Student loan payments: Actual numbers

[Johann]

So will PAYE never be expanded to IBR people like me? I have to start repayment in a few months.

http://bostonstudentloanlawyer.com/brea ... announced/

debuts dec 16 and guidelines are there.

[ballouttacontrol]

So, I'm a 3L, currently at about $60k in debt, one semester left, and about $10k in my pocket. I also haven't taken any loans this year, but will need to cover COL and $27k tuition next semester. Regional law firm paying $140k ish lined up with not bad COL.

Question is, should I take out only the loan balance I need to pay tuition+COL+survive? OR, should I MAX OUT the government loans?

I will need to max out the $20.k of Stafford at 5.84% regardless. So real question is: how much should I take in GradPLUS at 6.84%?

If I dump the last of my savings and take minimum loans, I'd start working in September owing maybe $90k ish. However, I could also take out a full 1-semester gradPLUS loan of $40k instead of only $10k at 6.84%, and graduate owing, say, $120k, but have an extra $30k in my pocket to invest towards a down payment in a couple years. Then, there's also the damn 4.2% origination fee on just getting the GradPLUS loan.

Originally I was thinking I'd just find the lowest interest rate possible, and then refinancing. But now I'm really thinking about maximizing the amount liquid $$$ I have.

What do y'all think? Refinance minimum loans to low rate, or max out loans and PAYE?

[JenDarby]

If you're making 140k in a low cost of living place you shouldn't need to take out extra loan money at that high of a rate to afford a down payment in a couple years. I would say take out only the loans you need and then take your cash baths once you graduate. Graduating with 90k should be easy to pay off at that income while still saving tons of money.

[180kickflip]

I haven't really done any research into how student loans (esp. at the grad level) work, but is it really possible to just choose to take out loans of like 40k when you don't "need" it for tuition? I mean, if you get a near full tuition scholarship and are just like 10k away from the expected student budget, will they really approve you for an additional 40k? I guess it's in their interest since they just get more interest and fees off of you, but it still doesn't seem too smart to give out THAT much $ when it isn't really needed for demonstrated expenses.

[ballouttacontrol]

If you're making 140k in a low cost of living place you shouldn't need to take out extra loan money at that high of a rate to afford a down payment in a couple years. I would say take out only the loans you need and then take your cash baths once you graduate. Graduating with 90k should be easy to pay off at that income while still saving tons of money.

Housing prices aren't really that low. Probably $700k or so for a nice place. I also may want to move markets to a higher COL region down the road. Regardless, maximizing $ is worth it, whether for a house or whatever. Just not sure which avenue would be best way to "max out."

I haven't really done any research into how student loans (esp. at the grad level) work, but is it really possible to just choose to take out loans of like 40k when you don't "need" it for tuition? I mean, if you get a near full tuition scholarship and are just like 10k away from the expected student budget, will they really approve you for an additional 40k? I guess it's in their interest since they just get more interest and fees off of you, but it still doesn't seem too smart to give out THAT much $ when it isn't really needed for demonstrated expenses.

No if you have a scholarship they deduct that from the $ you are allowed to take out. $80k COA with $50k scholarship means you can take out $30k. But if you make $50k on your own over your summer/during the school year, you can still request the loans.

[180kickflip]

ah. makes sense

[JenDarby]

You have like a month or maybe 90 days (I don't recall anymore) to give the money back without paying any fees. If you're really worried take it out and think about it. With the origination fees though I generally wouldn't do it and don't think it's necessary. Interest rates on mortgages are around 4.5% in many places (been quoted less even) and if it's not a major market you may only need 10% down (for a first home in FL, for instance, you can go as low as 5% down). Before paying extra fees for loan money you "might" need down the road for a down payment, I would look into the details. If you go on repaye you can pay next to nothing your first year and that would be a better method of saving money over taking out extra and paying origination fees.

[Johann]

Yeah I mean if you want the money for house and investing, max the loans and go PAYE. I would probably do that as well.

[Danger Zone]

Yeah I mean if you want the money for house and investing, max the loans and go PAYE. I would probably do that as well.

This is such stupendously terrible advice for someone that's only 60k in debt.

We get it: you like PAYE. That doesn't mean it's the answer for everyone.

[Johann]

Yeah I mean if you want the money for house and investing, max the loans and go PAYE. I would probably do that as well.

This is such stupendously terrible advice for someone that's only 60k in debt.

We get it: you like PAYE. That doesn't mean it's the answer for everyone.

He said he wanted money to buy a house ASAP. He's going to get 100k of cash for a row payment a lot faster by taking a lump sum loan and also not paying any loan stuff on paye. But I just redead his situation and looks like he has 50k income this year which will reduce the benefit of paye. He's obviously paying more in interest but that wasn't the question the guy asked. Goal was to buy a house ASAP which might be worth the extra 5k he pays in interest. Also, without knowing rent prices and shit the extra interest isn't in a vacuum. Saving money on interest in this scenario means throwing more money down the drain in non equity renting. I agree this scenario is not normally a paye scenario, but wanting a house ASAP throws it off the standard course. But yes I agree with you this isn't close to cut and dry like other scenarios here. Perhaps OP should Quantify the amount of interest worth paying for getting a house a year or so earlier. Also, what are rent prices like? Would the house have hoas?

[hous]

So, I'm a 3L, currently at about $60k in debt, one semester left, and about $10k in my pocket. I also haven't taken any loans this year, but will need to cover COL and $27k tuition next semester. Regional law firm paying $140k ish lined up with not bad COL.

Question is, should I take out only the loan balance I need to pay tuition+COL+survive? OR, should I MAX OUT the government loans?

I will need to max out the $20.k of Stafford at 5.84% regardless. So real question is: how much should I take in GradPLUS at 6.84%?

If I dump the last of my savings and take minimum loans, I'd start working in September owing maybe $90k ish. However, I could also take out a full 1-semester gradPLUS loan of $40k instead of only $10k at 6.84%, and graduate owing, say, $120k, but have an extra $30k in my pocket to invest towards a down payment in a couple years. Then, there's also the damn 4.2% origination fee on just getting the GradPLUS loan.

Originally I was thinking I'd just find the lowest interest rate possible, and then refinancing. But now I'm really thinking about maximizing the amount liquid $$$ I have.

What do y'all think? Refinance minimum loans to low rate, or max out loans and PAYE?

Minimize loans, use money you have now to cover COL, and refinance if you get a job paying over 50k. No brainer.

[Danger Zone]

I might be missing it but I don't see where the poster says they need a house ASAP. They should just save up like a prudent investor. If we're just telling people to waste money on interest then I don't really know what the point of this thread is.

[ballouttacontrol]

Thanks for the input guys. I see where both sides are coming from. I know I can take out loans til basically the last day of school, so I'll probably just get enough to cover tuition at first and keep thinking on it.

Rent prices aren't bad where I'm going, would probably split a $2500 2 bed. But owning a condo would be fukin great and beats throwing that $1250 down the drain every month.

[lacrossebrother]

The down the drain expression is low iq propaganda. Any interest you pay is "down the drain" too, plus any maintenance costs. Plus the risk premium.

[jess]

So will PAYE never be expanded to IBR people like me? I have to start repayment in a few months.

http://bostonstudentloanlawyer.com/brea ... announced/

debuts dec 16 and guidelines are there.

ooh amazing

[ballouttacontrol]

The down the drain expression is low iq propaganda. Any interest you pay is "down the drain" too, plus any maintenance costs. Plus the risk premium.

ummm BS

when u consider what the alternative is. No idea how paying interest is "down the drain" but the $36,000 you've paid at the end of the year in rent has returned you exactly negative 100% on your investment. Your mortgage payments OTOH build equity, less interest and fees attached to your loan. Plus your house slowly appreciates.

Not to mention, as mentioned by the one dude above, as soon as you have some good equity in your house you can leverage the fuk out of it with a Refi and do more stuff w/ your $.

[mylifeis24]

Job: Biglaw ($160K starting)
Wife's Salary: $33K
Location: NYC
Debt: 170K from Law + UG at average weighted rate of 6.269%
Wife's Debt: 41K at average rate of 6.025%

So I've read through a decent number of posts and I see that my initial impression to pay off loans as quickly as possible may not be the best move since I lose early years to invest in IRA/401k accounts and benefit from the compound interest. I absolutely hate the thought of having looming debt, however. I also know that there is no guarantee that someone stays in biglaw for 5, 6, 7 years, but if it's a matter of willpower and fighting through each day, I'm confident I'll get through – just my personality. And as for fear of being laid off or other things mostly out of my control, my loans are all federal, so I have that set of safety nets.

I'm curious if in my scenario, it's possible to pay down my and the wife's combined debt in 6-7 years AND maximize IRA/401k? If based on a 6.5 year repayment plan, the debt would be a total of $~270K. Assuming standard biglaw salary and bonus + my wife's income of $33K, if we started off paying something like $27K our first year, then $35K, then $45K, $53K, $55K, and $55K, and I contributed max of $23.5K each year for IRA/401k, that would still be plenty to live on the first year with NYC rent (assuming something like $3.5K monthly rent) after taxes.I feel like I'm missing something here because this doesn't seem that bad at all... Really appreciate everyone's help and the wise words in this thread!

[Johann]

Job: Biglaw ($160K starting)
Wife's Salary: $33K
Location: NYC
Debt: 170K from Law + UG at average weighted rate of 6.269%
Wife's Debt: 41K at average rate of 6.025%

So I've read through a decent number of posts and I see that my initial impression to pay off loans as quickly as possible may not be the best move since I lose early years to invest in IRA/401k accounts and benefit from the compound interest. I absolutely hate the thought of having looming debt, however. I also know that there is no guarantee that someone stays in biglaw for 5, 6, 7 years, but if it's a matter of willpower and fighting through each day, I'm confident I'll get through – just my personality. And as for fear of being laid off or other things mostly out of my control, my loans are all federal, so I have that set of safety nets.

I'm curious if in my scenario, it's possible to pay down my and the wife's combined debt in 6-7 years AND maximize IRA/401k? If based on a 6.5 year repayment plan, the debt would be a total of $~270K. Assuming standard biglaw salary and bonus + my wife's income of $33K, if we started off paying something like $27K our first year, then $35K, then $45K, $53K, $55K, and $55K, and I contributed max of $23.5K each year for IRA/401k, that would still be plenty to live on the first year with NYC rent (assuming something like $3.5K monthly rent) after taxes.I feel like I'm missing something here because this doesn't seem that bad at all... Really appreciate everyone's help and the wise words in this thread!

Staying in biglaw is not a matter of willpower. Your biglaw job is out of your control for the most part and at the whims of the economy. If you are too risk averse to put all your money in the stock market and let it ride, then you are too risk averse to leave govt protected debt.

[mylifeis24]

Job: Biglaw ($160K starting)
Wife's Salary: $33K
Location: NYC
Debt: 170K from Law + UG at average weighted rate of 6.269%
Wife's Debt: 41K at average rate of 6.025%

So I've read through a decent number of posts and I see that my initial impression to pay off loans as quickly as possible may not be the best move since I lose early years to invest in IRA/401k accounts and benefit from the compound interest. I absolutely hate the thought of having looming debt, however. I also know that there is no guarantee that someone stays in biglaw for 5, 6, 7 years, but if it's a matter of willpower and fighting through each day, I'm confident I'll get through – just my personality. And as for fear of being laid off or other things mostly out of my control, my loans are all federal, so I have that set of safety nets.

I'm curious if in my scenario, it's possible to pay down my and the wife's combined debt in 6-7 years AND maximize IRA/401k? If based on a 6.5 year repayment plan, the debt would be a total of $~270K. Assuming standard biglaw salary and bonus + my wife's income of $33K, if we started off paying something like $27K our first year, then $35K, then $45K, $53K, $55K, and $55K, and I contributed max of $23.5K each year for IRA/401k, that would still be plenty to live on the first year with NYC rent (assuming something like $3.5K monthly rent) after taxes.I feel like I'm missing something here because this doesn't seem that bad at all... Really appreciate everyone's help and the wise words in this thread!

Staying in biglaw is not a matter of willpower. Your biglaw job is out of your control for the most part and at the whims of the economy. If you are too risk averse to put all your money in the stock market and let it ride, then you are too risk averse to leave govt protected debt.

Fair, but lets assume for the sake of the question that I remain in biglaw for the time period discussed. Does the plan work?

[Old Gregg]

Staying in biglaw is not a matter of willpower. Your biglaw job is out of your control for the most part and at the whims of the economy. If you are too risk averse to put all your money in the stock market and let it ride, then you are too risk averse to leave govt protected debt.

I think, barring extremes, you can willpower your way into at least 7 years of biglaw. probably not at the same firm, but i dont think it's particularly challenging. and some people have a higher tolerance for shoveling shit for a longer period of time

[Johann]

Job: Biglaw ($160K starting)
Wife's Salary: $33K
Location: NYC
Debt: 170K from Law + UG at average weighted rate of 6.269%
Wife's Debt: 41K at average rate of 6.025%

So I've read through a decent number of posts and I see that my initial impression to pay off loans as quickly as possible may not be the best move since I lose early years to invest in IRA/401k accounts and benefit from the compound interest. I absolutely hate the thought of having looming debt, however. I also know that there is no guarantee that someone stays in biglaw for 5, 6, 7 years, but if it's a matter of willpower and fighting through each day, I'm confident I'll get through – just my personality. And as for fear of being laid off or other things mostly out of my control, my loans are all federal, so I have that set of safety nets.

I'm curious if in my scenario, it's possible to pay down my and the wife's combined debt in 6-7 years AND maximize IRA/401k? If based on a 6.5 year repayment plan, the debt would be a total of $~270K. Assuming standard biglaw salary and bonus + my wife's income of $33K, if we started off paying something like $27K our first year, then $35K, then $45K, $53K, $55K, and $55K, and I contributed max of $23.5K each year for IRA/401k, that would still be plenty to live on the first year with NYC rent (assuming something like $3.5K monthly rent) after taxes.I feel like I'm missing something here because this doesn't seem that bad at all... Really appreciate everyone's help and the wise words in this thread!

Staying in biglaw is not a matter of willpower. Your biglaw job is out of your control for the most part and at the whims of the economy. If you are too risk averse to put all your money in the stock market and let it ride, then you are too risk averse to leave govt protected debt.

Fair, but lets assume for the sake of the question that I remain in biglaw for the time period discussed. Does the plan work?

sure but i dont see why that changes anything. just PAYE for a year at those rates before you shove your hand all in to save 25k interest spread out over years. everyone in this thread thinking that debt is the devil needs to fix your head because it is going to cause you to make some terrible financial choices. you invested in a career. stop trying to pay it down day 1 on the job. work for a year in the job before you decide. change 27k first year to 5k and then increase the backend of those payments. the 22k delta is just saved and not wasted so it can be paid later.

[mylifeis24]

Job: Biglaw ($160K starting)
Wife's Salary: $33K
Location: NYC
Debt: 170K from Law + UG at average weighted rate of 6.269%
Wife's Debt: 41K at average rate of 6.025%

So I've read through a decent number of posts and I see that my initial impression to pay off loans as quickly as possible may not be the best move since I lose early years to invest in IRA/401k accounts and benefit from the compound interest. I absolutely hate the thought of having looming debt, however. I also know that there is no guarantee that someone stays in biglaw for 5, 6, 7 years, but if it's a matter of willpower and fighting through each day, I'm confident I'll get through – just my personality. And as for fear of being laid off or other things mostly out of my control, my loans are all federal, so I have that set of safety nets.

I'm curious if in my scenario, it's possible to pay down my and the wife's combined debt in 6-7 years AND maximize IRA/401k? If based on a 6.5 year repayment plan, the debt would be a total of $~270K. Assuming standard biglaw salary and bonus + my wife's income of $33K, if we started off paying something like $27K our first year, then $35K, then $45K, $53K, $55K, and $55K, and I contributed max of $23.5K each year for IRA/401k, that would still be plenty to live on the first year with NYC rent (assuming something like $3.5K monthly rent) after taxes.I feel like I'm missing something here because this doesn't seem that bad at all... Really appreciate everyone's help and the wise words in this thread!

sure but i dont see why that changes anything. just PAYE for a year at those rates before you shove your hand all in to save 25k interest spread out over years. everyone in this thread thinking that debt is the devil needs to fix your head because it is going to cause you to make some terrible financial choices. you invested in a career. stop trying to pay it down day 1 on the job. work for a year in the job before you decide. change 27k first year to 5k and then increase the backend of those payments. the 22k delta is just saved and not wasted so it can be paid later.

What would be a better allocation of that $22K?

[dixiecupdrinking]

There is none. PAYE may make sense only to the extent that it reduces your minimum payments and allows you to allocate the extra payments toward the highest rate loans.

There is no reason to invest that $22k in any other area if you are going to be paying 6.5+% interest instead. You can't get that kind of risk free return anywhere else. (Assuming you have an emergency fund already, etc.)

[Johann]

Job: Biglaw ($160K starting)
Wife's Salary: $33K
Location: NYC
Debt: 170K from Law + UG at average weighted rate of 6.269%
Wife's Debt: 41K at average rate of 6.025%

So I've read through a decent number of posts and I see that my initial impression to pay off loans as quickly as possible may not be the best move since I lose early years to invest in IRA/401k accounts and benefit from the compound interest. I absolutely hate the thought of having looming debt, however. I also know that there is no guarantee that someone stays in biglaw for 5, 6, 7 years, but if it's a matter of willpower and fighting through each day, I'm confident I'll get through – just my personality. And as for fear of being laid off or other things mostly out of my control, my loans are all federal, so I have that set of safety nets.

I'm curious if in my scenario, it's possible to pay down my and the wife's combined debt in 6-7 years AND maximize IRA/401k? If based on a 6.5 year repayment plan, the debt would be a total of $~270K. Assuming standard biglaw salary and bonus + my wife's income of $33K, if we started off paying something like $27K our first year, then $35K, then $45K, $53K, $55K, and $55K, and I contributed max of $23.5K each year for IRA/401k, that would still be plenty to live on the first year with NYC rent (assuming something like $3.5K monthly rent) after taxes.I feel like I'm missing something here because this doesn't seem that bad at all... Really appreciate everyone's help and the wise words in this thread!

sure but i dont see why that changes anything. just PAYE for a year at those rates before you shove your hand all in to save 25k interest spread out over years. everyone in this thread thinking that debt is the devil needs to fix your head because it is going to cause you to make some terrible financial choices. you invested in a career. stop trying to pay it down day 1 on the job. work for a year in the job before you decide. change 27k first year to 5k and then increase the backend of those payments. the 22k delta is just saved and not wasted so it can be paid later.

What would be a better allocation of that $22K?

i would just keep the 22k for cash on hand and life in general. you dont have to run all your assets to 0 to minimzie your loan balance. you may decide biglaw isnt for you. you may get shitcanned (legal economy is not pretty right now).

[Anonymous User]

Married Income: ~220k
Location: CA
Debt: ~260k at ~2.5%
Payments: ~3500/month

Full federal loans for law school. ~260k debt when I started repayment. 1 year of PAYE as a clerk at 370/month, after which balance was ~270k. Refinanced to 7 year term after entering private practice.