feet* live in a double-wide (A nice double-wide as far as they go, but still). I've spent hours reviewing garnishments and such, and at this point, with my credit already being in the crapper, go ahead and take 10%(The max in NY State) of my check for the rest of my life. I'll be long gone before you ever get all of my money.
Very interesting and insightful!ReplyDelete
Intentional, strategic DEFAULT EN MASSE is the only way to collapse this rigged system, rescue us from a lifetime of indentured servitude, and rebuild from scratch.ReplyDelete
Join us - many of us are already taking action: simply DEFAULT - refuse to pay your student loans, and let the banks collapse as this asset class is rendered worthless. We rebuild from there a system with fair, not bank-owned, rules.
Spread the word - we have already begun. Simply refuse to play this game anymore. DEFAULT EN MASSE. Please contact me for more details.