Student loan payments: get advice and actual numbers here Forum

[BuckinghamB]

Thanks for the input johann/avbucks/everyone else. That's all extremely helpful info. I probably should've specified in my OP that we'll be in a secondary market with different salary levels (~145k starting before bonuses), but roughly is in line with big law lockstep generally, just adjusted for lower COL. Rent in my city would be about $900/month if that helps at all.

Also, my wife won't be making the nice salary until after residency, which should last 3-4 years. During that period she'll be at around $50-60k Considering that, I'm thinking it might actually make more sense to do PAYE the first few years. I keep thinking it's the better move, but psychologically it's going to be tough to pull the PAYE trigger.

Regarding the refi, I think I'll definitely do at least part of the debt early on (but will hold of on some in case I get shitcanned). Still need to see what kind of rate I'd get. I'm K-JD so my lack of credit history might not save me as much as other people.

Thanks again.

[AVBucks4239]

Depends how your payments are structured. Sine your initial payments are interest-heavy, you really don't get there until you are making pure principal payments. So it's still a factor of like 10% principal/90% interest means you are getting 10% of the compound benefit instead of 100% from investing. Regardless, the point of all this shows the debate is legit and if the OP wants to do PAYE instead of aggressively paying loans, they would not be stupid to do so. It's just a choice and rational one and easily defensible.

$500,000 at 7% accrues at $2916.67 in interest per month. Make $8,500 payments and they are paying $5,500 towards principal on their first payment...then a little more the next payment, then a little more, all the way until they pay it off.


Since Johann and I seem to be polar opposites here, I would recommend any lurkers/posters to go over to Reddit, specifically /r/personalfinance, and post your situation. Scroll through some posts to see how to format. There's a lot of smart posters there that will help you make an informed decision.

[BuckinghamB]

^Thanks, I'll check that thread out

[Johann]

Thanks for the input johann/avbucks/everyone else. That's all extremely helpful info. I probably should've specified in my OP that we'll be in a secondary market with different salary levels (~145k starting before bonuses), but roughly is in line with big law lockstep generally, just adjusted for lower COL. Rent in my city would be about $900/month if that helps at all.

Also, my wife won't be making the nice salary until after residency, which should last 3-4 years. During that period she'll be at around $50-60k Considering that, I'm thinking it might actually make more sense to do PAYE the first few years. I keep thinking it's the better move, but psychologically it's going to be tough to pull the PAYE trigger.

Regarding the refi, I think I'll definitely do at least part of the debt early on (but will hold of on some in case I get shitcanned). Still need to see what kind of rate I'd get. I'm K-JD so my lack of credit history might not save me as much as other people.

Thanks again.

You should do REPAYE rather than PAYE if it is an option for you since the downsides of the 25 year forgiveness don't really mean anything because you will be paying off in full before then and to cop that 50% govt subsidy on the interest payment. If interest accrues at $2900 or whatever a month you're getting another $1,400 a month of payout there.

[RalphCMannuni]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

[krads153]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

I did fixed, to be safe since who the hell knows what libor is going to be

if you're planning on paying it off fast, it's less of a risk though to go with variable. if you're doing the full 20 years, i'd do fixed.

[beach_terror]

You might as well stick with the gov't if you're going to do the fixed rate. Not sure it's worth losing the protections for what's probably a 2% reduction.

[krads153]

I don't recall what sofi's minimum was now (60k?) so you can maybe refi that amount and leave the rest with gov.

i also get emails from banks with even lower rates with programs for student debt refinancing. so i'd do some more research into what rates are in the market now.

[lacrossebrother]

You might as well stick with the gov't if you're going to do the fixed rate. Not sure it's worth losing the protections for what's probably a 2% reduction.

6.7-->5.3 is like $9k savings for a 10 year loan.

so call it $1000/year for fed loan "insurance."

looking at it the other way, not sure how many people would buy the insurance for even $500.

[Anonymous User]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

Don't do variable. A 20-year variable loan is crazy sauce. I would stay far, far away from any variable loan with a term longer than 10 years (and possibly even with a term of greater than 5 years). And if you're only getting a 2% discount for getting variable, you're essentially betting that the average LIBOR rates over the next 20 years will be <2% higher than today's LIBOR rate. That's not a good bet. See, e.g., http://www.macrotrends.net/1433/histori ... ates-chart.

[Anonymous User]

Debt - 70k
Salary - 145

I want to use SoFi or a similar service. I start work in September, so when should I go about contacting them?

Also do they allow prepayment?

I want to be aggressive with my loan and knock it out in a couple of years. Originally I was going to throw my 8k in savings I have at my grad plus loans right off the bat and then live of credit card until my first paycheck. If I plan on using SoFi, should I ditch this plan?

Also, if using SoFi should I just ride out the term and not be aggressive?

I'm conflicted on what I should do. Not sure how long I will be in big law and my S/O want to buy a house after next year.


Other considerations:

S/O with ~50k salary and ~50k debt.

[XxSpyKEx]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

Agree with what everyone said re: the variable rate on a 20-year loan.

What's your current income and what do you project to it be at year 5, 10, 15, and 20? I'm just curious why a 20-year refi even makes sense. If your income is low enough that a 20-year refinance makes the most sense, I would think that PAYE for the next 20 years + tax bomb would wind up costing your less in the long run than the 5.375% interest across the next 20 years. Not to mention the all the nice protections with the federal loans. The only other thing I can think of is if you went to law school a long while ago and have $103k remaining in private student loans, but if that's the case, I would think you managed to lock in around a 2-3% fixed rate (which is what people were getting when they consolidated back in the day).

[abl]

Debt - 70k
Salary - 145

I want to use SoFi or a similar service. I start work in September, so when should I go about contacting them?

Also do they allow prepayment?

I want to be aggressive with my loan and knock it out in a couple of years. Originally I was going to throw my 8k in savings I have at my grad plus loans right off the bat and then live of credit card until my first paycheck. If I plan on using SoFi, should I ditch this plan?

Also, if using SoFi should I just ride out the term and not be aggressive?

I'm conflicted on what I should do. Not sure how long I will be in big law and my S/O want to buy a house after next year.


Other considerations:

S/O with ~50k salary and ~50k debt.

I don't know about prepayment, but I see no reason to wait on contacting SoFi: your loans are accumulating interest, so the sooner you refi, the better.

Don't live off of credit cards unless you have some 0% APR deal going. The interest rates on your credit cards will be > the interest rates on SoFi.

Regarding being aggressive with SoFi, well, it all depends on your risk tolerance. Assuming you get something like a 5% 10-year fixed rate loan with SoFi, it's probably more likely than not (but far from guaranteed) that you could beat that in the private market. That said, investing when you still have loans = leveraging your money, which is a risky strategy. Personally, I'd treat your loans like part of your investment portfolio. The benefit of your loans is that you can guarantee yourself some interest rate gains by paying them off faster. The cost is that by paying off your loans, you lose liquidity. For your particular situation, because you may want to buy a house in a year or so, I would discourage you from paying off your loans particularly aggressively: you'll need to save for a down payment on your house. This also means that you should not be investing your money as aggressively as you might otherwise (because you'll need it in the next year or two, you should be making lower-variability lower-risk investments).

Personally, if I were in your shoes, here's what I would do:

(1) refi with sofi or DRB or common bond ASAP (assuming you get a good interest rate). Put your loans in some combination of 5- and 10-year fixed depending on your budgetary flexibility (and be cautious -- you never know how having a baby, losing your job, etc, will impact your ability to pay off your loans);

(2) pay the minimum on your loans over the next 1-2 years while saving aggressively for a house down payment, put that savings in something like Vanguard mutual funds with an approximately 70% bonds / 30% stock balance (more weighted towards bonds if you're less risk tolerant, more weighted towards stocks if you're more);

(3) after you buy your house (or if you decide you're not going to buy a home anytime soon), then you can start considering how to balance your savings / loan repayments. Personally, if I were in your shoes at this point, I would treat my loans as part of my portfolio. So if you want to have a 50/50 bonds/stock balance (e.g., an asset allocation designed for neither the particular long- or particular short-term), consider putting the 50% of your "bond investment" funds into paying down your loans instead of actually buying bonds -- I think you'll find that the guaranteed interest rates of your loans will equal or beat the non-guaranteed rates of bond-based funds (and the short-term liquidity you'll lose won't matter if you're not investing for the short term).

[Anonymous User]

OP

Great response. Thanks man. Good stuff to consider.

[RalphCMannuni]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

Agree with what everyone said re: the variable rate on a 20-year loan.

What's your current income and what do you project to it be at year 5, 10, 15, and 20? I'm just curious why a 20-year refi even makes sense. If your income is low enough that a 20-year refinance makes the most sense, I would think that PAYE for the next 20 years + tax bomb would wind up costing your less in the long run than the 5.375% interest across the next 20 years. Not to mention the all the nice protections with the federal loans. The only other thing I can think of is if you went to law school a long while ago and have $103k remaining in private student loans, but if that's the case, I would think you managed to lock in around a 2-3% fixed rate (which is what people were getting when they consolidated back in the day).

I'm a first year associate in a market-paying satellite office. I've only been here 10 months but have no intention of leaving, so expect income to stay lock-step. I left a similarly lucrative career in business and could go back to that if necessary, so I'm not concerned with losing federal protections. Rationale for seeking low monthly payment is that I have to support a family on my income alone. My thinking wrt variable is that I can either throw more money at it or refi again after a few class year raises. Not sure though whether that's realistic.

[XxSpyKEx]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

Agree with what everyone said re: the variable rate on a 20-year loan.

What's your current income and what do you project to it be at year 5, 10, 15, and 20? I'm just curious why a 20-year refi even makes sense. If your income is low enough that a 20-year refinance makes the most sense, I would think that PAYE for the next 20 years + tax bomb would wind up costing your less in the long run than the 5.375% interest across the next 20 years. Not to mention the all the nice protections with the federal loans. The only other thing I can think of is if you went to law school a long while ago and have $103k remaining in private student loans, but if that's the case, I would think you managed to lock in around a 2-3% fixed rate (which is what people were getting when they consolidated back in the day).

I'm a first year associate in a market-paying satellite office. I've only been here 10 months but have no intention of leaving, so expect income to stay lock-step. I left a similarly lucrative career in business and could go back to that if necessary, so I'm not concerned with losing federal protections. Rationale for seeking low monthly payment is that I have to support a family on my income alone. My thinking wrt variable is that I can either throw more money at it or refi again after a few class year raises. Not sure though whether that's realistic.

You could always do the 20-year fixed rate and throw more money at your loans. Nothing will be stopping you from repaying sooner with the fixed rate loan, and the extra 2% doesn't really add up to very much across the next 2-3 years---it's only $2k more in interest in your first year and will presumably decrease as the balance of your loan does, so I can't imagine that'll severely impede your ability to repay your loans quickly (unlike situations where people are sitting with a quarter million in debt at 7.9%). I'd be surprised if you're able to get a better deal on a 20-year fixed rate loan in a few years (unless we go into another recession, but in that case you might not even be in biglaw anymore).

[abl]

Long time lurker coming out of hiding for financial advice. I have $103k I'm going to refi with SoFi. Term will be twenty years, but need to decide between the variable rate (approved for 3.315%) or fixed rate (approved for 5.375%). Difference in monthly payment today is $110 ($573 vs. $683). What does the TLS crystal ball say I should do?

Agree with what everyone said re: the variable rate on a 20-year loan.

What's your current income and what do you project to it be at year 5, 10, 15, and 20? I'm just curious why a 20-year refi even makes sense. If your income is low enough that a 20-year refinance makes the most sense, I would think that PAYE for the next 20 years + tax bomb would wind up costing your less in the long run than the 5.375% interest across the next 20 years. Not to mention the all the nice protections with the federal loans. The only other thing I can think of is if you went to law school a long while ago and have $103k remaining in private student loans, but if that's the case, I would think you managed to lock in around a 2-3% fixed rate (which is what people were getting when they consolidated back in the day).

I'm a first year associate in a market-paying satellite office. I've only been here 10 months but have no intention of leaving, so expect income to stay lock-step. I left a similarly lucrative career in business and could go back to that if necessary, so I'm not concerned with losing federal protections. Rationale for seeking low monthly payment is that I have to support a family on my income alone. My thinking wrt variable is that I can either throw more money at it or refi again after a few class year raises. Not sure though whether that's realistic.

Variable only makes sense if you're pretty sure that you'll be paying it all back over the next couple of years. Interest rates will not stay this low forever (they likely will start going up in this year), and if you go to refi after interest rates go up, you're going to end up with a higher fixed rate.

My recommendation to you would actually be to try to be a little more frugal and pay more to your loans -- and try to see if you can make a 10-year fixed work (which for you will probably be about 4.5% interest and will save you about $50k over the life of the loan). It's hard to say without knowing your personal circumstances, but I have trouble believing that you make $160k/year (or $145k/year or even $100k/year) and genuinely don't have room in your budget for an extra $3k/year or so to put into loans. You'll pay off your loans twice as quickly and ultimately save yourself close to $50,000. Put another way, if you can find an additional $300/m in your budget to put towards loans for the next 10 years, that'll save you approximately $700/m for the 10 years after that. Not a bad investment.

If you really can't make that work, still consider refinancing your loans in some mix of 10-year fixed and 20-year fixed. If you do half and half ($50k at 10-year fixed and $50k at 5-year fixed) your payments will be around $850/m for the first ten years and then will drop down to $340/m for the next 10 years. And doing it this way will save you almost $25,000 in interest over the life of the loans. (Doing it this way will also decrease your loan burden as your kids get older--and likely more expensive.)

[minnbills]

85K. 970 monthly payment. 10 year repayment schedule. Going to make extra payments a few times a year and try to pay off in 6 years.

Trying to figure out if I can do automatic payment while also targeting the high interest loans.

[thewaterlanding]

Some of my payments are due for a couple small loans from undergrad. I'm studying for the bar and don't make or have money to last me to the end of bar prep until I start my job to make the payments on my loan. I went and filled out some preliminary stuff and the loan servicer said I qualify for IBR to pay $0 since I obviously have no gross income. Is this a good move? What should I do when I start my job regarding payments?


HELP ASAP!!

[minnbills]

How much cash would you need to make the payments?

Also, can you defer the loans a couple more months?

[thewaterlanding]

How much cash would you need to make the payments?

Also, can you defer the loans a couple more months?

I don't think I can. They are from undergrad. I wouldnt be able to make it to my start date if I had to make payments.

[Elston Gunn]

How much cash would you need to make the payments?

Also, can you defer the loans a couple more months?

I don't think I can. They are from undergrad. I wouldnt be able to make it to my start date if I had to make payments.

I don't see why you wouldn't go on IBR (or PAYE if you can). The only downside is that you'll accrue more interest by not paying, but that's just because you're not making payments, not because of IBR.

[thewaterlanding]

How much cash would you need to make the payments?

Also, can you defer the loans a couple more months?

I don't think I can. They are from undergrad. I wouldnt be able to make it to my start date if I had to make payments.

I don't see why you wouldn't go on IBR (or PAYE if you can). The only downside is that you'll accrue more interest by not paying, but that's just because you're not making payments, not because of IBR.

And I'm fine with that just for the 3 more months before employment.

[Elston Gunn]

And I'm fine with that just for the 3 more months before employment.

Yeah. There's no downside. You can pay more when you start working without a problem.

[itascot1992]

Does anyone know where to find a calculator where you can estimate the money saved by making payments on interest AND Principal while still in a non-payment period? I am in a situation where I may be able to pay part of some loans off while in law school