Financial tips for surviving the summer after law school before articling

[capitalttruth]

I'm about to finish law school and my articling term starts August 26th. I write the Bar in June. 

I may be encountering some pretty bleak financial times in this period. I have no income; my RA job through school is ending in April. I asked to start articling early but the government is steadfast in me starting in late August. 

What did you do in the summer after law school before articling began? How did you stay afloat while studying for the Bar?

[OnlyResident]

I know this might not be what you want to hear, but presumably you have access to a LOC, which you can use to support yourself for a couple of months, until you start articling. 

I would not recommend finding a job while also studying for the Bar exam. It's not worth it. 

[Turtles]

The time period between the bar exam and articling is often the last, or second-to-last, long breaks one gets in this profession (i.e., other than between end-of-articling and hireback as an associate), I would savour every second of it unless you absolutely cannot afford to not work. If you have a government job lined up, it would seem like you probably can survive on debt and make repayments once employed.

If you have a PSLOC, there's that. A cheaper form of debt may be a "credit card balance transfer" with a promotional rate of interest, these tend to be around 0% interest for 1 year + 2% balance transfer fee, with the transfer payable to your regular chequing account as cash, so likely cheaper debt than your PSLOC (unless you fail to pay it back on time, in which case the the interest becomes insane, which is how they make their money).

Obviously don't take on more debt than you can reasonably repay. But in terms of things to cut back on to better position your finances, giving up your post-3L summer would not be my pick.  

[piranesi]

Think about LSAT tutoring?

[SNAILS]

You do have that time period between June 20 and August 26. That is 8 weeks of potential income that has no impact on your success for the barrister and solicitor exams. 

I suggest first deciding how hard you want to study between graduating Law School and the bar exam. If you only want to study 20 hours per week, you can work part time. If you want to study 40+, then don't work. Hopefully there is suitable work available to you, but even something in the $20/hr range and up would really help regardless of whether it is in the legal field or not.

I echo what @Turtles says about this being our last long break in the profession. But I respectfully disagree about paying credit card interest.  

I inputted the following numbers into this (https://www.creditkarma.com/calculators/credit-cards/debt-repayment): Debt = $150 000, interest rate is 7%, estimated monthly payment $1000. The results were 358 months to pay off your debt (29 years) and lifetime interest of $207,855.81, which is more than your total debt!

If your articling for the government pays about $63 000/yr, then you can't realistically put too much more than $1000 towards your debt unless you are living with your parents or something. Do not assume your financial worries end when you start articling!

As a hypothetical, let's say you are making $90 000 ($7500/month pre-tax) as a junior associate, and you are putting $2000 aside a month to pay debt. The calculator says 99 months to pay off your debt (8.25 years) and $47,883.50 in lifetime interest. If you plan to lease a car or start paying for a house, your income is getting a huge squeeze!

[Turtles]

3 hours ago, SNAILS said:

I echo what @Turtles says about this being our last long break in the profession. But I respectfully disagree about paying credit card interest.  

I never told anyone to pay credit card interest. The general credit card balance transfer promo rate is 0% interest for 12 months + 2% disbursement fee, i.e., the cost of $10,000.00 cash to your bank account at the start of summer = $200.00 paid at the time of the transfer, with no interest accruing at all, nor any other fees, if repaid within 12 months (you don't use the card while the money is outstanding due to how interest is calculated). 

3 hours ago, SNAILS said:

I inputted the following numbers into this (https://www.creditkarma.com/calculators/credit-cards/debt-repayment😞 Debt = $150 000, interest rate is 7%, estimated monthly payment $1000. The results were 358 months to pay off your debt (29 years) and lifetime interest of $207,855.81, which is more than your total debt!

I'm not sure why you're assuming OP has 150k of debt (is that from a different post?), but if you're suggesting they maxed out their PSLOC during law school, generally PSLOCs convert to 10 year term loans, so your calculation is quite off. If it's government student loan debt, given the interest-free federal portion (and potentially interest-free provincial portion, depending on province), then it's much easier to manage. 

3 hours ago, SNAILS said:

If your articling for the government pays about $63 000/yr, then you can't realistically put too much more than $1000 towards your debt unless you are living with your parents or something. Do not assume your financial worries end when you start articling!

Ultimately their reasonable tolerance for additional debt will depend on their current financial situation and projected future income, I would hesitate to make so many assumptions about both and then declaring they can't handle even $1000 of additional debt. We just don't know their actual circumstances.

[SNAILS]

@Turtles: I have to congratulate you on a very well articulated argument for what is objectively speaking a very foolish position. The ability to defend foolish positions will assist you greatly as a lawyer, I'm sure. And I say this with no disrespect intended.

I would summarize my position as follows: That a law student with a high degree of debt ought to be very aware of the difficulty of paying it off and ought not to assume that beginning a career as an articling student or lawyer is an automatic gateway to  financial success.

I can summarize your apparent position as follows (doing my very best to not create a strawman): That a law student with a high degree of debt can use tricks and gimmicks to ward off financial ruin in the short term, and that there is no point speculating about long term ability to pay off debt since we do not know his level of debt or the circumstances of his loans. 

If you bother to respond to this, you'll probably say your position is something other than this, but in the larger concept of this forum thread, the above is essentially what you are arguing.

Here is my response to your last post:

1. You did not say to pay credit card interest. You are right.
2. You are telling us there is a credit card where a person could transfer $10 000 or more and pay only 2% for the amount of credit transferred if the debt is paid off in 12 months? Can you provide links to which financial institution provides such a card and the conditions thereof? I might be very interested in such a card myself! 
3. The more common scheme is to have a balance on Credit Card A, then to pay that credit card off with Credit Card B before interest is due on credit card A. Credit Cards C and D and so on may be used as needed to further the scheme. Such schemes are usually only done by people on the verge of bankruptcy. Financial institutions have safeguards in place to prevent this from being done. It does not help the person doing it pay off debt long term, and may encourage that person to get deeper into debt.

4. The level of debt the OP Has

You are right that @capitalttruth has not told us how much debt he has. I used $150 000 in debt as an example since this is what I deem to be a median range of debt for someone like the OP who wrote they are going to experience "pretty bleak" financial times.

In this thread ( https://canlawforum.com/topic/401-the-debt-of-law-school/ ) @Mountebank wrote that $100 000 is reasonable after law school.

Here ( https://canlawforum.com/topic/4267-average-debt-coming-out-of-law-school/ ), @Phaedrus said he was $110 000 in debt after law school. @Lilbb19 said $190 000 for him, @Talleyrandophile said $55 000 just for law school, and @McLovin indicated $135 000 after having worked in big law over the summer and making good investments.

Here ( https://canlawforum.com/topic/3918-not-being-able-to-pay-back-loc/#comment-43445 ) @BlockedQuebecois used $150 000 as a reasonable hypothetical for a law student with a lot of debt to illustrate the affects of interest rates on monthly payments.

My point in my post was about paying off debt for typical law students with a lot of debt. Obviously, variables between law students will make every situation drastically different (some might have family support, some might have relatively low debt, some might have pre-law school savings, and some might be entering a big law job with an exceptionally high salary). 

 

 

5. The terms of repayment of a PSLOC and the provincial and federal portion of the student loan

I believe the provincial portion of a NLSCS (OSAP in Ontario) student loan in many provinces is suspended for 6 months (April  graduates begin paying interest in Nov 2024) and federal loans remain at 0%. This will generally be the first $30 0000 - $40 000 of a law student's total debt. Private loans through your bank will be at slightly above 7% depending on your exact loan plan.

6. 10 year loan terms

@Turtles, what you said about "PSLOC during law school, generally PSLOCs convert to 10 year term loans" is probably technically correct. But it demonstrates a mentality towards debt that I am expressly trying to discourage. 

The mentality I am encouraging is for a law student to decide how much they are willing and bale to put towards paying off debt, and then calculate how long it will take to pay off that debt and how much interest their are going to have to pay in that time. My conclusion is that student with larger debt loads need to be very vigilant and aggressive in starting to pay their debts before they get out of control.

Your mentality (shared by many people I think) is that a law student can and should avoid paying off debt as long as they can, and even add to that debt during periods of voluntary unemployment. At a certain point in time, the bank will prescribe how much you have to pay monthly, and then you'll of course pay that amount.

To put apply that strategy to the OP, you seem to be implying that he ought to (effectively) borrow the money he requires for living expenses between now and when his articling starts on August 26. We don't know how much his debt is right now. But you seem to be implying that if the bank tells him his minimum monthly payment is $1000, or $2000, or $3000 he can just start paying it then.

I would suggest having a bit more foresight than that, unless you are certain that your future salary and debt load will be manageable when mandatory monthly minimum payment kick in (which of course depends on many personal factors).

Conclusion

My advice is more for student debt in general than for the OP. You are right, we do not "know their actual circumstances" and should not make "make so many assumptions" about "their current financial situation and projected future income."

But you are also making assumptions. What if the truth of the matter is that a particular law student has no family support, has an exceptionally high level of debt, and actually does not get hired back after articling and experiences a period of unemployment? What if they do get a job as an associate, but for $65 000?

 

 

[BHC1]

The credit card transfer gimmick suggested above should be an absolute last resort, probably considered only a small step above a pay day loan. These things often have hidden fees and conditions that can be absolutely brutal. I’ve seen colleagues ruin their lives with this stuff. Try to avoid at all costs. 

If you don’t mind the possibility of profound personal embarrassment, you could also consider asking your friends or a close professor in law school for help. Your professors may be able to offer you another short term RA position if they know you are in dire need. Many professors have discretionary funds from book royalties and the like that they can deploy. Further, some of your cohort will have parents in the top 1% of income earners, so your law school friends may be able to give you a personal loan. Depending on the scale of your financial problems, these could be solutions.  
 

 

 

[scooter]

@capitalttruth This thread has gone off the rails, but my advice for your situation is that you need a detailed budget before you even consider any of the things being discussed here. The most useful thing you can do for yourself is have a clear and accurate understanding of your expenses.

I would recommend checking out some of the budgeting/personal finance subreddits. They have a lot of resources for creating a budget, managing debt, etc. If you poke around enough, you’ll probably also find threads from people in your exact situation. And you’ll notice that people there refrain from giving advice unless you provide them with a detailed breakdown of your debt and expenses 🙂

[ccounsel2024]

Informative thread. Can someone tell me more about what happens when PSLOC converts into a term loan? If it turns into a 10 year term loan, can you negotiate rate or will it stay at prime? 

OP - I'll be working this summer bc of reasons that @SNAILS has mentioned. I'm sure you know your situation best and for me personally, it would be financially irresponsible to not work between the break and the start of articling. For others, that may not be the case and they can enjoy their time. 

[Turtles]

16 hours ago, SNAILS said:

@Turtles: I have to congratulate you on a very well articulated argument for what is objectively speaking a very foolish position. The ability to defend foolish positions will assist you greatly as a lawyer, I'm sure. And I say this with no disrespect intended.

Damn, that's a needlessly aggressive first paragraph, but I'll try to engage in good faith nonetheless. 

16 hours ago, SNAILS said:

I can summarize your apparent position as follows (doing my very best to not create a strawman): That a law student with a high degree of debt can use tricks and gimmicks to ward off financial ruin in the short term, and that there is no point speculating about long term ability to pay off debt since we do not know his level of debt or the circumstances of his loans. 

No need to create a strawman summary of my point, I provided a summary of my key point at the end of my original post:

On 3/5/2024 at 9:51 PM, Turtles said:

Obviously don't take on more debt than you can reasonably repay. But in terms of things to cut back on to better position your finances, giving up your post-3L summer would not be my pick.  

You realize I avoided telling OP whether they can handle additional debt, since we lack sufficient information about their finances, right? Instead, I answered their question in practical terms (how to finance the interim summer months if they do not take employment), assuming they will make the determination of whether to take interim employment themselves (since, again, only they have the information necessary to understand what is reasonable in their circumstances).

16 hours ago, SNAILS said:

1. You are telling us there is a credit card where a person could transfer $10 000 or more and pay only 2% for the amount of credit transferred if the debt is paid off in 12 months? Can you provide links to which financial institution provides such a card and the conditions thereof? I might be very interested in such a card myself! 

I would generally avoid linking specific recommendations because people should do their due diligence before seeing a link and blindly jumping in (as is true for anything finance), but since you asked, the classic balance transfer promo provider is MBNA (Canadian entity owned by TD, no longer subsidiary of MBNA UK) for a 12 month balance transfer at 0% interest + 1-3% balance transfer fee (depending on exact current promo, has varied over decades), release of funds into chequing account at any Canadian bank is allowed (i.e., it is not reserved strictly to paying off another CC, you can use it as a pure cash loan to your bank account), see RFD forum for broader discussion (consolidates community discussion / tips & tricks / summarizes past and current affiliate offers): https://forums.redflagdeals.com/mbna-cards-bt-promos-mbna-tl-new-card0-12-month-offer-2210803/  Other issuers (e.g., CIBC, BMO, etc) also play the balance transfer promo game, see a summary and comparison (past and current offers) also on RFD: https://forums.redflagdeals.com/latest-balance-transfer-promos-2244577/ . For RFD, generally start with the first page to see if there's an up-to-date summary and/or list of past offers, then work  backwards from last page for the latest info and experiences. RFD is a general "deals" forum for those who don't know and is pretty good also for comparison of bank account / non-PSLOC personal line of credit / and other finance and non-finance offers.

Often the balance transfer promos can be further leveraged by applying through affiliate links for additional $50-150 cash or giftcard sign-up offers, offsetting part or all of the balance transfer fee. The general flow is apply via affiliate link for extra sign-up offer (but double check the affiliate offer still confers the same or better promotional interest rate, promo period, and balance transfer fee rate, plus no annual fee) -> new credit card is opened -> request "balance transfer to bank account" within your approved credit limit (keep in mind the added balance transfer fee so you don't exceed the credit card limit when the two are charged together) -> the balance transfer amount is deposited to your bank account in a few days and your credit card will show a balance for that amount + the transfer fee -> do not use the card for any other purchase whatsoever -> make monthly payments of the minimum balance (the greater of 1-3% of the balance or ~$10, depending on the card, usually) -> no interest / other fee is charged during the entire promo period -> make sure every cent of the transfer is repaid by the last day of the 9/12/15 month promo period (as applicable) -> if fully repaid, no further fees / interest of any kind -> can close the card or keep using as a regular CC.

Again, I am not recommending anyone go open a new credit card and do a balance transfer, or to look at their existing card(s) and see if they have a favourable balance transfer offer on their account already, only highlighting that there are potential lower cost of debt options compared to a PSLOC for short-term (i.e., 12 month) loans if you are certain you can repay it within the interest free period and know how to do it properly. I'd be hopeful law school grads are better positioned than most in society to read the T&C for themselves, make an informed decision, and understand how to avoid any issues, but I recognize that may be wishful thinking given the level of reading comprehension on this forum sometimes. As I mentioned before, the issuers offering these make their money on people failing to make minimum payments (and thus breaking the terms of the promo interest rate -> making the whole thing subject to interest) or failing to repay by the end of the promo period (again making the whole thing subject to interest), so balance transfers only make sense if you have read the terms and are absolutely confident in repayment. For a couple months' living costs for someone with reasonable employment during most of the promo period, absent significant debt or expenses that threaten solvency, a balance transfer may not only be reasonable, but preferable over a PSLOC, due to the comparatively low cost (net 1-3% due to the balance transfer fee vs 7+% on the PSLOC) and limited risk given the size of the amount to be repaid and knowledge about how to do it properly. But again, it's up to individuals to figure out their financial circumstances, their tolerance for debt, and the risk that things may not go to plan.

17 hours ago, SNAILS said:

4. The level of debt the OP Has

You are right that @capitalttruth has not told us how much debt he has. I used $150 000 in debt as an example since this is what I deem to be a median range of debt for someone like the OP who wrote they are going to experience "pretty bleak" financial times.

In this thread ( https://canlawforum.com/topic/401-the-debt-of-law-school/ ) @Mountebank wrote that $100 000 is reasonable after law school.

Here ( https://canlawforum.com/topic/4267-average-debt-coming-out-of-law-school/ ), @Phaedrus said he was $110 000 in debt after law school. @Lilbb19 said $190 000 for him, @Talleyrandophile said $55 000 just for law school, and @McLovin indicated $135 000 after having worked in big law over the summer and making good investments.

Here ( https://canlawforum.com/topic/3918-not-being-able-to-pay-back-loc/#comment-43445 ) @BlockedQuebecois used $150 000 as a reasonable hypothetical for a law student with a lot of debt to illustrate the affects of interest rates on monthly payments.

My point in my post was about paying off debt for typical law students with a lot of debt. Obviously, variables between law students will make every situation drastically different (some might have family support, some might have relatively low debt, some might have pre-law school savings, and some might be entering a big law job with an exceptionally high salary). 

5. The terms of repayment of a PSLOC and the provincial and federal portion of the student loan

I believe the provincial portion of a NLSCS (OSAP in Ontario) student loan in many provinces is suspended for 6 months (April  graduates begin paying interest in Nov 2024) and federal loans remain at 0%. This will generally be the first $30 0000 - $40 000 of a law student's total debt. Private loans through your bank will be at slightly above 7% depending on your exact loan plan.

I'm glad we agree you were making assumptions about the OP's debt load and there was no indication that they actually hold anything like 150k debt. You seem to conflate "reasonable" debt load, as in it's understandable how someone would accumulate so much debt, as somehow being the median debt load we can assume OP bears. All of the actual stats I've ever seen (rather than anecdotes on a forum) have suggested a median debt load less than half of this. That doesn't mean OP doesn't have 150k+, only that such an assumption, absent evidence, is bizarre. You also seem to assume most of their debt (whatever that may be) is subject to interest and that their average interest rate will be in the ballpark of 7%, when you also recognize much if not all of it may simply be interest free (e.g., if they hold BC student loans, the entire federal + provincial amount is interest free, which could mean 100k+ of interest free debt).

There's little value debating counterfactuals, OP is free to share more info to keep discussion relevant to them. Also keep in mind government student loans have generous programs to pause payments for 6 months due to loss of employment and so on. For students with disabilities, the government will even pay the principal portion of the loan, meaning the outstanding balance decreases despite making no payments in the event of an inability to make payments. These are relevant to understanding the inherent risk level of outstanding debt (again, OP hasn't said how much, if any, they have). 

17 hours ago, SNAILS said:

6. 10 year loan terms

@Turtles, what you said about "PSLOC during law school, generally PSLOCs convert to 10 year term loans" is probably technically correct. But it demonstrates a mentality towards debt that I am expressly trying to discourage. 

The mentality I am encouraging is for a law student to decide how much they are willing and bale to put towards paying off debt, and then calculate how long it will take to pay off that debt and how much interest their are going to have to pay in that time. My conclusion is that student with larger debt loads need to be very vigilant and aggressive in starting to pay their debts before they get out of control.

Your mentality (shared by many people I think) is that a law student can and should avoid paying off debt as long as they can, and even add to that debt during periods of voluntary unemployment. At a certain point in time, the bank will prescribe how much you have to pay monthly, and then you'll of course pay that amount.

To put apply that strategy to the OP, you seem to be implying that he ought to (effectively) borrow the money he requires for living expenses between now and when his articling starts on August 26. We don't know how much his debt is right now. But you seem to be implying that if the bank tells him his minimum monthly payment is $1000, or $2000, or $3000 he can just start paying it then.

I would suggest having a bit more foresight than that, unless you are certain that your future salary and debt load will be manageable when mandatory monthly minimum payment kick in (which of course depends on many personal factors).

Your key error was discussing a repayment scheme that didn't make any sense. The bank will expect repayment in the order of clearing out the PSLOC debt in 10 years as a minimum (e.g., structured as a 10 year term loan with fixed payments), absent refinancings or special circumstances. Your point would be better made sticking to realistic circumstances, since 20+ year repayment and your discussion of making minimum payments calculated artificially low are trying to transpose the features of revolving credit repayment to debt of a different structure (after conversion to a term loan) that only create misunderstanding about how such debt works and undermines your apparent goal of people figuring out the effects of debt. 

You are totally right to say it may be prudent to accelerate repayment. And that people should model their future income inflows and debt repayment outflows to understand their financial position. My initial post, again, assumes OP reflected on the reality of their financial situation and decided, justifiably, that they could tolerate additional debt. You're free to hammer on that point to OP that they need to consider what their debt payments will be, take-home income will be, the risk of not getting hired back or finding comparable employment right away, etc. But trying to assert I have the wrong mentality for reminding OP that this summer will be one of their last moments of rest, and to instead think about cutting costs elsewhere rather than give up this invaluable opportunity, only reflects that you prioritize debt minimalization over all else. That's fine for you, but it isn't a universal truth. My mentality is not that debt repayment should be indefinitely delayed, or that infinite debt is good, but that debt is a tool that can be used to attain wealth and help achieve your goals in life and is not intrinsically scary so long as you have a plan and the capacity to manage it responsibly. It's ok to add 10k (and the associated costs of that debt) to your total debt load to go spend your summer traveling or decompressing on the heels of law school, recruitment pressures, and bar exam prep, and in advance of the challenges of articling, if you can reasonably pay it off and have a plan to do so in a timely manner. Again, that depends on OP's actual situation, which we don't know. I bothered to highlight it for the OP because I see many young kids, especially from poorer socioeconomic backgrounds, who have jumped from high school to undergrad to law school without taking a break or smelling the roses because their life has always been about trying to attain financial freedom their parents never had, and it's all-too-easy to put on blinders and keep fighting the fight only to burn yourself out and actually leave yourself worse off. If your circumstances allow, it's ok to live life. We are alive to live, not to hit a net worth benchmark by a certain deadline. The greatest threat to many with high debt loads out of law school is whether they burn themselves out and need to exit the profession before they ever realize a return on their law school education investment. Taking a job you don't want in the few months of peace you have, before working your ass off in articling, and then doing it all over again in the summer before hireback before again trying to overwork yourself to impress as a junior lawyer, may not be the formula to success as you seem to suggest. Work hard, play hard; not work hard, be miserable, and work hard again, y'know?

Again, everything is qualified to actual circumstances. I am not telling someone on the brink of bankruptcy to go spend $50k to party in the bahamas. I am simply reminding particularly younger kids to think about the value of their freedom during the interim period vis-a-vis the significance of some small amount of income towards their debt. For some, it may be financially necessary to take the summer job and work; for others, it may prove harmful in the long run. 

 

17 hours ago, SNAILS said:

Conclusion

My advice is more for student debt in general than for the OP. You are right, we do not "know their actual circumstances" and should not make "make so many assumptions" about "their current financial situation and projected future income."

But you are also making assumptions. What if the truth of the matter is that a particular law student has no family support, has an exceptionally high level of debt, and actually does not get hired back after articling and experiences a period of unemployment? What if they do get a job as an associate, but for $65 000?

 

If you want to be an advocate for greater responsibility over indebtedness, you're probably better off making a standalone post that targets people before they enter into such debt, rather than co-opting the OP's thread when you don't know if they have any debt, let alone whether it is low-interest (prime rate) vs interest-free (federal student loans + certain provinces) or how much relative to anticipated future income streams.

That said, I have no qualms with reminding people to be financially smart, especially if you also share personal finance resources so they can educate themselves (e.g., sharing McGill's free online personal finance course, though I'm not sure if it's any good myself).   

For your closing paragraph, rather than engage in more counterfactuals that may or may not be relevant to OP, I will repeat my very first comment -- OP needs to do their own due diligence, based on their actual circumstances: 

On 3/5/2024 at 9:51 PM, Turtles said:

Obviously don't take on more debt than you can reasonably repay. But in terms of things to cut back on to better position your finances, giving up your post-3L summer would not be my pick.  

If you want to discuss personal finance further (and hopefully not with needless walls of text, or trying so hard to recharacterize what others have said on this forum, or making more dogmatic statements of financial truths regardless of one's particular circumstances), I encourage you to make a separate discussion post and share links to resources, rather than further clutter this thread.

 

[Diplock]

I'm not going to contribute much, but I'll add this observation. Part of the disagreement here is how to put numbers to the OP's statement that things look "pretty bleak." People are trying to assist in good faith but are making very different assumptions about what that means.

Truthfully, even some agreement on what "pretty bleak" means in objective terms doesn't solve the question. Because this is actually one person's subjective view of their financial situation. Some people get stressed and panic easily when taking on even modest amounts of debt. Some people let themselves get one step from the street before realizing they have a problem. Where does the OP really fall in this spectrum? We have no way of knowing unless they choose to clarify. You'd hope the OP falls more in line with "get stressed early" because that's the responsible approach. But opposite assumptions are equally valid.

[WhoKnows]

11 hours ago, ccounsel2024 said:

Informative thread. Can someone tell me more about what happens when PSLOC converts into a term loan? If it turns into a 10 year term loan, can you negotiate rate or will it stay at prime? 

You can always negotiate rate (and depending on your creditworthiness/the amount of business you give the bank, they may or may not budge). 

Conversion usually occurs officially 12 months after articling ends. The PSLOC will at that point no longer be a revolving line. They use the balance at that point to determine a minimum monthly payment that will result in the loan being repaid in 120 months. Interest rate changes will modify the MMP up or down to keep the 10yr term. 

Once a year the MMP is reassessed based on whether you have made additional payments, to keep the 10yr term. 

So for example (fictional numbers, I'm not running the math). Steve has 100,000 on a PSLOC and finishes articling June of 2024. Starting July of 2025 the bank calculates that at current rates Steve's minimum payment on a 10yr term is $1,350 per month and that is due starting that month. In October the Bank of Canada announces a rate hike. Starting in November, Steve's new monthly payment is $1,390, as the increased interest rate means he needs to pay a bit more each month to have the loan paid off at the 10 year mark. 

In February, Steve receives his bonus and makes an additional Payment of $20,000 against the PSLOC. In June, the bank reasseses the loan and determines that because of that lump sum, Steve's new minimum payment is $925/month starting in July, which again reflects the 10 year term. 

Edited March 11 by WhoKnows

[ccounsel2024]

11 hours ago, WhoKnows said:

You can always negotiate rate (and depending on your creditworthiness/the amount of business you give the bank, they may or may not budge). 

Conversion usually occurs officially 12 months after articling ends. The PSLOC will at that point no longer be a revolving line. They use the balance at that point to determine a minimum monthly payment that will result in the loan being repaid in 120 months. Interest rate changes will modify the MMP up or down to keep the 10yr term. 

Once a year the MMP is reassessed based on whether you have made additional payments, to keep the 10yr term. 

So for example (fictional numbers, I'm not running the math). Steve has 100,000 on a PSLOC and finishes articling June of 2024. Starting July of 2025 the bank calculates that at current rates Steve's minimum payment on a 10yr term is $1,350 per month and that is due starting that month. In October the Bank of Canada announces a rate hike. Starting in November, Steve's new monthly payment is $1,390, as the increased interest rate means he needs to pay a bit more each month to have the loan paid off at the 10 year mark. 

In February, Steve receives his bonus and makes an additional Payment of $20,000 against the PSLOC. In June, the bank reasseses the loan and determines that because of that lump sum, Steve's new minimum payment is $925/month starting in July, which again reflects the 10 year term. 

Thank you. From experience (or from those you know), do you know what the "going rate" is when converting (i.e. for a PSLOC the rate is typically at prime). Just wondering what I should expect. 

 

Also, side question - do you know what a typical bonus looks like in the first few years of practice at a corporate, DT Toronto law firm? I know it depends on billables but what could that look like, is 20k reasonable? No idea how bonuses work. Thinking about strategies for repayment now that I'm graduating soon. 

[WhoKnows]

13 hours ago, ccounsel2024 said:

Thank you. From experience (or from those you know), do you know what the "going rate" is when converting (i.e. for a PSLOC the rate is typically at prime). Just wondering what I should expect. 

 

Also, side question - do you know what a typical bonus looks like in the first few years of practice at a corporate, DT Toronto law firm? I know it depends on billables but what could that look like, is 20k reasonable? No idea how bonuses work. Thinking about strategies for repayment now that I'm graduating soon. 

Prime is going rate. 

If the firm you are with is a large national, 20k is a reasonable thought for someone hitting their target, give or take. 

Edited March 12 by WhoKnows

[Lawstudents20202020]

Just gunna pop in here to remind people that the psloc is now a 20 year loan if your balance gets high enough. That does take some of the pressure off in the first couple years of practice, plus it makes financial planning dead easy.

[SNAILS]

I would like to add two things which I think is worth keeping in mind for new graduates with no prior experience paying off large amounts of debt over many years:

1. Do not view your PLOC as a stand alone "monthly bill" without a view to how it factors into your larger financial situation. You might also wish to lease a car which has monthly payments. You might have mortgage payments on your first home or condo. Debt is fairly fluid. For example, if your student load payments leave you short on money, and that causes you to enter into a longer term lease on a car, the way I look at it, your car payments and student loan payments are quite interconnected. If you are going to make a financial plan, consider your projected income and any money you might intend to borrow in the future. 
2. You'll hear terms like "good debt" and "bad debt." Going to law school was probably good debt if are likely to make more money being a lawyer than you spent on your degree. Do not confuse this concept with some notion that it is good to prolong being in student debt if there is any way you can pay it off more quickly.