Help beach figure out how to pay off his loans fast

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
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beach_terror
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Help beach figure out how to pay off his loans fast

Postby beach_terror » Wed Apr 17, 2013 11:05 pm

In short - I have a job paying me 105-115k starting and I'll have ~170k in loans from UG/LS at graduation. I'm moving back home after graduation for awhile (5-12 months) and want to pay off my loans as fast as possible. Is there anything I can other than just pay it off via fedloans as fast as the money comes in? Figuring on a monthly basis, I'll have 5-5.5k to pay off my loans, with 500/750 to savings and the rest spending. Not contributing to my 401k until I'm eligible for matching at my firm (which is a year after you start).

Is this the smartest way to pay down my loans? I really know nothing about finances. I still don't have a credit card.

ETA: not in biglaw, assume good/great job security
Last edited by beach_terror on Wed Apr 17, 2013 11:14 pm, edited 1 time in total.

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bizzybone1313
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Re: Help beach figure out how to pay off his loans fast

Postby bizzybone1313 » Wed Apr 17, 2013 11:12 pm

In 2009, when the market crashed, it was a great time to invest. Right now? It is probably one of the worst times to invest. The market has gone up way too much. I would start attacking the debt with huge chunks of my money. Your return would be pretty good because interest rates on the loans are so high. If you must invest (I would only do about 10-20% of one's salary at this point in time), I would buy almost strictly into Europe via ETF's. Europe has some very high quality companies that are underpriced right now. Stay away from financial companies though. U.S. companies have gone way too much in value. Avoid buying a BMW or otherwise blowing your money in depreciating assets for like 2-3 years. At your current salary, I would say you could pay at least $100,000 off your loans in about 3 years. I saved a shit load of money by working 3 1/2 years at a $60K salary. Don't go blow your money on dumb things and you will do well.

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soccerfreak
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Re: Help beach figure out how to pay off his loans fast

Postby soccerfreak » Wed Apr 17, 2013 11:14 pm

Tagging. I know nothing about finances.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Wed Apr 17, 2013 11:16 pm

This might be stupid, but can I approach a bank about buying/paying off the loan and pay them a reduced interest rate with some sort of accelerated repayment rate (5 years)?

rad lulz
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Re: Help beach figure out how to pay off his loans fast

Postby rad lulz » Wed Apr 17, 2013 11:22 pm

beach_terror wrote:I'm moving back home after graduation for awhile (5-12 months)

Same bro

No shame

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Wed Apr 17, 2013 11:43 pm

rad lulz wrote:
beach_terror wrote:I'm moving back home after graduation for awhile (5-12 months)

Same bro

No shame

If I can just soundproof my room, I'd be set for a few years. Probably won't happen though.

rad lulz
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Re: Help beach figure out how to pay off his loans fast

Postby rad lulz » Wed Apr 17, 2013 11:44 pm

,
Last edited by rad lulz on Tue Oct 04, 2016 11:28 pm, edited 1 time in total.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Thu Apr 18, 2013 12:21 pm

Still seeking advice

UndecidedMN
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Re: Help beach figure out how to pay off his loans fast

Postby UndecidedMN » Thu Apr 18, 2013 12:28 pm

Best bet now is to do just what you said, just pay as much as you can every month. You really cannot take out personal loans these days from banks. Even if you did, it would be tied to Prime and then it would be the same interest rate anyway. Getting a loan elsewhere with a shorter amortization schedule is a bad idea. It locks you into high payments and can hurt you if you can't make the higher payment. Just take the fed loans and pay as much as you can every month. You always then have the safety net of a lower payment. Also Federal loans are much more forgiving if you can't pay one month. That is the safe bet.

paul554
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Re: Help beach figure out how to pay off his loans fast

Postby paul554 » Thu Apr 18, 2013 2:07 pm

Pay the loans with as much as you willing to throw at it BUT also start dumping into that 401(k) even if it's not being matched. The loan will save you some money since it's getting paid off quicker but really if you can pay if off in less then 5 years while maxing 401(K), I'd recommend that. Your loan won't be compounding in 20 years but that 401(k) will be and it is never to soon to start saving for retirement.

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Mroberts3
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Re: Help beach figure out how to pay off his loans fast

Postby Mroberts3 » Thu Apr 18, 2013 2:16 pm

I do know some things about personal finance, but I don't pretend to be an expert.

Even living at home and having good job security you should still work on building an emergency fund of 6-12 months of living expenses. If you know you could stay at home then this can be less to account for the lack of rent payment. Remember, few people saw 2008 coming. While it is good to pay off loans ASAP, you don't want to be stuck with 120k in loans with 0 savings should the worst case scenario happen.

That said, I agree with paying down loans with nothing into the 401(k) until matching kicks in. Paying down loans is like a guaranteed 6.8% return on investment because you are saving interest. That is as good/better than you can expect from the market but without the risk. (e.g. $1,000 to loans saves you more in interest than $1,000 will probably make you in the market). Once matching kicks in, however, that is free money, so take it. It's true the 401(k) will compound, but you aren't losing out on much waiting a year for matching to kick in.

I would set 1k aside for savings (maybe even 2k for the first 2-3 months to start), use what you need for living, and the rest to the loans.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Thu Apr 18, 2013 2:49 pm

I plan on making smallish contributions to a savings account during all of this. Yearly bonuses will be in the 10k-20k range, but I won't be eligible until next year since they're issued via calendar year. My average monthly income will be 6-6.8k. I'm figuring that'll break down as:

-$5,000 to $5,500 in loan repayment
-$500 to $750 in savings
-remainder in spending money

My biggest concern is killing off the absurd interest rates on some of the loans as fast as possible. I have enough income to live comfortably on a 10 year repayment plan, but I don't see why I should pay an extra shit ton of interest if I can avoid it. I'd also like to be able to buy a starter house in 10 years if I want.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Thu Apr 18, 2013 5:00 pm

Anyone know anything about SmarterBucks?

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Tekrul
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Re: Help beach figure out how to pay off his loans fast

Postby Tekrul » Thu Apr 18, 2013 5:43 pm

Build a time machine, go back one week, short the gold and commodity stock.

Then bet on the volatility index.

Sip piña coladas from your orbiting space home.

tigyrgrl
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Re: Help beach figure out how to pay off his loans fast

Postby tigyrgrl » Sat Apr 20, 2013 4:24 pm

I second the idea of having anywhere from 6-12 months of savings squirreled away (even if all you need is payments on loans for that time period.) Also if you are paying on your loans, you will want to specify for additional principal only. Otherwise extra payments will be credited against you future payments.

Ex:

Total Loan 1000
Needed Payment 100 for May
Actual Payment 200 for May

That additional 100 is going to be credited against June unless you specify that you want it applied directly to principal.

This can make the interest difficult to predict, and can cost additional money in interest later.

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bizzybone1313
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Re: Help beach figure out how to pay off his loans fast

Postby bizzybone1313 » Sat Apr 20, 2013 4:32 pm

Tekrul wrote:Build a time machine, go back one week, short the gold and commodity stock.

Then bet on the volatility index.

Sip piña coladas from your orbiting space home.


I am shorting gold right now. DZZ. I knew gold was gonna crash. I have owned it for like a year.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Mon Apr 22, 2013 1:01 am

tigyrgrl wrote:I second the idea of having anywhere from 6-12 months of savings squirreled away (even if all you need is payments on loans for that time period.) Also if you are paying on your loans, you will want to specify for additional principal only. Otherwise extra payments will be credited against you future payments.

Ex:

Total Loan 1000
Needed Payment 100 for May
Actual Payment 200 for May

That additional 100 is going to be credited against June unless you specify that you want it applied directly to principal.

This can make the interest difficult to predict, and can cost additional money in interest later.

TLDR of this is pay minimum on interest and apply the rest to the principal, right?

indo
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Re: Help beach figure out how to pay off his loans fast

Postby indo » Mon Apr 22, 2013 1:36 am

beach_terror wrote:In short - I have a job paying me 105-115k starting and I'll have ~170k in loans from UG/LS at graduation. I'm moving back home after graduation for awhile (5-12 months) and want to pay off my loans as fast as possible. Is there anything I can other than just pay it off via fedloans as fast as the money comes in? Figuring on a monthly basis, I'll have 5-5.5k to pay off my loans, with 500/750 to savings and the rest spending. Not contributing to my 401k until I'm eligible for matching at my firm (which is a year after you start).

Is this the smartest way to pay down my loans? I really know nothing about finances. I still don't have a credit card.

ETA: not in biglaw, assume good/great job security

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magp90
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Re: Help beach figure out how to pay off his loans fast

Postby magp90 » Mon Apr 22, 2013 3:48 pm

If you can, I would recommend trying to pay off the interest that had accrued after each year. This seriously reduces the amount you wind up paying overall, and your monthly payments will be slightly less. It obviously depends on what your financial situation is after any given year or after graduation, though. As for trying to pay them off faster than the bills come in... if you're staying at home, I would just suggest flinging as much money at the loans as possible, so that you minimize compounding interest and you have less to pay off when you're out on your own.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Mon Apr 22, 2013 3:50 pm

magp90 wrote:If you can, I would recommend trying to pay off the interest that had accrued after each year. This seriously reduces the amount you wind up paying overall, and your monthly payments will be slightly less. It obviously depends on what your financial situation is after any given year or after graduation, though. As for trying to pay them off faster than the bills come in... if you're staying at home, I would just suggest flinging as much money at the loans as possible, so that you minimize compounding interest and you have less to pay off when you're out on your own.

How is paying off the interest better than paying off the principal (after paying the minimum on the interest)? I genuinely don't know. Explain it to me like I'm 5.

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guano
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Re: Help beach figure out how to pay off his loans fast

Postby guano » Mon Apr 22, 2013 3:57 pm

beach_terror wrote:
magp90 wrote:If you can, I would recommend trying to pay off the interest that had accrued after each year. This seriously reduces the amount you wind up paying overall, and your monthly payments will be slightly less. It obviously depends on what your financial situation is after any given year or after graduation, though. As for trying to pay them off faster than the bills come in... if you're staying at home, I would just suggest flinging as much money at the loans as possible, so that you minimize compounding interest and you have less to pay off when you're out on your own.

How is paying off the interest better than paying off the principal (after paying the minimum on the interest)? I genuinely don't know. Explain it to me like I'm 5.

Ignore that post. Have you consolidated?
If not, figure out the highest interest rate loan*. Pay minimum payments on all other loans, then max out repayment of that loan, paying down as much principal as you can, as fast as you can.
Once that loan is paid off, take the next highest interest loan, and max out payments there. Keep going until you're debt free.
*probably a tie among your Gradplus loans. Pick the one with the lowest balance

The advantage here is, if something happens where you can no longer max out repayments, your minimum monthly will have been reduced.


BTW I am a finance professional

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magp90
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Re: Help beach figure out how to pay off his loans fast

Postby magp90 » Mon Apr 22, 2013 4:05 pm

beach_terror wrote:
magp90 wrote:If you can, I would recommend trying to pay off the interest that had accrued after each year. This seriously reduces the amount you wind up paying overall, and your monthly payments will be slightly less. It obviously depends on what your financial situation is after any given year or after graduation, though. As for trying to pay them off faster than the bills come in... if you're staying at home, I would just suggest flinging as much money at the loans as possible, so that you minimize compounding interest and you have less to pay off when you're out on your own.

How is paying off the interest better than paying off the principal (after paying the minimum on the interest)? I genuinely don't know. Explain it to me like I'm 5.


I'm mostly talking about paying off the interest after each year of law school. That would prevent the loan from getting to be as big as it really could be. You'll still have the same issues paying back the loans after graduation. It's not really a long-term solution, but it does cut down how much you wind up paying in total by the time you're finished paying the whole thing back. Just a thought.

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beach_terror
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Re: Help beach figure out how to pay off his loans fast

Postby beach_terror » Mon Apr 22, 2013 4:09 pm

guano wrote:
beach_terror wrote:
magp90 wrote:If you can, I would recommend trying to pay off the interest that had accrued after each year. This seriously reduces the amount you wind up paying overall, and your monthly payments will be slightly less. It obviously depends on what your financial situation is after any given year or after graduation, though. As for trying to pay them off faster than the bills come in... if you're staying at home, I would just suggest flinging as much money at the loans as possible, so that you minimize compounding interest and you have less to pay off when you're out on your own.

How is paying off the interest better than paying off the principal (after paying the minimum on the interest)? I genuinely don't know. Explain it to me like I'm 5.

Ignore that post. Have you consolidated?
If not, figure out the highest interest rate loan*. Pay minimum payments on all other loans, then max out repayment of that loan, paying down as much principal as you can, as fast as you can.
Once that loan is paid off, take the next highest interest loan, and max out payments there. Keep going until you're debt free.
*probably a tie among your Gradplus loans. Pick the one with the lowest balance

The advantage here is, if something happens where you can no longer max out repayments, your minimum monthly will have been reduced.


BTW I am a finance professional

I have not - can I do that through whatever company owns my loans? Should I do it?

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guano
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Re: Help beach figure out how to pay off his loans fast

Postby guano » Mon Apr 22, 2013 4:09 pm

magp90 wrote:
beach_terror wrote:
magp90 wrote:If you can, I would recommend trying to pay off the interest that had accrued after each year. This seriously reduces the amount you wind up paying overall, and your monthly payments will be slightly less. It obviously depends on what your financial situation is after any given year or after graduation, though. As for trying to pay them off faster than the bills come in... if you're staying at home, I would just suggest flinging as much money at the loans as possible, so that you minimize compounding interest and you have less to pay off when you're out on your own.

How is paying off the interest better than paying off the principal (after paying the minimum on the interest)? I genuinely don't know. Explain it to me like I'm 5.


I'm mostly talking about paying off the interest after each year of law school. That would prevent the loan from getting to be as big as it really could be. You'll still have the same issues paying back the loans after graduation. It's not really a long-term solution, but it does cut down how much you wind up paying in total by the time you're finished paying the whole thing back. Just a thought.

:?: :arrow: :idea:
Now explain it to me like you would to a professional

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guano
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Re: Help beach figure out how to pay off his loans fast

Postby guano » Mon Apr 22, 2013 4:11 pm

beach_terror wrote:I have not - can I do that through whatever company owns my loans? Should I do it?

The advantage to consolidating is that you get a slight interest rate reduction
The disadvantage is that you can't personalize your repayment terms (as I described above)
If you currently plan on paying down aggressively, but might pay less per month in the future, I'd recommend not consolidating, as it removes any flexibility.




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