Student loan payments: get advice and actual numbers here

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beach_terror

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Re: Student loan payments: Actual numbers

Postby beach_terror » Tue Jan 09, 2018 3:19 pm

beach_terror wrote:Debt: 175k
Payments: 1k minimum (lowest available), additional 3-3.5k/mo for now to the highest interest loan, pay it off, rinse and repeat
Income: over $100k
Plan: 25 year fixed (hope to be done in 4-5 years)
Note: living at home to knock off as much principal as possible until after New Years

Also hit positive net worth this year. Loans under 40k right now. Quoted post is from Nov. 2013. Hope to be done with my loans by the end of 2018.

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Re: Student loan payments: Actual numbers

Postby bk1 » Tue Jan 09, 2018 3:44 pm

beach_terror wrote:
beach_terror wrote:Debt: 175k
Payments: 1k minimum (lowest available), additional 3-3.5k/mo for now to the highest interest loan, pay it off, rinse and repeat
Income: over $100k
Plan: 25 year fixed (hope to be done in 4-5 years)
Note: living at home to knock off as much principal as possible until after New Years

Also hit positive net worth this year. Loans under 40k right now. Quoted post is from Nov. 2013. Hope to be done with my loans by the end of 2018.

Congrats!!!

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Tue Jan 09, 2018 3:59 pm

Would love some advice on the best way to pay off my loans when I graduate.

Debt at graduation in 2018: $80k
Interest rates: Ranging from ~5%-6%
Income: $180k (biglaw)
Savings: None
Other info: no credit card debt, living in NYC


I'm very grateful that I don't have a lot of debt and that I have a good job to make the payments, but my situation gets a little tricky because of my future plans. Long story short, I doubt that I'll be a lawyer for a long time. I certainly won't be in biglaw. I don't plan on being in biglaw for more than 3 years and its very likely that I'll be transitioning into a non-law job that pays VERY little (probably below 30k). Considering these things, I'm wondering if it makes more sense to aggressively pay off loans (25-30k a year) or save more and pay off the loans on an extended timeline. Im obviously very clueless on these matters, but I'm open to suggestions. Any advice on how I should attack this would be greatly appreciated!

Thanks!

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Re: Student loan payments: get advice and actual numbers here

Postby Danger Zone » Tue Jan 09, 2018 4:04 pm

Anonymous User wrote:Would love some advice on the best way to pay off my loans when I graduate.

Debt at graduation in 2018: $80k
Interest rates: Ranging from ~5%-6%
Income: $180k (biglaw)
Savings: None
Other info: no credit card debt, living in NYC


I'm very grateful that I don't have a lot of debt and that I have a good job to make the payments, but my situation gets a little tricky because of my future plans. Long story short, I doubt that I'll be a lawyer for a long time. I certainly won't be in biglaw. I don't plan on being in biglaw for more than 3 years and its very likely that I'll be transitioning into a non-law job that pays VERY little (probably below 30k). Considering these things, I'm wondering if it makes more sense to aggressively pay off loans (25-30k a year) or save more and pay off the loans on an extended timeline. Im obviously very clueless on these matters, but I'm open to suggestions. Any advice on how I should attack this would be greatly appreciated!

Thanks!

If you already know biglaw isn't the career for you, I'd try to bank as much as possible (and thus pay as little towards loans as possible)
Last edited by Danger Zone on Sat Jan 27, 2018 2:25 pm, edited 1 time in total.

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SmokeytheBear

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Re: Student loan payments: get advice and actual numbers here

Postby SmokeytheBear » Tue Jan 09, 2018 4:12 pm

Anonymous User wrote:Would love some advice on the best way to pay off my loans when I graduate.

Debt at graduation in 2018: $80k
Interest rates: Ranging from ~5%-6%
Income: $180k (biglaw)
Savings: None
Other info: no credit card debt, living in NYC


I'm very grateful that I don't have a lot of debt and that I have a good job to make the payments, but my situation gets a little tricky because of my future plans. Long story short, I doubt that I'll be a lawyer for a long time. I certainly won't be in biglaw. I don't plan on being in biglaw for more than 3 years and its very likely that I'll be transitioning into a non-law job that pays VERY little (probably below 30k). Considering these things, I'm wondering if it makes more sense to aggressively pay off loans (25-30k a year) or save more and pay off the loans on an extended timeline. Im obviously very clueless on these matters, but I'm open to suggestions. Any advice on how I should attack this would be greatly appreciated!

Thanks!


FRB MAFIA.

1. Take advantage of being in NYC, working in big law, and having just enough debt; refinance with First Republic Bank. Not sure what the deal will be when you graduate, but now you can refinance on a 5 year term at 1.95%. If you repay your balance in full within 48 months, they will refund you up to 2% of the original loan balance.

2. Figure out what your monthly budget is (rent, food, minimum loan payments, etc).

3. Start building up an emergency fund of at least three months of your expenses. Figure out what your monthly expenses are (see 2 above), pay minimum on your loans after you have refinanced, and then stash away all excess cash into your emergency fund until you've hit your goal of having three-ish months of emergency funds saved.

4. Pay off your loans as fast as possible. You can do this two ways.
4a. Just pay all excess income to FRB after you've covered your monthly expenses and minimum loan payments.
4b. Pay minimum payments each month and divert all excess income to a savings account. Create a spreadsheet (I can provide you a link to a good google doc) that projects payments on loans. Figure out what your potential rebate from FRB would be if you pay off early. Then look at the the spreadsheet and figure out, assuming you pay minimum monthly payments each month, which payment you will have paid interest equal to the rebate from FRB. Once you've hit that day, make a balloon payment from your savings account with the money you've been stashing. If you stash it in a good no-penalty CD (like discussed above) you can make a little extra cheddar for your trouble.

Obviously come hit up one of the FRB mafia for a FRB referral. You get $200 bonus, we get $300.

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Re: Student loan payments: get advice and actual numbers here

Postby Danger Zone » Tue Jan 09, 2018 5:03 pm

I'm not positive refi and aggressively pay down is the right answer for this anon, but I'm always happy to offer my FRB referral haha. Really it's up to you OP, what you feel most comfortable with. With that level of debt, you will definitely have to pay it all off, just a matter of now or later.
Last edited by Danger Zone on Sat Jan 27, 2018 2:25 pm, edited 1 time in total.

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Tue Jan 09, 2018 5:32 pm

It all depends. If, three years from now, you're making $25k and trying to support a family, well, that's pretty different than if you're married and your SO is making $100k. Also, it's highly relevant what your expected COL will be in three years. Are you trying to figure out how to make this (moving to a <$30k job in ~3 years) work in NYC or in rural Arkansas? And do you anticipate wanting to buy a house anytime soon? Nobody here can give you good advice re balancing your debt and your liquidity without knowing more about your circumstances. Finally, I assume you're not at Yale and therefore likely won't get any income-based repayment assistance from your law school (what are the gov programs like? Isn't there a gov program that doesn't require you stay in law)?

To the poster: regardless of the above, it certainly wouldn't hurt for you to be far less in debt and/or have built up significant savings three years from now. How you want to prioritize paying off your debt vs building savings is probably less important than living frugally now and stashing as much of that biglaw income away as you possibly can. We can all give you better advice about how much or how aggressively you want to refinance, but at your level of debt, the difference between the best reasonable and worst reasonable outcome is likely just a couple thousand dollars. On the other hand, with some savvy NYC planning (and a willingness to cut back), you can save that in 1-2 months by packing/cooking most of your meals, living in a more affordable area, etc.

tl;dr: give us more info for better debt planning advice. But the difference between the best and the worst debt planning advice is going to be far smaller (potentially by a factor of ten or more) than the COL differences between various living situations you might reasonably consider.

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Re: Student loan payments: get advice and actual numbers here

Postby bk1 » Tue Jan 09, 2018 6:17 pm

Danger Zone wrote:I'm not positive refi and aggressively pay down is the right answer for this anon, but I'm always happy to offer my FRB referral haha. Really it's up to you OP, what you feel most comfortable with. With that level of debt, you will definitely have to pay it all off, just a matter of now or later.

I think getting rid of loans ASAP is the more obvious call. What's the point of the banked money? Is it to get better EV than just paying down the loans? It can't really be to pay for something since OP will have to live off of the sub-30k salary. Since OP will be living off that low salary, I think getting OP's financials as streamlined as possible before it makes the most sense. I would get an e-fund set up and get debt-free. With savings beyond that, I would max retirement accounts since OP won't be able to save that much on the sub-30k salary. If there's more savings after that, maybe save for a down payment, or maybe spend the money on stuff OP enjoys (since it appears that OP won't enjoy being a biglawyer).

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Tue Jan 09, 2018 7:02 pm

bk1 wrote:
Danger Zone wrote:I'm not positive refi and aggressively pay down is the right answer for this anon, but I'm always happy to offer my FRB referral haha. Really it's up to you OP, what you feel most comfortable with. With that level of debt, you will definitely have to pay it all off, just a matter of now or later.

I think getting rid of loans ASAP is the more obvious call. What's the point of the banked money? Is it to get better EV than just paying down the loans? It can't really be to pay for something since OP will have to live off of the sub-30k salary. Since OP will be living off that low salary, I think getting OP's financials as streamlined as possible before it makes the most sense. I would get an e-fund set up and get debt-free. With savings beyond that, I would max retirement accounts since OP won't be able to save that much on the sub-30k salary. If there's more savings after that, maybe save for a down payment, or maybe spend the money on stuff OP enjoys (since it appears that OP won't enjoy being a biglawyer).


Having some sort of liquidity safety net gets more important, not less, as your salary--and therefore margin for error--decreases. How much more important it is for the OP is going to be based on a lot of info that (s)he has yet to provide (family support, family obligations, area COL, etc).

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Re: Student loan payments: get advice and actual numbers here

Postby Hikikomorist » Tue Jan 09, 2018 7:07 pm

bk1 wrote:
Danger Zone wrote:I'm not positive refi and aggressively pay down is the right answer for this anon, but I'm always happy to offer my FRB referral haha. Really it's up to you OP, what you feel most comfortable with. With that level of debt, you will definitely have to pay it all off, just a matter of now or later.

I think getting rid of loans ASAP is the more obvious call. What's the point of the banked money? Is it to get better EV than just paying down the loans? It can't really be to pay for something since OP will have to live off of the sub-30k salary. Since OP will be living off that low salary, I think getting OP's financials as streamlined as possible before it makes the most sense. I would get an e-fund set up and get debt-free. With savings beyond that, I would max retirement accounts since OP won't be able to save that much on the sub-30k salary. If there's more savings after that, maybe save for a down payment, or maybe spend the money on stuff OP enjoys (since it appears that OP won't enjoy being a biglawyer).

Why? After refinancing, s/he'll have an amazingly low interest rate. That's something anyone should want to keep for as long as possible (at least the four years). Streamlining seems kind of silly as a justification, as I hope any job paying $30k/year leaves a decent amount of spare time.

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Re: Student loan payments: get advice and actual numbers here

Postby bk1 » Tue Jan 09, 2018 7:11 pm

Anonymous User wrote:
bk1 wrote:
Danger Zone wrote:I'm not positive refi and aggressively pay down is the right answer for this anon, but I'm always happy to offer my FRB referral haha. Really it's up to you OP, what you feel most comfortable with. With that level of debt, you will definitely have to pay it all off, just a matter of now or later.

I think getting rid of loans ASAP is the more obvious call. What's the point of the banked money? Is it to get better EV than just paying down the loans? It can't really be to pay for something since OP will have to live off of the sub-30k salary. Since OP will be living off that low salary, I think getting OP's financials as streamlined as possible before it makes the most sense. I would get an e-fund set up and get debt-free. With savings beyond that, I would max retirement accounts since OP won't be able to save that much on the sub-30k salary. If there's more savings after that, maybe save for a down payment, or maybe spend the money on stuff OP enjoys (since it appears that OP won't enjoy being a biglawyer).


Having some sort of liquidity safety net gets more important, not less, as your salary--and therefore margin for error--decreases. How much more important it is for the OP is going to be based on a lot of info that (s)he has yet to provide (family support, family obligations, area COL, etc).

That's the point of setting up the e-fund. OP has small enough debt that I don't think it's an either or. And I think that having one less obligation is more valuable than having the even larger e-fund.

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Re: Student loan payments: get advice and actual numbers here

Postby Danger Zone » Tue Jan 09, 2018 7:14 pm

Neither route is a bad call with the info we currently have from OP
Last edited by Danger Zone on Sat Jan 27, 2018 2:25 pm, edited 1 time in total.

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Re: Student loan payments: get advice and actual numbers here

Postby bk1 » Tue Jan 09, 2018 9:39 pm

Danger Zone wrote:Neither route is a bad call with the info we currently have from OP

Agreed.

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Wed Jan 10, 2018 1:09 am

I am above-mentioned OP. Thank you guys for the great advice. Its very helpful, and I'm very appreciative. Sorry I should have been a little more specific about the post-law facts. I'm not entirely certain if I'll be living in NYC but that would be the goal. Also, not really planning on purchasing a house anytime in the near future. My biggest concern revolves around having the debt hang over my head. If by year three of biglaw Ive been more modest with my loan repayment and still have ~25k debt remaining, would it be possible to just slow down the repayment by a lot? Im not entirely sure about the specifics regarding refinancing, but I imagine I wouldn't be able to meet the 5 year repayment plan at that point with a very low salary. But, conceivably, I would still be able to make some kind of payment toward it.

Another possibility, which my parents have mentioned in passing, is them taking a home equity line of credit and paying off my loans in full, and then me paying them back. Neither I, nor my parents are really super familiar with this route, so for all I know its a horrible idea. But it seems that the interest rate is way lower on this line of credit and obviously paying my parents back would be far more manageable.

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Wed Jan 10, 2018 2:06 am

bk1 wrote:
Anonymous User wrote:
bk1 wrote:
Danger Zone wrote:I'm not positive refi and aggressively pay down is the right answer for this anon, but I'm always happy to offer my FRB referral haha. Really it's up to you OP, what you feel most comfortable with. With that level of debt, you will definitely have to pay it all off, just a matter of now or later.

I think getting rid of loans ASAP is the more obvious call. What's the point of the banked money? Is it to get better EV than just paying down the loans? It can't really be to pay for something since OP will have to live off of the sub-30k salary. Since OP will be living off that low salary, I think getting OP's financials as streamlined as possible before it makes the most sense. I would get an e-fund set up and get debt-free. With savings beyond that, I would max retirement accounts since OP won't be able to save that much on the sub-30k salary. If there's more savings after that, maybe save for a down payment, or maybe spend the money on stuff OP enjoys (since it appears that OP won't enjoy being a biglawyer).


Having some sort of liquidity safety net gets more important, not less, as your salary--and therefore margin for error--decreases. How much more important it is for the OP is going to be based on a lot of info that (s)he has yet to provide (family support, family obligations, area COL, etc).

That's the point of setting up the e-fund. OP has small enough debt that I don't think it's an either or. And I think that having one less obligation is more valuable than having the even larger e-fund.


Not necessarily -- it entirely depends on the OP's situation. Someone planning on dropping down to a 25k/year salary in a high COL area with no safety net needs a much bigger e-fund than someone planning on dropping down to that salary in a low COL area with a wealthy and supportive family, spouse, etc. Someone who wants to buy a house within the next ~5 years needs a much bigger pot of liquidity than someone who plans on renting for the next 20. Someone who is supporting a family off of his or her income needs more liquidity than someone who is single (and plans on remaining single for the foreseeable future). We can't really weigh the value of liquidity to the OP against the cost of a monthly debt obligation without knowing more details about the OP's goals and situation.

Here's an illustration: let's imagine that the OP doesn't have much of a safety net and expects her salary to remain low for the foreseeable future. Let's further imagine that she's planning on moving to a low COL city with affordable real estate (like, say, Cleveland) at the point she drops down to 25k/year. And let's imagine that the OP then plans on settling in Cleveland--and wants to eventually own a house. It may well be more valuable to someone in the OP's position to move to Cleveland with $60k/7 years remaining on her debt and with $80k in the bank than it will to have $0k in debt and $20k in the bank (either way the OP has "invested" $100k in debt/savings). Why? Assuming $15k/10k of the OP's savings are earmarked e-fund (more in the former situation because of her debt obligations), that leaves the OP with $65k/$10k in true liquidity. In the former circumstance -- in which the OP has debt and liquidity -- the OP can buy a house immediately on moving to Cleveland. The cost-savings of owning a house vs renting and the non-pecuniary value to someone who wants to settle down of homeownership can be pretty substantial. The OP could even buy a duplex and use the rent in the first unit to cover her whole mortgage -- thereby reducing her effective rent to $0. Her monthly rent/debt obligations ($0/m effective mortgage + $800/m debt) might not even be greater than had she paid off her debt ($800/m rent + $0/m debt) -- but she'll have additional extra money in the bank (~20k after buying the home, not including the e-fund) and will own/be building equity in a house. On the other hand, if the OP goes to Cleveland with no debt and $20k in the bank ($10k in true liquidity), she might have to save for five or ten years to be able to afford an equivalent house.*

What debt/liquidity strategy best suits your needs is not necessarily going to be the strategy that best suits the OP's needs. Debt is bad and annoying and stressful -- but there are very real benefits to liquidity as well, especially for someone (potentially) in the OP's circumstances. I'm not arguing that saving to buy a home in Cleveland is always or usually the right call -- but I hope that it's obvious from the above example that for some people, at least, it is.

Without knowing more, if it was me, I'd save as much as is humanely possible while working, over the course of the ~3 year time frame, on getting my debt down to something that is manageable on a $25k/year salary (something like $25k in debt)--and refinance that debt on a 10-year payment plan towards the end of my time in biglaw. So, in the above situation (e.g., $100k to put towards debt/savings/e-fund), I'd "move to Cleveland" with $25k in debt newly refinanced on a 10-year plan and $45k cash in the bank. That would provide me with a pretty manageable monthly debt load (~$200/m), a decent e-fund (~$15k), and still enough leftover to put down a payment on a modest house in a low COL area ($30k, which is 20% down on a $150k house). That's probably pretty safe generic advice that splits the baby.


*The other advantage of liquidity in this house-buying circumstance is the flexibility it can allow OP with respect to when she applies for a mortgage. If the OP knows she wants to buy a house in Cleveland, it may be in her best interest to buy one in the last six months of her job at biglaw--so that she has no issue qualifying for a competitive mortgage with terms that meet her interests. That's only possible if the OP has liquidity. On the other hand, if the OP has to wait until she's living in Cleveland and making $25k/year to buy the house, she is more likely to end up getting a mortgage--assuming she qualifies at all--with worse terms, PMI, etc.

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Wed Jan 10, 2018 2:13 am

Anonymous User wrote:I am above-mentioned OP. Thank you guys for the great advice. Its very helpful, and I'm very appreciative. Sorry I should have been a little more specific about the post-law facts. I'm not entirely certain if I'll be living in NYC but that would be the goal. Also, not really planning on purchasing a house anytime in the near future. My biggest concern revolves around having the debt hang over my head. If by year three of biglaw Ive been more modest with my loan repayment and still have ~25k debt remaining, would it be possible to just slow down the repayment by a lot? Im not entirely sure about the specifics regarding refinancing, but I imagine I wouldn't be able to meet the 5 year repayment plan at that point with a very low salary. But, conceivably, I would still be able to make some kind of payment toward it.

Another possibility, which my parents have mentioned in passing, is them taking a home equity line of credit and paying off my loans in full, and then me paying them back. Neither I, nor my parents are really super familiar with this route, so for all I know its a horrible idea. But it seems that the interest rate is way lower on this line of credit and obviously paying my parents back would be far more manageable.


Sorry -- I cross-posted. If you want to stay in NYC and continue to rent after biglaw, plan on staying in biglaw for approximately three years, and anticipate making $25k/year in a non-LRAP-eligible job after that, I mostly agree with the other posters: you should re-fi quickly, aim to have saved a 6-month emergency fund as quickly as possible, and then try to pay off all of your debt before leaving biglaw. I think those goals are feasible without you having to share a 5-bedroom house in NJ. If you're not able to do that, you can refi whatever remaining debt you have before leaving biglaw (and I would definitely do it before leaving biglaw) to give yourself the longest possible payoff timeline. $25k in debt refinanced on a 15-year payoff schedule is only about $185/m. But I really think that building a reasonable e-fund and paying off all of your $80k debt while working in NYC biglaw for 3 years is a feasible and worthwhile goal.

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Mon Jan 15, 2018 2:47 pm

just took my bonus and put 24k of it towards law school loans... humble brag, but ouch, that hurt

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Re: Student loan payments: get advice and actual numbers here

Postby SmokeytheBear » Mon Jan 15, 2018 9:41 pm

Anonymous User wrote:just took my bonus and put 24k of it towards law school loans... humble brag, but ouch, that hurt


Congrats.

Just calculated my tax return and trying to figure out if I should put it up my nose or toward loans.

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Re: Student loan payments: get advice and actual numbers here

Postby Johann » Mon Jan 15, 2018 9:56 pm

Anonymous User wrote:Would love some advice on the best way to pay off my loans when I graduate.

Debt at graduation in 2018: $80k
Interest rates: Ranging from ~5%-6%
Income: $180k (biglaw)
Savings: None
Other info: no credit card debt, living in NYC


I'm very grateful that I don't have a lot of debt and that I have a good job to make the payments, but my situation gets a little tricky because of my future plans. Long story short, I doubt that I'll be a lawyer for a long time. I certainly won't be in biglaw. I don't plan on being in biglaw for more than 3 years and its very likely that I'll be transitioning into a non-law job that pays VERY little (probably below 30k). Considering these things, I'm wondering if it makes more sense to aggressively pay off loans (25-30k a year) or save more and pay off the loans on an extended timeline. Im obviously very clueless on these matters, but I'm open to suggestions. Any advice on how I should attack this would be greatly appreciated!

Thanks!

if youre actually exiting into a low paying job in 3 years, id do PAYE/REPAYE and pay less than 20k on those loans before getting forgiveness. depends on your debt tolerance, but paying this down is dumb if you arent going to be there long and would prefer having cash as to no cash.

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Re: Student loan payments: get advice and actual numbers here

Postby Damage Over Time » Tue Jan 16, 2018 5:58 pm

I've been hearing conflicting things about the student loan interest deduction. Am I correct in understanding that it is not being phased out, and you can deduct up to $2500 of student loan interest paid directly from taxable income, assuming you make less than $80k that year?

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Tue Jan 16, 2018 6:48 pm

Posting anon because I post on TLS often and many TLS'ers know who I am in real life.

Looking for motivation because I got denied for refinancing with SoFi today because my credit score is too low. I'm going to pay off CC debt and apply again in 2 months with what will hopefully be an increased FICO. But this sucks.

0Ls in this thread: Student loan debt is real and it is terrible. I only (haha) had about 120K in loans and despite paying like $1200 a month have barely made a dent in them. Make sure you know what you're getting into.

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Re: Student loan payments: get advice and actual numbers here

Postby Anonymous User » Wed Jan 17, 2018 10:18 pm

Hi all, I will be graduating in May and I’m looking for some advice on my loan repayment plan.

I currently owe $150,000 and I would really like to pay off my loans in 5-7 years. I did the estimate calculator and under the standard 10 year plan my monthly payment would $1700. How much more than that should I be putting down monthly to be done in 5-7 years? Is being done in 5-7 even realistic? Any advice/thoughts would be helpful.

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Re: Student loan payments: get advice and actual numbers here

Postby beach_terror » Wed Jan 17, 2018 10:24 pm

What’s your income?

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Re: Student loan payments: get advice and actual numbers here

Postby SmokeytheBear » Mon Jan 22, 2018 4:10 pm

Just plugged in the numbers into HRBlock only to find out I’m getting hit with the AMT. FML

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Re: Student loan payments: get advice and actual numbers here

Postby anonnymouse » Fri Feb 02, 2018 11:51 am

Interest rates are up recently. U.S. 10-year is up 38 bps in the last month. Has anyone tried to refi with FRB in the last 30 days and, if yes, can you tell me if they still offer 1.95% for 5 year terms? They don't let you see rates on the site anymore without putting in email info.



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