$10,000... Now What?

If you are like most attorneys I have met, you either have or had a ton of student debt or you came out of law school with none.

Rarely do I meet someone who is in-between! It seems like to me you get a full ride from scholarships/grants or you take out a ton of debt to get it done...

Talking with many attorneys a lot have been holding out for student loan forgiveness before they started or finished paying off their loans! There was a lot of uncertainty about what the administration was going to do for student borrowers.

Now we finally have clarity, as of Wednesday the 24th, it has been announced that you can qualify for up to $20,000 in forgiveness for federal loans! You are eligible for $10,000 per borrower if you make less than $125,000 as an individual or $250,000 as a married couple. An additional $10,000 is available for those that received a Pell Grant. On top of that deferment has been extended one final time until December 31st with payments resuming on the 1st of the year!

For many people, this is great news, but for many attorneys it is going to do very little to help them! Average student loan balances for attorneys are around $165,000 and the average starting salary is $110,000, if you are in big law the average salary is closer to $200,000.

This means many attorneys will not be getting any forgiveness, as their income will just be too high! In the public sector, this will likely have less of an impact because most attorneys in that world are already on track to qualify under the PLFS program. In my opinion, this forgiveness is great news for most, but will not help attorneys out in a significant way!

According to some estimates that I have seen people should expect a $150-$300 decrease in their monthly payments! As seen in the graph below, many people plan on paying off more loans with that money...

That leads naturally into a conversation about how to best pay those loans off! The best method is with a modified debt snowball approach that will help you do both the top three things from that survey... Pay off loans, save for retirement, and invest money!

The most common question is how is that possible? In simple terms, you are spinning the tables of compound interest in your favor instead of the banks! On average 30% of your debt payments are going straight to interest. In other words, $30 out of a $100 payment is going to nothing but interest... You need to kill that problem fast!

I'll reserve the whole breakdown of that program for another post...

If you want to learn more contact me and visit my website!

www.wealthbrilliance.com