Student loan payments: Actual numbers

(On Campus Interviews, Summer Associate positions, Firm Reviews, Tips, ...)
Forum rules
Anonymous Posting

Anonymous posting is only appropriate when you are revealing sensitive employment related information about a firm, job, etc. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.

Failure to follow these rules will get you outed, warned, or banned.
User avatar
thewaterlanding
Posts: 85
Joined: Thu Feb 02, 2012 12:15 pm

Re: Student loan payments: Actual numbers

Postby thewaterlanding » Tue Dec 29, 2015 11:13 am

2015 Grad

Debt: 144k
Salary: 140k pre-tax (wife + mine)
No car payment - probably am going to need a car soon though as one of our cars is at 250K miles.
Monthly rent: 1100/ month


Current monthly payments are roughly 1,500/month on the 10 year standard plan. My plan was to throw as much as we can at them, so roughly 2k a month, but I didn't know if that was smart or if you guys had a different take on what I should do.

Thanks for your help!

gabewatch
Posts: 114
Joined: Wed Dec 16, 2009 1:15 am

Re: Student loan payments: Actual numbers

Postby gabewatch » Tue Dec 29, 2015 11:17 am

2014 wrote:
gk101 wrote:
2014 wrote:I'm making a large payment today to hit the $2500 interest deduction - is there anything I need to do to ensure the payment counts as "interest"? My loans just hit repayment of that is relevant.

are you making more than 72k this year?

No I'm a stub year

lacrossebrother wrote:
gabewatch wrote:
gk101 wrote:
2014 wrote:I'm making a large payment today to hit the $2500 interest deduction - is there anything I need to do to ensure the payment counts as "interest"? My loans just hit repayment of that is relevant.

are you making more than 72k this year?


I think its 80K. https://www.irs.gov/publications/p970/ch04.html

1. my nelnet straight up said that my shit is all interest ( i made same payment)
2. the phase out cap has nothing to do with that. also, just to be clear, phase out is from 65k-80k of MAGI. But yea, if you're in that range, try to make a big IRA/401k contribution if you haven't already.
3. big thing is (if on PAYE), make sure you don't click "don't advance payment" so that your payment covers future months too (i.e. no payments for jan-march)


So it was obvious on your servicer's website? I'm thinking I may have to call mine since it's less clear.


I was trying to do the same thing just a few days ago, also stub year. I needed to pay off another 750 or so of interest to hit the 2,500. Also just went into repayment recently. NAVIENT is awful with this type of stuff. My payments before repayment began all went towards interest, and then after payment began they are allocated differently, and partially into the principal. Also, it seems as soon as you make the scheduled payment, anything paid after is deemed as part of the next payment. Worst system. I think they are confusing on purpose. I ended up just paying an extra 1,500 in hopes that at least 750 of that is allocated towards interest - but who knows, payment is still pending as I made it a few days ago so I'm not sure how it will be allocated.

On a side note, I've read that if you want extra payments allocated in a specific manner, for instance, towards the principal on your highest interest loan, the best way to make sure it gets done is to send paper checks with written instructions. Seems insane that they can't get their shit together to allow this to easily happen online.

User avatar
2014
Posts: 5831
Joined: Sat Jun 05, 2010 3:53 pm

Re: Student loan payments: Actual numbers

Postby 2014 » Tue Dec 29, 2015 11:29 am

Just called the servicer on the loan I wanted to make a payment on and they said since the loan went into repayment they capitalized all of the interest and any payment would be 100% principle.

My other loans are through Fed Loan Servicing (if anyone is familiar with them) and are in limbo because my Repaye verification is pending. Am I just screwed here?

User avatar
grand inquisitor
Posts: 2613
Joined: Thu Mar 26, 2015 11:21 am

Re: Student loan payments: Actual numbers

Postby grand inquisitor » Tue Dec 29, 2015 11:43 am

read that irs pub linked above

Capitalized interest. This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. No deduction for capitalized interest is allowed in a year in which no loan payments were made.

User avatar
lacrossebrother
Top 17 consensus poster
Posts: 6850
Joined: Wed Jul 30, 2014 11:15 pm

Re: Student loan payments: Actual numbers

Postby lacrossebrother » Tue Dec 29, 2015 11:52 am

grand inquisitor wrote:read that irs pub linked above

Capitalized interest. This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. No deduction for capitalized interest is allowed in a year in which no loan payments were made.

^^^
exactly. it is precisely because they capitalized the interest, your $2500 of payments are deductible.

BigLawer
Posts: 121
Joined: Mon Feb 18, 2013 3:37 pm

Re: Student loan payments: Actual numbers

Postby BigLawer » Tue Dec 29, 2015 12:07 pm

If you refi, and therefore an entire loan is paid off and re-established...can you claim max deduction?

daydreamer
Posts: 108
Joined: Thu Jun 10, 2010 4:10 pm

Re: Student loan payments: Actual numbers

Postby daydreamer » Tue Dec 29, 2015 12:17 pm

BigLawer wrote:If you refi, and therefore an entire loan is paid off and re-established...can you claim max deduction?


I'm also interested in the answer to this. How do you determine how much of your payment goes to interest as opposed to principal?

BigLawer
Posts: 121
Joined: Mon Feb 18, 2013 3:37 pm

Re: Student loan payments: Actual numbers

Postby BigLawer » Tue Dec 29, 2015 12:24 pm

Well when you refi, the lender pays the debt in full when it funds the loan. So my question is, do I get credit for them paying my original lender the interest that had accrued?

gabewatch
Posts: 114
Joined: Wed Dec 16, 2009 1:15 am

Re: Student loan payments: Actual numbers

Postby gabewatch » Tue Dec 29, 2015 12:32 pm

BigLawer wrote:Well when you refi, the lender pays the debt in full when it funds the loan. So my question is, do I get credit for them paying my original lender the interest that had accrued?


Highly doubt it.

User avatar
lacrossebrother
Top 17 consensus poster
Posts: 6850
Joined: Wed Jul 30, 2014 11:15 pm

Re: Student loan payments: Actual numbers

Postby lacrossebrother » Tue Dec 29, 2015 12:39 pm

BigLawer wrote:Well when you refi, the lender pays the debt in full when it funds the loan. So my question is, do I get credit for them paying my original lender the interest that had accrued?

why would you get a tax credit for someone else's contribution?

User avatar
Tiago Splitter
Posts: 15464
Joined: Tue Jun 28, 2011 1:20 am

Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Tue Dec 29, 2015 1:57 pm

thewaterlanding wrote:2015 Grad

Debt: 144k
Salary: 140k pre-tax (wife + mine)
No car payment - probably am going to need a car soon though as one of our cars is at 250K miles.
Monthly rent: 1100/ month


Current monthly payments are roughly 1,500/month on the 10 year standard plan. My plan was to throw as much as we can at them, so roughly 2k a month, but I didn't know if that was smart or if you guys had a different take on what I should do.

Thanks for your help!

I would look into refinancing your debt. If you can get a low enough interest rate there's no rush to pay off the loans, but if not then paying them off quickly is likely the right strategy. That said I would at least make Roth or traditional IRA contributions for yourself and your wife so that you're taking advantage of tax-advantaged accounts while you can and building up some savings.

User avatar
lacrossebrother
Top 17 consensus poster
Posts: 6850
Joined: Wed Jul 30, 2014 11:15 pm

Re: Student loan payments: Actual numbers

Postby lacrossebrother » Tue Dec 29, 2015 2:04 pm

lacrossebrother wrote:
BigLawer wrote:Well when you refi, the lender pays the debt in full when it funds the loan. So my question is, do I get credit for them paying my original lender the interest that had accrued?

why would you get a tax credit for someone else's contribution?

With this said, you should be able to pay $2500 to your refi'er and claim the deduction

User avatar
bk1
Posts: 18406
Joined: Sun Mar 14, 2010 7:06 pm

Re: Student loan payments: Actual numbers

Postby bk1 » Tue Dec 29, 2015 3:34 pm

Anonymous User wrote:New Op here.

You all have been giving out such great advice I was hoping I could throw my numbers out there for some guidance. I feel incredibly trapped right now. The stress is enormous! Here are my numbers, please tell me what you think may be helpful.


$167,046.00 total student loan debt (all fed loans undergrad & law) The very little that I have from undergrad is subsidized. I am not currently in repayment, but will be in approx. 10 months. I am currently a 3L.

$24,250 Total credit card debt (3 Cards Total. 1 Card was a refinance one, it has 0% APR until 3/2017, it is maxed right now at 5K. The other two have pretty high interest. And about 15K more of credit left combined.

I have two car loans, my wife’s car (I’m a cosigner), which she usually pays from part time unskilled labor work and my car. My car note is: $6,064. With 3.5% interest. I have a 2012 VW Passat TDI. She has a 2012 VW Jetta, and that Note is $13,500 Approx. with 4% interest. Both of our cars are fairly reliable and have about 50K miles on them.

Mortgage: Is $350 a month, which includes tax and Insurance. The Mortgage is about 4% on a 50K total loan. It is a VA mortgage. I am prior military. I plan on renting this house through a property management company once I start work full time. I am expecting $1200 a month in rent. It is a 3 bedroom 2.5 bath house in the South. Rental property people take 10% of rent to watch over it and collect rent.

Unsecured Loans: (1) Home remodel loan, $4,000 (17.75% APR) (2) Kay Credit, Total $2,500. No interest until 10/2016.


Salary and benefits Information:

I was hired by one of the military branches to be a JAG. My pay and benefits start sometime this coming August, 2016. So I will start getting paid right after the Bar exam.

Total taxable salary is: $63,446.40 yearly. That is pay grade 03E for 2015.

Also include in taxable income a potential $1000 approx. monthly for rental property.

Total un-taxed housing allowance $27,720 yearly. $2,310 monthly, 03E With Dependents. This is based on a northeastern base location. Which is where I will likely be.

Total BAS allowance (for sustenance), un-taxed: $253.63 a month. $3,043.56 for the year.

100% free health care and dental for my wife and I. We have no children.

My wife is an undergrad student. She will not likely have substantial or consistent income for a while. She works part time unskilled labor positions right now. She may attend law school. We aren’t sure about that right now. And we don’t have kids currently.


Summary: Total yearly income before taxes is: $106,209.96. So these are all of my numbers currently. As I said above, I am a 3L. I am at a T25 with median grades. I will likely be a Jag for at least the next 8 years. The next 4 years minimum because that is what my current employment contract is for. Afterward I was considering moving on to be an AUSA. Or I may stay in and retire from the military. I already have 4 years of the 20 completed. So the clear plan for the student loans is to do some income based repayment that will keep my loan payments as low as possible until I can use PSLF 10 years down the road. What else can I do here? Am I screwed? Will it be sometime until I have a middle class lifestyle? Any advice or tips whatsoever? Please help.


TLS really isn't the greatest place for you to ask this question. You should look at somewhere more specialized such as r/personalfinance. To be blunt:

More than anything, you need to stop living beyond your means. You are carrying approximately 50k debt (cars + credit + personal loan) without factoring in your student loans or mortgage. I hate to be harsh but your finances seem to show a lot of poor financial decisions. For example, it's hard to tell, but based on the interest rates and amount owed it looks like you guys bought 2 new cars a few years ago right before you both became students. Additionally, it looks like you are upside down on your wife's car (again, hard to tell without more info).

You need to make a tight budget and stick to it, which includes cutting to the essentials and downsizing your lifestyle. Use all your spare money to pay down debt (either snowball or avalanche, depending on your personal needs). You ask about living a middle class lifestyle, but you've already been living a middle class lifestyle (a house, 2 new cars, thousands spent on jewelry, etc) financed by credit cards and debt. Now is the time to cut back on that lifestyle and live within your means.

You probably need to post a full budget to somewhere like r/personalfinance and have objective outsiders tear apart your budget and recommend places to save. For my recommendations, first you'll need to do PSLF for your school loans (as you noted). It appears you won't have significant income for the next 6+ months so for that time you need to focus on cutting expenses, including potentially selling your vehicles and buying $5k beaters (though maybe not, it'll depend on the value of your current cars versus what you can get for cheaper). Once you have income, focus on paying down debt (probably the home remodel loan first, followed by the highest interest credit cards while making sure your 0% cards are paid off by the time the 0% runs out).

User avatar
bk1
Posts: 18406
Joined: Sun Mar 14, 2010 7:06 pm

Re: Student loan payments: Actual numbers

Postby bk1 » Tue Dec 29, 2015 3:47 pm

Anonymous User wrote:2014 grad here.
Total student debt 265k at an average of more than 7% interest (was 272k at graduation and a large % of my debt is at 7.9%). No other debt besides student loans.
NYC big law and single. In 2015, I paid 2k a month for student loans + 1/3 of my bonus, and plan on doing the same this year.
5% of my income goes in unmatched 401k, and I also take $1,000 a month and invest it to savings account or SPY ETF.

I thought about re-financing, but am scared of economy going down and getting canned. Am I doing things really wrong?

I personally wouldn't do unmatched 401k until your debt is lower unless you are on an income-based plan (in which case 401k contributions reduce the amount you have to pay). You're not really doing anything "wrong" per se, it just depends on which of the 3 options are most preferable to you: (1) income-based, (2) refinance, (3) aggressively pay down fed loans. That said, I think your method is the worst option of the 3 because most calculations seem to have income-based plans coming out ahead of aggressive repayment on fed loans. If you're really worried about being canned to the point that you don't want to refi, I would lean towards doing income-based (lax has some decent writeups in either this thread or another thread).

You should also be building an emergency fund (presumably that's what he 1k/month is going to). I would not put your e-fund in ETFs (instead use something safe/liquid like high-interest savings or CDs).

User avatar
BmoreOrLess
Posts: 2082
Joined: Wed Apr 11, 2012 10:15 pm

Re: Student loan payments: Actual numbers

Postby BmoreOrLess » Wed Dec 30, 2015 10:24 am

lacrossebrother wrote:
lacrossebrother wrote:
BigLawer wrote:Well when you refi, the lender pays the debt in full when it funds the loan. So my question is, do I get credit for them paying my original lender the interest that had accrued?

why would you get a tax credit for someone else's contribution?

With this said, you should be able to pay $2500 to your refi'er and claim the deduction


You get the credit when someone else (e.g., your parents) makes payments on the loan. Obviously refi is different than your parents paying your loans as a 'gift,' but there may be an argument if its not addressed in a reg somewhere.

As long as you have made payments somewhere, the interest prior to the refi should be deductable since it is effectively capitalized (but again I wouldn't be surprised if this is addressed in a reg).

Anonymous User
Posts: 273139
Joined: Tue Aug 11, 2009 9:32 am

Re: Student loan payments: Actual numbers

Postby Anonymous User » Wed Dec 30, 2015 11:02 am

bk1 wrote:
TLS really isn't the greatest place for you to ask this question. You should look at somewhere more specialized such as r/personalfinance. To be blunt:

More than anything, you need to stop living beyond your means. You are carrying approximately 50k debt (cars + credit + personal loan) without factoring in your student loans or mortgage. I hate to be harsh but your finances seem to show a lot of poor financial decisions. For example, it's hard to tell, but based on the interest rates and amount owed it looks like you guys bought 2 new cars a few years ago right before you both became students. Additionally, it looks like you are upside down on your wife's car (again, hard to tell without more info).

You need to make a tight budget and stick to it, which includes cutting to the essentials and downsizing your lifestyle. Use all your spare money to pay down debt (either snowball or avalanche, depending on your personal needs). You ask about living a middle class lifestyle, but you've already been living a middle class lifestyle (a house, 2 new cars, thousands spent on jewelry, etc) financed by credit cards and debt. Now is the time to cut back on that lifestyle and live within your means.

You probably need to post a full budget to somewhere like r/personalfinance and have objective outsiders tear apart your budget and recommend places to save. For my recommendations, first you'll need to do PSLF for your school loans (as you noted). It appears you won't have significant income for the next 6+ months so for that time you need to focus on cutting expenses, including potentially selling your vehicles and buying $5k beaters (though maybe not, it'll depend on the value of your current cars versus what you can get for cheaper). Once you have income, focus on paying down debt (probably the home remodel loan first, followed by the highest interest credit cards while making sure your 0% cards are paid off by the time the 0% runs out).


Thank you for your reply. I agree with pretty much everything you suggested. I checked KBB on my wife's car, we are upside down in it. Which is depressing because we haven't even had it a year. As far as the cars go, mine has too much equity that I would lose from downgrading, plus my resale value is much lower because of the whole VW diesel scandal. I wouldn't want to get rid of her car either, being that we are upside down in it and stand to lose even more if we tried to get something else. Our payments on both are extremely low and manageable, because of the low interest rates.

As far as living beyond our means, you are right! It is hard to tell what your "means" are in school. Your income is $0, so you really don't have any means whatsoever. This is why our unsecured debt is high, we have essentially had to live on credit for three years. Within the context of a poor paying job I would totally agree our spending is outrageous. But perhaps within the context of having the job I have the level of spending is less egregious.

User avatar
AVBucks4239
Posts: 870
Joined: Wed Feb 10, 2010 11:37 pm

Re: Student loan payments: Actual numbers

Postby AVBucks4239 » Wed Dec 30, 2015 11:43 am

Anonymous User wrote:
bk1 wrote:
TLS really isn't the greatest place for you to ask this question. You should look at somewhere more specialized such as r/personalfinance. To be blunt:

More than anything, you need to stop living beyond your means. You are carrying approximately 50k debt (cars + credit + personal loan) without factoring in your student loans or mortgage. I hate to be harsh but your finances seem to show a lot of poor financial decisions. For example, it's hard to tell, but based on the interest rates and amount owed it looks like you guys bought 2 new cars a few years ago right before you both became students. Additionally, it looks like you are upside down on your wife's car (again, hard to tell without more info).

You need to make a tight budget and stick to it, which includes cutting to the essentials and downsizing your lifestyle. Use all your spare money to pay down debt (either snowball or avalanche, depending on your personal needs). You ask about living a middle class lifestyle, but you've already been living a middle class lifestyle (a house, 2 new cars, thousands spent on jewelry, etc) financed by credit cards and debt. Now is the time to cut back on that lifestyle and live within your means.

You probably need to post a full budget to somewhere like r/personalfinance and have objective outsiders tear apart your budget and recommend places to save. For my recommendations, first you'll need to do PSLF for your school loans (as you noted). It appears you won't have significant income for the next 6+ months so for that time you need to focus on cutting expenses, including potentially selling your vehicles and buying $5k beaters (though maybe not, it'll depend on the value of your current cars versus what you can get for cheaper). Once you have income, focus on paying down debt (probably the home remodel loan first, followed by the highest interest credit cards while making sure your 0% cards are paid off by the time the 0% runs out).


Thank you for your reply. I agree with pretty much everything you suggested. I checked KBB on my wife's car, we are upside down in it. Which is depressing because we haven't even had it a year. As far as the cars go, mine has too much equity that I would lose from downgrading, plus my resale value is much lower because of the whole VW diesel scandal. I wouldn't want to get rid of her car either, being that we are upside down in it and stand to lose even more if we tried to get something else. Our payments on both are extremely low and manageable, because of the low interest rates.

As far as living beyond our means, you are right! It is hard to tell what your "means" are in school. Your income is $0, so you really don't have any means whatsoever. This is why our unsecured debt is high, we have essentially had to live on credit for three years. Within the context of a poor paying job I would totally agree our spending is outrageous. But perhaps within the context of having the job I have the level of spending is less egregious.


BK1's post was really good, but just to add...

You'll get harsher responses on /r/personalfinance, and I encourage you to post there; but I just want to point out that it's fucking absurd to say "I want a middle class lifestyle" when (a) you haven't earned a penny yet and (b) you've actually been living more than a middle class lifestyle, but funded by credit. College is for living like a college kid, not racking up hundreds of thousands in other debt. You don't deserve a house, a couple new cars, jewelry, all the other shit you bought on credit, absolutely none of it.

I think you know this already, so sorry for sounding like a dick. But take a look at this calculator (http://www.dinkytown.net/java/Debt2Amount.html) to see how much you're really paying for items when you put them on credit and don't pay them off at the end of the month. That $4,000 home remodel loan is going to cost you $5,250. The $1,000 TV you bought (just for an easy number and hypothetical example) will cost you $1,800 if you stretch out the payments all the way. That $5,000 in credit card debt at hypothetical 29% interest will mean you'll pay $12,000 total to pay that off if you just pay the minimums.

Next time you buy something on credit that you don't intend to pay off for a while, put $500 in a mason jar, take a shit on top of it, and then light the thing on fire. That's basically what you're doing by paying interest on credit cards.

So my recommendations are this:

(1) Enroll in PSLF.
(2) Get rid of your cars for cheaper vehicles. Everything you're saying is about them is a bullshit, lazy, or flawed excuse as to why you don't want to downgrade.
(3) Contribute to 401k (or 403b) up to match.
(4) Use spare money from not having a car payment/lower car payment to pay off debts with highest interest rate first.
(5) Make a budget and stick to it.
(6) You seem to be impulsive (like me), so what I do is take $200 cash beginning of every month and that's my bullshit money. I can do whatever I want with it (beers, random purchases, whatever). But I never go over that amount.

Lastly, don't feel bad. I was similarly clueless when I graduated law school. But it's time to grow up and take control of things. I encourage you to buy "I Will Teach You to Be Rich" by Ramit Sethi, which is a good introductory book on personal finance. I'd also order "The Millionaire Next Door" so you can get a perspective on what it actually means to live a middle class lifestyle while making good financial decisions. Then cap it off with "Bogleheads Guide to Investing" and you'll be in good hands.

Reading those books is actually step one. Read all of them and soak it in. You'll quickly realize why your situation is absolutely fucking absurd.

Anonymous User
Posts: 273139
Joined: Tue Aug 11, 2009 9:32 am

Re: Student loan payments: Actual numbers

Postby Anonymous User » Wed Dec 30, 2015 11:57 am

AVBucks4239 wrote:
Anonymous User wrote:
bk1 wrote:
TLS really isn't the greatest place for you to ask this question. You should look at somewhere more specialized such as r/personalfinance. To be blunt:

More than anything, you need to stop living beyond your means. You are carrying approximately 50k debt (cars + credit + personal loan) without factoring in your student loans or mortgage. I hate to be harsh but your finances seem to show a lot of poor financial decisions. For example, it's hard to tell, but based on the interest rates and amount owed it looks like you guys bought 2 new cars a few years ago right before you both became students. Additionally, it looks like you are upside down on your wife's car (again, hard to tell without more info).

You need to make a tight budget and stick to it, which includes cutting to the essentials and downsizing your lifestyle. Use all your spare money to pay down debt (either snowball or avalanche, depending on your personal needs). You ask about living a middle class lifestyle, but you've already been living a middle class lifestyle (a house, 2 new cars, thousands spent on jewelry, etc) financed by credit cards and debt. Now is the time to cut back on that lifestyle and live within your means.

You probably need to post a full budget to somewhere like r/personalfinance and have objective outsiders tear apart your budget and recommend places to save. For my recommendations, first you'll need to do PSLF for your school loans (as you noted). It appears you won't have significant income for the next 6+ months so for that time you need to focus on cutting expenses, including potentially selling your vehicles and buying $5k beaters (though maybe not, it'll depend on the value of your current cars versus what you can get for cheaper). Once you have income, focus on paying down debt (probably the home remodel loan first, followed by the highest interest credit cards while making sure your 0% cards are paid off by the time the 0% runs out).


Thank you for your reply. I agree with pretty much everything you suggested. I checked KBB on my wife's car, we are upside down in it. Which is depressing because we haven't even had it a year. As far as the cars go, mine has too much equity that I would lose from downgrading, plus my resale value is much lower because of the whole VW diesel scandal. I wouldn't want to get rid of her car either, being that we are upside down in it and stand to lose even more if we tried to get something else. Our payments on both are extremely low and manageable, because of the low interest rates.

As far as living beyond our means, you are right! It is hard to tell what your "means" are in school. Your income is $0, so you really don't have any means whatsoever. This is why our unsecured debt is high, we have essentially had to live on credit for three years. Within the context of a poor paying job I would totally agree our spending is outrageous. But perhaps within the context of having the job I have the level of spending is less egregious.


BK1's post was really good, but just to add...

You'll get harsher responses on /r/personalfinance, and I encourage you to post there; but I just want to point out that it's fucking absurd to say "I want a middle class lifestyle" when (a) you haven't earned a penny yet and (b) you've actually been living more than a middle class lifestyle, but funded by credit. College is for living like a college kid, not racking up hundreds of thousands in other debt. You don't deserve a house, a couple new cars, jewelry, all the other shit you bought on credit, absolutely none of it.

I think you know this already, so sorry for sounding like a dick. But take a look at this calculator (http://www.dinkytown.net/java/Debt2Amount.html) to see how much you're really paying for items when you put them on credit and don't pay them off at the end of the month. That $4,000 home remodel loan is going to cost you $5,250. The $1,000 TV you bought (just for an easy number and hypothetical example) will cost you $1,800 if you stretch out the payments all the way. That $5,000 in credit card debt at hypothetical 29% interest will mean you'll pay $12,000 total to pay that off if you just pay the minimums.

Next time you buy something on credit that you don't intend to pay off for a while, put $500 in a mason jar, take a shit on top of it, and then light the thing on fire. That's basically what you're doing by paying interest on credit cards.

So my recommendations are this:

(1) Enroll in PSLF.
(2) Get rid of your cars for cheaper vehicles. Everything you're saying is about them is a bullshit, lazy, or flawed excuse as to why you don't want to downgrade.
(3) Contribute to 401k (or 403b) up to match.
(4) Use spare money from not having a car payment/lower car payment to pay off debts with highest interest rate first.
(5) Make a budget and stick to it.
(6) You seem to be impulsive (like me), so what I do is take $200 cash beginning of every month and that's my bullshit money. I can do whatever I want with it (beers, random purchases, whatever). But I never go over that amount.

Lastly, don't feel bad. I was similarly clueless when I graduated law school. But it's time to grow up and take control of things. I encourage you to buy "I Will Teach You to Be Rich" by Ramit Sethi, which is a good introductory book on personal finance. I'd also order "The Millionaire Next Door" so you can get a perspective on what it actually means to live a middle class lifestyle while making good financial decisions. Then cap it off with "Bogleheads Guide to Investing" and you'll be in good hands.

Reading those books is actually step one. Read all of them and soak it in. You'll quickly realize why your situation is absolutely fucking absurd.


Thank you for the insight.

EDIT: Thanks for the personal finance link. I did not know this existed.

User avatar
bk1
Posts: 18406
Joined: Sun Mar 14, 2010 7:06 pm

Re: Student loan payments: Actual numbers

Postby bk1 » Wed Dec 30, 2015 1:06 pm

Anonymous User wrote:Thank you for your reply. I agree with pretty much everything you suggested. I checked KBB on my wife's car, we are upside down in it. Which is depressing because we haven't even had it a year. As far as the cars go, mine has too much equity that I would lose from downgrading, plus my resale value is much lower because of the whole VW diesel scandal. I wouldn't want to get rid of her car either, being that we are upside down in it and stand to lose even more if we tried to get something else. Our payments on both are extremely low and manageable, because of the low interest rates.

As far as living beyond our means, you are right! It is hard to tell what your "means" are in school. Your income is $0, so you really don't have any means whatsoever. This is why our unsecured debt is high, we have essentially had to live on credit for three years. Within the context of a poor paying job I would totally agree our spending is outrageous. But perhaps within the context of having the job I have the level of spending is less egregious.

Happy to help. Yea, I figured it probably wouldn't make sense to sell your cars based on the info you provided which is why I mentioned it only as possibility. I'm don't really agree with AVBucks on selling the cars unless their value is significantly different than you've estimated (wouldn't hurt to see what people are selling them for online). The point of selling a car that you spent too much on (even an upside down) is to buy something that costs around 5k (which tends to be a good price point for reliability).

For example, if you owed 20k on a car worth 15k, selling it and buying a 5k car will be cheaper in the long run. The problem is that your wife's Jetta appears to be worth ~6k based on KBB (depends on the trim/options). Selling it to buy a 5k beater isn't really going to save much, if any, money. Similarly, if your car isn't worth much more than loan (KBB says ~12k, but I am not sure how much Dieselgate brings that down) you also won't save much money on that car. That said, your point about "too much equity" in your car is irrelevant. Cars are depreciating assets and right now your goal is to cut costs so you can pay down your debts, which can include downsizing your car (i.e., using that equity to pay off credit cards and loans with high interest rates). I'd add that, for the future, the general rule of thumb for car purchases you'll see from personal finance blogs/forums tends to be that financing should be 3 years or fewer and payments should be 20% or less of your net income each month (generally applies to single people).

I add this only because your wife may still be in school: I get it that school makes things less obvious to budget, but I think a good place to start is the cost of living estimate provided by your school(s). If you don't have a job, you shouldn't really be spending more than what the school estimates for a student budget. For example, students generally can't afford to remodel their homes (if they even have one). If it was a necessity (e.g., replacing a broken water heater), you should have had a house emergency fund to cover that (which should be a part of your home ownership budget). It's also unclear to me why you would necessarily need to use credit cards. For the last 3 years, you should have been able to take out student loans to cover all of tuition plus cost of living at your law school. There are your wife's costs as well, but presumably should could take out school loans (which would have been cheaper than credit cards) and her part-time work also would help defray living costs. Ideally, going forward, you should try to live of just the income you guys have, even though your wife will still be a student.

Finally, the whys of your situation are not really important. Your situation is your situation. You should focus on two things: (1) fixing the bad habits that got you in this situation in the first place, and (2) getting out of debt. Good luck.

User avatar
AVBucks4239
Posts: 870
Joined: Wed Feb 10, 2010 11:37 pm

Re: Student loan payments: Actual numbers

Postby AVBucks4239 » Wed Dec 30, 2015 3:09 pm

bk1 wrote:Happy to help. Yea, I figured it probably wouldn't make sense to sell your cars based on the info you provided which is why I mentioned it only as possibility. I'm don't really agree with AVBucks on selling the cars unless their value is significantly different than you've estimated (wouldn't hurt to see what people are selling them for online). The point of selling a car that you spent too much on (even an upside down) is to buy something that costs around 5k (which tends to be a good price point for reliability).

For example, if you owed 20k on a car worth 15k, selling it and buying a 5k car will be cheaper in the long run. The problem is that your wife's Jetta appears to be worth ~6k based on KBB (depends on the trim/options). Selling it to buy a 5k beater isn't really going to save much, if any, money. Similarly, if your car isn't worth much more than loan (KBB says ~12k, but I am not sure how much Dieselgate brings that down) you also won't save much money on that car. That said, your point about "too much equity" in your car is irrelevant. Cars are depreciating assets and right now your goal is to cut costs so you can pay down your debts, which can include downsizing your car (i.e., using that equity to pay off credit cards and loans with high interest rates). I'd add that, for the future, the general rule of thumb for car purchases you'll see from personal finance blogs/forums tends to be that financing should be 3 years or fewer and payments should be 20% or less of your net income each month (generally applies to single people).

I add this only because your wife may still be in school: I get it that school makes things less obvious to budget, but I think a good place to start is the cost of living estimate provided by your school(s). If you don't have a job, you shouldn't really be spending more than what the school estimates for a student budget. For example, students generally can't afford to remodel their homes (if they even have one). If it was a necessity (e.g., replacing a broken water heater), you should have had a house emergency fund to cover that (which should be a part of your home ownership budget). It's also unclear to me why you would necessarily need to use credit cards. For the last 3 years, you should have been able to take out student loans to cover all of tuition plus cost of living at your law school. There are your wife's costs as well, but presumably should could take out school loans (which would have been cheaper than credit cards) and her part-time work also would help defray living costs. Ideally, going forward, you should try to live of just the income you guys have, even though your wife will still be a student.

Finally, the whys of your situation are not really important. Your situation is your situation. You should focus on two things: (1) fixing the bad habits that got you in this situation in the first place, and (2) getting out of debt. Good luck.


The bolded is what I was getting at with the car situation. There's no reason for his wife to have a $13k car when she can get a 2008-2009 Honda Civic with 50-75,000 miles for like $8,000. I don't care how allegedly underwater he is.

The underlined is also very important. You recognize you've created a mountain of shit and that it's time to fix it. I strongly, strongly, strongly encourage you to buy those books I recommended earlier. It's the best $40 you'll have spent.

User avatar
bk1
Posts: 18406
Joined: Sun Mar 14, 2010 7:06 pm

Re: Student loan payments: Actual numbers

Postby bk1 » Wed Dec 30, 2015 3:20 pm

AVBucks4239 wrote:The bolded is what I was getting at with the car situation. There's no reason for his wife to have a $13k car when she can get a 2008-2009 Honda Civic with 50-75,000 miles for like $8,000. I don't care how allegedly underwater he is.

But his wife does not have a 13k car. His wife has a ~6k car (using KBB estimate for a low trim Jetta) with a 13k loan attached to it. To replace it he'd first have to have enough cash to cover the negative equity (seems unlikely based on financial info provided), sell it, and then finance a used car. Because of the negative equity, the relatively low value of the car, the low rate on the current loan, and the likely higher rate on a used car loan, I just don't see how it would make sense to replace the wife's car.

Now, if it's actually close to 13k (e.g., my above estimate based on trim is wrong), then I agree with you. If it's significantly underwater then there's not much that can be done except to pay it off. "how allegedly actually underwater he is" is extremely relevant to the decision (OP should at least take a look and see what the current market is for both cars, but it seems like the Jetta may not be worth replacing).

User avatar
AVBucks4239
Posts: 870
Joined: Wed Feb 10, 2010 11:37 pm

Re: Student loan payments: Actual numbers

Postby AVBucks4239 » Wed Dec 30, 2015 3:37 pm

bk1 wrote:
AVBucks4239 wrote:The bolded is what I was getting at with the car situation. There's no reason for his wife to have a $13k car when she can get a 2008-2009 Honda Civic with 50-75,000 miles for like $8,000. I don't care how allegedly underwater he is.

But his wife does not have a 13k car. His wife has a ~6k car (using KBB estimate for a low trim Jetta) with a 13k loan attached to it. To replace it he'd first have to have enough cash to cover the negative equity (seems unlikely based on financial info provided), sell it, and then finance a used car. Because of the negative equity, the relatively low value of the car, the low rate on the current loan, and the likely higher rate on a used car loan, I just don't see how it would make sense to replace the wife's car.

Now, if it's actually close to 13k (e.g., my above estimate based on trim is wrong), then I agree with you. If it's significantly underwater then there's not much that can be done except to pay it off. "how allegedly actually underwater he is" is extremely relevant to the decision (OP should at least take a look and see what the current market is for both cars, but it seems like the Jetta may not be worth replacing).

I admittedly missed how actually underwater he is. TL;DR is don't pay for depreciating assets.

Anonymous User
Posts: 273139
Joined: Tue Aug 11, 2009 9:32 am

Re: Student loan payments: Actual numbers

Postby Anonymous User » Wed Dec 30, 2015 5:01 pm

AVBucks4239 wrote:
bk1 wrote:
AVBucks4239 wrote:The bolded is what I was getting at with the car situation. There's no reason for his wife to have a $13k car when she can get a 2008-2009 Honda Civic with 50-75,000 miles for like $8,000. I don't care how allegedly underwater he is.

But his wife does not have a 13k car. His wife has a ~6k car (using KBB estimate for a low trim Jetta) with a 13k loan attached to it. To replace it he'd first have to have enough cash to cover the negative equity (seems unlikely based on financial info provided), sell it, and then finance a used car. Because of the negative equity, the relatively low value of the car, the low rate on the current loan, and the likely higher rate on a used car loan, I just don't see how it would make sense to replace the wife's car.

Now, if it's actually close to 13k (e.g., my above estimate based on trim is wrong), then I agree with you. If it's significantly underwater then there's not much that can be done except to pay it off. "how allegedly actually underwater he is" is extremely relevant to the decision (OP should at least take a look and see what the current market is for both cars, but it seems like the Jetta may not be worth replacing).

I admittedly missed how actually underwater he is. TL;DR is don't pay for depreciating assets.



Her Jetta is an SEL trim level. The SEL should raise the estimate. We got it for about 15k about 9 months ago. We aren't too terriblely underwater on the Jetta; perhaps based on the trade in value. Either way though my wife works part time and pays her note herself. So unless she falls behind on the payments I cannot justify taking it away from her.

Edit: also my liquid cash on hand is $4000. I also have $1000 in long term stocks that are doing well.

User avatar
bk1
Posts: 18406
Joined: Sun Mar 14, 2010 7:06 pm

Re: Student loan payments: Actual numbers

Postby bk1 » Wed Dec 30, 2015 6:15 pm

Anonymous User wrote:Her Jetta is an SEL trim level. The SEL should raise the estimate. We got it for about 15k about 9 months ago. We aren't too terriblely underwater on the Jetta; perhaps based on the trade in value. Either way though my wife works part time and pays her note herself. So unless she falls behind on the payments I cannot justify taking it away from her.

Edit: also my liquid cash on hand is $4000. I also have $1000 in long term stocks that are doing well.

For that trim level, it may actually make sense to sell it because you'll be able to pay ~5-8k for a car (buy selling it and buying a beater) rather than the projected ~13k. To me, the larger problem is that you are phrasing this as "you" and then "your wife." You two, collectively, are in 50k+ non-student/mortgage debt. You both need to make sacrifices to pay it off. This means both of you realistically evaluating where you can both save money, cars included. You shouldn't do anything unilaterally, but your debt is a crisis that needs to be addressed which requires talking things over with your wife.

I would sell the stocks. You have a loan accruing ~18% interest and are carrying balances on credit cards, you do not have the financial stability to be able to invest in stocks.

User avatar
2014
Posts: 5831
Joined: Sat Jun 05, 2010 3:53 pm

Re: Student loan payments: Actual numbers

Postby 2014 » Wed Dec 30, 2015 6:29 pm

lacrossebrother wrote:
grand inquisitor wrote:read that irs pub linked above

Capitalized interest. This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. No deduction for capitalized interest is allowed in a year in which no loan payments were made.

^^^
exactly. it is precisely because they capitalized the interest, your $2500 of payments are deductible.

This was very helpful. Are we going to be unable to get the 1098 form servicers though most likely? I guess the answer is to still claim it and play the audit lottery.




Return to “Legal Employment”

Who is online

The online users are hidden on this forum.