Student loan payments: get advice and actual numbers here Forum

[chiguy99]

Are the fin hardship calculations really that easy to fall into? I was initially thinking not PAYE for the very reason that I fully anticipate being out of fin hardship in yr 3, 4, 5 ... Def sometime before the yr 20. IF things go as planned, PAYE pmts will exceed an extended plan in just a couple yrs and 10% capitalization is a hard pill to swallow

Depends on the debt level. You go out of financial hardship if the PAYE minimum exceeds the 10 year plan payments. The 10% capitalization isn't much of an issue: capitalization for someone with 200k debt means about an extra 100 bucks a month in interest. It's not like there's some big up front cost you'll incur if you fall out of financial hardship.

Regarding your last post, again it depends on the debt level. Someone starting with 250k in debt needs to make upwards of 400k to be out of financial hardship.

Looking into PAYE and realized why I dismissed it ... First loan is from 2006 ... Ineligible. As I read it, sounds like I'm ineligible completely, as opposed to just my pre-Oct '07 loans

Sorry for steering ship away, just thought the discussion would be helpful to everyone since no one's figures and situations are identical but all could consider what I'm proposing

[A. Nony Mouse]

I think people often use PAYE to refer to PAYE and IBR, which is available to people who have earlier loans. IBR's terms are less favorable but it's the same general idea. And I think as of this December PAYE is also going to be available to all?

[lawschoolgal2563]

Admittedly dumb question here, but I want to make sure I'm not missing something. Just graduated and will be starting big law in the fall. I have undergrad debt that I already took my six-month grace period on between undergrad and law school, but I'd like to avoid making payments on that loan until I start working full-time. When I called my loan servicer about my options, they said going under an IBR plan for this loan until I begin working would be a better route than forbearance since, given my stats, I wouldn't have to pay anything. Is there some catch that I'm missing about being able to switch off from a zero-payment IBR plan while studying for the bar/before starting work? It's a subsidized loan so the interest payments would supposedly be taken care of by the govt while I'm on it. Sorry if this has been answered in another forum that I missed!

[Johann]

Admittedly dumb question here, but I want to make sure I'm not missing something. Just graduated and will be starting big law in the fall. I have undergrad debt that I already took my six-month grace period on between undergrad and law school, but I'd like to avoid making payments on that loan until I start working full-time. When I called my loan servicer about my options, they said going under an IBR plan for this loan until I begin working would be a better route than forbearance since, given my stats, I wouldn't have to pay anything. Is there some catch that I'm missing about being able to switch off from a zero-payment IBR plan while studying for the bar/before starting work? It's a subsidized loan so the interest payments would supposedly be taken care of by the govt while I'm on it. Sorry if this has been answered in another forum that I missed!

This is the smart thing to do. I fit into a sort of unique category like you and hence get to make $0 payments on my debt right now while in biglaw. It's a pretty sweet set up when that aligns.

[AVBucks4239]

Admittedly dumb question here, but I want to make sure I'm not missing something. Just graduated and will be starting big law in the fall. I have undergrad debt that I already took my six-month grace period on between undergrad and law school, but I'd like to avoid making payments on that loan until I start working full-time. When I called my loan servicer about my options, they said going under an IBR plan for this loan until I begin working would be a better route than forbearance since, given my stats, I wouldn't have to pay anything. Is there some catch that I'm missing about being able to switch off from a zero-payment IBR plan while studying for the bar/before starting work? It's a subsidized loan so the interest payments would supposedly be taken care of by the govt while I'm on it. Sorry if this has been answered in another forum that I missed!

This is the right way to go, not only for what Johann mentioned, but also because interest capitalizes while you are in forbearance but only accrues simple interest if you are on a $0 payment IBR plan. Props to the service rep who actually gave you good advice.

[lawschoolgal2563]

Thanks Johann and AVBucks! I really appreciate the help.

[Anonymous User]

Ok, I just did a refi.

Best rate: DRB - 3.5% (5-year fixed); 4.5% (10-year fixed); 2.38% (5-year variable), rates include direct deposit discount
FICO Score: 790-820
Refi amount: ~$50,000
Salary: $100-$150k (1-3 years of experience, inc. clerking)

My sense is that the primary factors in getting a favorable rate are DTI and FICO score. FWIW I was told by several lenders (I put in applications at DRB, common bond, and sofi) that my credit score was in the "best" tier that they considered, and so improvements in my score wouldn't impact my interest rate. Nobody seemed to care about where I went to law school. The offers I got from common bond and sofi were >0.5% worse than DRB, and I was unable to negotiate a better rate with anyone (my DRB 5/10 year fixed rates matched their current best published offer; but, somewhat inexplicably, my 5-year variable rate did not).

I plan on trying to pay as much off as possible in the next five years (which I think is a feasible goal that still allows me to put ~10% of my income into my tax-advantaged retirement plan). I understand that I would likely get a better ROI putting my money elsewhere, but I'd gladly give up a grand or two in lost gains for the peace of mind of paying off my debt quickly. I'm also treating the extra money that I put towards my loans as a low-risk short-term investment; I looked some, and I'm not convinced that I could beat ~4% in guaranteed interest in a private market investment that preserved relatively short-term liquidity (but like I said, even if I could, I'm happy to trade a couple % in interest for the guaranteed interest rate).

[chiguy99]

I think people often use PAYE to refer to PAYE and IBR, which is available to people who have earlier loans. IBR's terms are less favorable but it's the same general idea. And I think as of this December PAYE is also going to be available to all?

Looked it up and you're right ... all loans eligible Dec

[LA Spring]

Is it crazy to continue to pay off loans @6.5% over the next four years? FWIW: At the end of the month I have 4k leftover (after tuition, housing, auto and 401k) to use for everything else.

[Robertalfie]

Your actual student loan interest rate may be different than the rates in these examples and will be based on your credit history, which repayment option you choose and other factors, including your cosigner's (if any) credit history.
The deferment period is an example of the number of months a student is not required to make any payments of principal or interest, unless a student elects, during the application process, to make $25 in-school, fixed payments. It includes the amount of time the student is enrolled in school at least half-time and a grace period. The repayment period is the number of months over which the loan will be repaid.

[Johann]

Is it crazy to continue to pay off loans @6.5% over the next four years? FWIW: At the end of the month I have 4k leftover (after tuition, housing, auto and 401k) to use for everything else.

You might be a good candidate for refi. Need to know salary and debt loads.

[LA Spring]

Is it crazy to continue to pay off loans @6.5% over the next four years? FWIW: At the end of the month I have 4k leftover (after tuition, housing, auto and 401k) to use for everything else.

You might be a good candidate for refi. Need to know salary and debt loads.

Without bonus (on 2000 hours), income is 130k (est. 4-5% more next year), debt load is 110k. Credit approaching 800.
What is the downside of refi?

[Johann]

Is it crazy to continue to pay off loans @6.5% over the next four years? FWIW: At the end of the month I have 4k leftover (after tuition, housing, auto and 401k) to use for everything else.

You might be a good candidate for refi. Need to know salary and debt loads.

Without bonus (on 2000 hours), income is 130k (est. 4-5% more next year), debt load is 110k. Credit approaching 800.
What is the downside of refi?

You lose government repayment leniency by going to a private lender. If you think your job is very secure and you have no plans to go government/nonprofit in the next 5 years, I'd prolly refi. Government loans are nice for PAYE incase you get employment wrecked or PSLF going government. If you are trying to pay loans aggresively, I'd refi.

[Anonymous User]

Ok, I just did a refi.

Best rate: DRB - 3.5% (5-year fixed); 4.5% (10-year fixed); 2.38% (5-year variable), rates include direct deposit discount
FICO Score: 790-820
Refi amount: ~$50,000
Salary: $100-$150k (1-3 years of experience, inc. clerking)

My sense is that the primary factors in getting a favorable rate are DTI and FICO score. FWIW I was told by several lenders (I put in applications at DRB, common bond, and sofi) that my credit score was in the "best" tier that they considered, and so improvements in my score wouldn't impact my interest rate. Nobody seemed to care about where I went to law school. The offers I got from common bond and sofi were >0.5% worse than DRB, and I was unable to negotiate a better rate with anyone (my DRB 5/10 year fixed rates matched their current best published offer; but, somewhat inexplicably, my 5-year variable rate did not).

I plan on trying to pay as much off as possible in the next five years (which I think is a feasible goal that still allows me to put ~10% of my income into my tax-advantaged retirement plan). I understand that I would likely get a better ROI putting my money elsewhere, but I'd gladly give up a grand or two in lost gains for the peace of mind of paying off my debt quickly. I'm also treating the extra money that I put towards my loans as a low-risk short-term investment; I looked some, and I'm not convinced that I could beat ~4% in guaranteed interest in a private market investment that preserved relatively short-term liquidity (but like I said, even if I could, I'm happy to trade a couple % in interest for the guaranteed interest rate).

Adding another DRB data point:

I just graduated and began the DRB process end of March using my offer letter and school documents.

Rates below reflect the discount for auto-debit.
Variable rates: 2.48% (5YR); 2.66% (10YR); 3.01% (15YR); 3.23% (20YR)
Fixed rates: 3.5% (5YR); 4.5% (10YR); 5.0% (15YR); 5.25% (20YR)
FICO: 780-799
Refi amount: $144,000
Salary: $173k - $185k

Doing the refi before starting work/before graduating (which I think only DRB allows) will save me about $3,000 in interest during the grace period. As anon mentioned above, I think DTI is the biggest factor in determining your rate (especially for the super-low variable rates).

(Edit: changed the fixed rates to include auto-debit discount)

[Anonymous User]

I'm totally illiterate when it comes to finances, so I was wondering if you guys could give me some advice. My numbers are:

Debt: $180k at an average interest rate between 7.0% and 7.5%
Salary: $110k (not PSLF eligible)
Expected PAYE monthly payment: $700-800
Expected 10 yr payment: $2,100
Family status: Single, no major financial responsibilities

Is it crazy to stay on PAYE? Or should I immediately begin the 10 yr repayment plan? Another relevant factor is that I already have 2 years of PSLF work under my belt, and I plan to go to government at some indeterminate point in my career. I'm strongly leaning toward riding PAYE for a while, but I just wanted to confirm that this isn't a bad idea.

[chiguy99]

Debt: 164k
Salary: 50k w/ potential for much more but no guarantee (non-legal gig with payoff coming in yr3 and beyond (hopefully))

Correct me if I'm wrong, but doesn't it make most sense (not just for me but for most ppl) to take on a 25 yr plan (level or graduated) with super low monthly payments then apply extra directly to the Grad PLUS loans to eliminate those ASAP? This way you just knock off the top interest loans one-by-one instead of spreading one lump sum payment evenly across all your loans with varying interest rates.

I just cant seem to see why this wouldn't be more effective, but have some reservations for some reason. Thoughts?

Are there any back-end issues with paying off your loans early under PAYE/IBR? That is not relying on forgiveness at all but applying PAYE/IBR pmt + extra for high int loans. Just capitalization once out of fin hardship?

I'm now thinking taking the ext. fixed pmt ($1212) will likely make most sense. Sure, while I'm making $50k I am losing out on extra money to throw at high int. loans, but once I achieve a salary of about $85k, the IBR pmt exceeds $1212 plus I dont have to worry about capitalization (not at 85K) or going in and out of fin hardship given I'm entering a 100% commission job. Thoughts?

[Johann]

Debt: 164k
Salary: 50k w/ potential for much more but no guarantee (non-legal gig with payoff coming in yr3 and beyond (hopefully))

Correct me if I'm wrong, but doesn't it make most sense (not just for me but for most ppl) to take on a 25 yr plan (level or graduated) with super low monthly payments then apply extra directly to the Grad PLUS loans to eliminate those ASAP? This way you just knock off the top interest loans one-by-one instead of spreading one lump sum payment evenly across all your loans with varying interest rates.

I just cant seem to see why this wouldn't be more effective, but have some reservations for some reason. Thoughts?

Are there any back-end issues with paying off your loans early under PAYE/IBR? That is not relying on forgiveness at all but applying PAYE/IBR pmt + extra for high int loans. Just capitalization once out of fin hardship?

I'm now thinking taking the ext. fixed pmt ($1212) will likely make most sense. Sure, while I'm making $50k I am losing out on extra money to throw at high int. loans, but once I achieve a salary of about $85k, the IBR pmt exceeds $1212 plus I dont have to worry about capitalization (not at 85K) or going in and out of fin hardship given I'm entering a 100% commission job. Thoughts?

Just switch to fixed payments once you start making 85k and PAYE now.

[Johann]

I'm totally illiterate when it comes to finances, so I was wondering if you guys could give me some advice. My numbers are:

Debt: $180k at an average interest rate between 7.0% and 7.5%
Salary: $110k (not PSLF eligible)
Expected PAYE monthly payment: $700-800
Expected 10 yr payment: $2,100
Family status: Single, no major financial responsibilities

Is it crazy to stay on PAYE? Or should I immediately begin the 10 yr repayment plan? Another relevant factor is that I already have 2 years of PSLF work under my belt, and I plan to go to government at some indeterminate point in my career. I'm strongly leaning toward riding PAYE for a while, but I just wanted to confirm that this isn't a bad idea.

I'd PAYE. You are 20% of the way to forgiveness. You might return that side.

[chiguy99]

Debt: 164k
Salary: 50k w/ potential for much more but no guarantee (non-legal gig with payoff coming in yr3 and beyond (hopefully))

Correct me if I'm wrong, but doesn't it make most sense (not just for me but for most ppl) to take on a 25 yr plan (level or graduated) with super low monthly payments then apply extra directly to the Grad PLUS loans to eliminate those ASAP? This way you just knock off the top interest loans one-by-one instead of spreading one lump sum payment evenly across all your loans with varying interest rates.

I just cant seem to see why this wouldn't be more effective, but have some reservations for some reason. Thoughts?

Are there any back-end issues with paying off your loans early under PAYE/IBR? That is not relying on forgiveness at all but applying PAYE/IBR pmt + extra for high int loans. Just capitalization once out of fin hardship?

I'm now thinking taking the ext. fixed pmt ($1212) will likely make most sense. Sure, while I'm making $50k I am losing out on extra money to throw at high int. loans, but once I achieve a salary of about $85k, the IBR pmt exceeds $1212 plus I dont have to worry about capitalization (not at 85K) or going in and out of fin hardship given I'm entering a 100% commission job. Thoughts?

Just switch to fixed payments once you start making 85k and PAYE now.

Can only switch to standard 10yr plan from PAYE = $2105 pmt

[Johann]

i dont think thats true.

[Anonymous User]

I have around 50k in loans at ~5% and 90k savings (half of that in 401k). Worth it to pay off all my loans with my cash savings that are NOT in 401k or to invest my cash savings? I'd prefer to have some money saved up for emergency purposes, but in the long term paying off loans might be best since I'm not sure I can get that kind of return in the market. if anyone knows what I should invest in that will get me more than ~5%, I'd appreciate hearing it.

[Anonymous User]

If starting mid month and if my firm pays monthly - will my first paycheck be prorated or for a full month?

[Anastasia Dee Dualla]

If starting mid month and if my firm pays monthly - will my first paycheck be prorated or for a full month?

You likely won't get paid until month two and then you will receive one full month's pay with the remainder pro-rated.

[Johann]

I have around 50k in loans at ~5% and 90k savings (half of that in 401k). Worth it to pay off all my loans with my cash savings that are NOT in 401k or to invest my cash savings? I'd prefer to have some money saved up for emergency purposes, but in the long term paying off loans might be best since I'm not sure I can get that kind of return in the market. if anyone knows what I should invest in that will get me more than ~5%, I'd appreciate hearing it.

You should refi the loans for al ow 3%ish rate and then keep your money in the SPY, which has historically exceeded 8% annually on average over the last 50 years.

[Anonymous User]

Sorry if I overlooked this info somewhere. Quick question regarding Dec. 2015 expansion of PAYE:

I am currently ineligible for PAYE because of loans I took out before 2007 in undergrad. I am married, and my wife and I file separately so that her income won't affect my repayment amount and vice versa. I know a lot of new policy proposals (like REPAYE) propose counting spousal income (even if you file separately) for purposes of calculating repayment amount. If PAYE is expanded in December so that old borrowers like me can take advantage of it, will they count my wife's income too in calculating my repayment amounts even if we file separately?

Thanks in advance. This thread is awesome as are all of you.