Student loan payments: Actual numbers

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Jan 04, 2016 10:13 pm

Danger Zone wrote:
LA Spring wrote:
Anonymous User wrote: I thought of just paying the IBR minimum and saving on the side for the tax bomb.


Tax Bomb?? Come again...

Well, as it stands, any loans forgiven under IBR qualify as debt forgiveness and thus are included in your income when you file your tax return that year. So you get to pay taxes on your forgiven student loan debt.


Yeah but once you get that bill you can get on a payment plan with the IRS, based on your financial info (income vs necessary expenses), with the IRS. If you are unemployed at the time you can get on CNC (Currently Not Collectible). So you are pretty much getting on another PAYE-like plan. Of course ideally you can pay the forgiveness of debt income off at once.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Mon Jan 04, 2016 11:23 pm

Anonymous User wrote:
Danger Zone wrote:
LA Spring wrote:
Anonymous User wrote: I thought of just paying the IBR minimum and saving on the side for the tax bomb.


Tax Bomb?? Come again...

Well, as it stands, any loans forgiven under IBR qualify as debt forgiveness and thus are included in your income when you file your tax return that year. So you get to pay taxes on your forgiven student loan debt.


Yeah but once you get that bill you can get on a payment plan with the IRS, based on your financial info (income vs necessary expenses), with the IRS. If you are unemployed at the time you can get on CNC (Currently Not Collectible). So you are pretty much getting on another PAYE-like plan. Of course ideally you can pay the forgiveness of debt income off at once.

I mean, yeah, but I would hope you'd find some stability in your employment situation and financial situation in twenty years after only making minimal loan payments.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jan 05, 2016 1:21 am

Have over $200k in loans, but also getting hit with an extra $3k in taxes thanks to AMT this year. Sucks to be both high income and highly indebted.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jan 05, 2016 11:41 am

Hey for the purposes of minimizing your taxable income in regards to REPAYE, IBR, PAYE etc. a 457(b) is the same as a 401K correct? Relevant for us government lawyers. Thanks.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Tue Jan 05, 2016 11:53 am

Anonymous User wrote:Hey for the purposes of minimizing your taxable income in regards to REPAYE, IBR, PAYE etc. a 457(b) is the same as a 401K correct? Relevant for us government lawyers. Thanks.

Yes, your 457(b) contributions are deductible.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jan 05, 2016 12:04 pm

Thanks!

Quick opinion question: people usually recommend maxing out these sort of retirement accounts for those of us on income based repayment plans. But what about situations where you have to stay at least 5 years to keep the employer match amounts? Is it still worth it if you see yourself leaving/trying to leave the employer before 5 years?

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Tue Jan 05, 2016 1:18 pm

Anonymous User wrote:Hey for the purposes of minimizing your taxable income in regards to REPAYE, IBR, PAYE etc. a 457(b) is the same as a 401K correct? Relevant for us government lawyers. Thanks.

One thing to remember is that 457 has separate contribution limits from a 403(b) (or 401(k) if you have one) so if you really want to get crazy you can defer $36,000 into those plans.

Anonymous User wrote:Thanks!

Quick opinion question: people usually recommend maxing out these sort of retirement accounts for those of us on income based repayment plans. But what about situations where you have to stay at least 5 years to keep the employer match amounts? Is it still worth it if you see yourself leaving/trying to leave the employer before 5 years?

The idea behind deferring to pre-tax accounts is that it lowers your AGI and thus the amount you have to pay on the income based plans. You should definitely contribute up to any match but even if no match exists there are benefits to contributing. In your case I'd probably just contribute up to whatever match you'd get in 5 years just in case you do stay. Worst case you've built up some nice savings.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jan 05, 2016 7:31 pm

Loans: ~150k
Monthly payment: $400
Salary: $70k
Type of payment: IBR

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Thu Jan 14, 2016 6:36 pm

Salary: 120k
Debt: 97k
Payment: ~$1k, ten years fixed at between 4.5 and 6.8%, averaging just under 6%

Planning on refinancing once I obtain a better credit score by paying off my credit card debt (about $15k).

This is amazingly a very good outcome from my TTT school.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Thu Jan 14, 2016 7:38 pm

Salary: 180k plus bonus (market biglaw)
Total debt at graduation: around 175k, including 15-20k of undergrad debt.
Current debt: around 110k
Repayment: about 3.5 years remaining at 1.9% fixed.
Monthly payment: $2300 or so.

Bank has offered up to 2% back if repay within 4 years total, so effectively 0% interest in that case.

I clerked for a year and have done a little more than a year at the firm. In that time, I have refinanced three times: once immediately after law school, then when starting law firm, and finally about 6 months ago when I got this very good interest rate. I have a decent rainy-day fund and maxed out 401k last year.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Thu Jan 14, 2016 7:52 pm

Anonymous User wrote:Salary: 180k plus bonus (market biglaw)
Total debt at graduation: around 175k, including 15-20k of undergrad debt.
Current debt: around 110k
Repayment: about 3.5 years remaining at 1.9% fixed.
Monthly payment: $2300 or so.

Bank has offered up to 2% back if repay within 4 years total, so effectively 0% interest in that case.

I clerked for a year and have done a little more than a year at the firm. In that time, I have refinanced three times: once immediately after law school, then when starting law firm, and finally about 6 months ago when I got this very good interest rate. I have a decent rainy-day fund and maxed out 401k last year.


Very intriguing about the multiple refinances. Did you jump from one private lender to another or were you able to refinance with the same lender? I'd also like to hear more about how you got that 2% bank repayment deal, if you don't mind. I haven't heard of that before.

I'm curious because I have about $65k with SOFI at 3.1% on a 5-year variable. Would love to get it down to 1.9% fixed. Thanks for any helpful tips.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Thu Jan 14, 2016 7:56 pm

I'm guessing it's First Republic Bank: http://m.firstrepublic.com/fundyourdreams

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Re: Student loan payments: Actual numbers

Postby krads153 » Thu Jan 14, 2016 8:02 pm

Wow, 1.9% fixed is pretty awesome....almost unheard of

I think I got a ton of spam emails from First Republic, lol

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Re: Student loan payments: Actual numbers

Postby krads153 » Thu Jan 14, 2016 8:04 pm

Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Thu Jan 14, 2016 8:07 pm

krads153 wrote:Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.

Uh not if your rate is 1.9%

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Re: Student loan payments: Actual numbers

Postby krads153 » Thu Jan 14, 2016 8:12 pm

Danger Zone wrote:
krads153 wrote:Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.

Uh not if your rate is 1.9%


I bought when SPY was down, but apparently it's even worse off now so I've actually lost money in the market, there's an argument to be made that it's just going to get even worse, esp if we hit 2008 records.

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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Thu Jan 14, 2016 8:14 pm

krads153 wrote:
Danger Zone wrote:
krads153 wrote:Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.

Uh not if your rate is 1.9%


I bought when SPY was down, but apparently it's even worse off now so I've actually lost money, so there's an argument to be made that it's just going to get even worse, esp if we hit 2008 records

This is obviously a terrible way to think about investing though. "The market might go down more" so don't invest? You're also the guy who said you would pay down loans fast but also recommended maxing out your 401k so I'm not really sure what to say.

Also if we do go full 2008 and you get Lathamed you're way better off with the cash than with less student loans.

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Re: Student loan payments: Actual numbers

Postby krads153 » Thu Jan 14, 2016 8:20 pm

Tiago Splitter wrote:
krads153 wrote:
Danger Zone wrote:
krads153 wrote:Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.

Uh not if your rate is 1.9%


I bought when SPY was down, but apparently it's even worse off now so I've actually lost money, so there's an argument to be made that it's just going to get even worse, esp if we hit 2008 records

This is obviously a terrible way to think about investing though. "The market might go down more" so don't invest? You're also the guy who said you would pay down loans fast but also recommended maxing out your 401k so I'm not really sure what to say.

Also if we do go full 2008 and you get Lathamed you're way better off with the cash than with less student loans.


You can wait to invest when the market is even worse (seems like it's heading that way), but right now your money might be better off paying down loans.

I paid down basically all of my loans living like a miser in a little over 2.75 years (while maxing 401k as sort of my emergency fund). I ended going from negative 200k net worth to positive couple hundred thousand positive net worth in over 3/4 years or so. So yeah, totally possible while maxing out 401k. The reason why you should max your 401k is if you think you won't make as much money in the future - it's not just about investments. It's also about future salaries. I'm going to take a salary cut at some point, so it made a lot of sense for me (I'll likely be in a lower tax bracket), even though I heavily paid down loans. I don't see what's wrong with that advice - pay down loans and max out 401k....do you think you're going to make 200k+ forever?

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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Thu Jan 14, 2016 8:32 pm

krads153 wrote: I don't see what's wrong with that advice - pay down loans and max out 401k....do you think you're going to make 200k+ forever?

As I've said to you many times, if you think you are going to take a big paycut soon paying down loans is stupid. Many of us are looking at the kind of debt that will take several years of aggressive payments to pay off. I'm not paying my loans down aggressively precisely because I don't think I will be making 200k forever.

If you do think you are going to make 200k forever, pay down your loans ASAP unless of course someone wants to give you 1.9%.

Otherwise if people want to believe in your 500k turnaround in 3/4 years on a biglaw salary that's on them. Mere mortals shouldn't expect to be able to put a ton towards loans beyond the 401k max plus interest.

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Re: Student loan payments: Actual numbers

Postby krads153 » Thu Jan 14, 2016 8:36 pm

Tiago Splitter wrote:
krads153 wrote: I don't see what's wrong with that advice - pay down loans and max out 401k....do you think you're going to make 200k+ forever?

As I've said to you many times, if you think you are going to take a big paycut soon paying down loans is stupid. Many of us are looking at the kind of debt that will take several years of aggressive payments to pay off. I'm not paying my loans down aggressively precisely because I don't think I will be making 200k forever.

If you do think you are going to make 200k forever, pay down your loans ASAP unless of course someone wants to give you 1.9%.

Otherwise if people want to believe in your 500k turnaround in 3/4 years on a biglaw salary that's on them.


I never said it was 500k turn around, say around upper 300k/lower 400k turn around in 3/4 years (including 401k, mind you - so that's a big benefit of over 50-60k, although this will eventually be taxed) plus bonuses, etc....not sure why that's hard to believe

Anyway, when I graduated there was no such thing as PAYE, so for us oldies paying off debt quickly was wise. PAYE may be fine, who knows what will happen in the long term to PAYE. I was merely commenting that relying on the stock market to make this somehow pay off for you (paying minimum on loans, investing such money, and relying on PAYE) is a risky proposition, esp. since who knows what will happen to the stock market.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Thu Jan 14, 2016 8:42 pm

Your advice should come with a disclaimer that it's terrible and you're out of touch.

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Re: Student loan payments: Actual numbers

Postby krads153 » Thu Jan 14, 2016 8:52 pm

Danger Zone wrote:Your advice should come with a disclaimer that it's terrible and you're out of touch.


haha, whatever you want to think. Don't really care. I haven't really done a lot of research into PAYE admittedly, but IMO relying on the stock market seems risky.

Anyway, part of the reason why I was able to turn my net worth around was because I also paid like $500 per month in rent for awhile because I had a few roommates even though I live in a major metro area. This is the kind of advice you should be advocating (at the expense side) if you want to save money/pay down loans, etc.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Thu Jan 14, 2016 11:31 pm

Anonymous User wrote:
Anonymous User wrote:Salary: 180k plus bonus (market biglaw)
Total debt at graduation: around 175k, including 15-20k of undergrad debt.
Current debt: around 110k
Repayment: about 3.5 years remaining at 1.9% fixed.
Monthly payment: $2300 or so.

Bank has offered up to 2% back if repay within 4 years total, so effectively 0% interest in that case.

I clerked for a year and have done a little more than a year at the firm. In that time, I have refinanced three times: once immediately after law school, then when starting law firm, and finally about 6 months ago when I got this very good interest rate. I have a decent rainy-day fund and maxed out 401k last year.


Very intriguing about the multiple refinances. Did you jump from one private lender to another or were you able to refinance with the same lender? I'd also like to hear more about how you got that 2% bank repayment deal, if you don't mind. I haven't heard of that before.

I'm curious because I have about $65k with SOFI at 3.1% on a 5-year variable. Would love to get it down to 1.9% fixed. Thanks for any helpful tips.


Sure, I refinanced with SOFi right after law school to a 10 year plan (which was the most I could pay on a clerk's salary) (I think around 4.8-5% if I remember right), and then again to a 5 year plan (around 3.5%). None of these places charges you to refinance so I would keep an eye out to see if the market rate decreases or you can find another bank that beats your current rate.

Yes my current loan of 1.9% is through First Republic. Love the bank: smooth process, great rate, and like the fact that I can go to a branch and talk to people if I need anything. Not everyone will qualify though. They look at loan ratio to income, have maximum loan amounts, and have a lengthy application; it is much more involved than Sofi. I think my numbers put me right on the line, but they have a strong relationship with my firm, which I think ultimately put me over.

My plan has always been to aggressively pay my loans down. I have slowed down due to the great interest rate, but still want to have the flexibility, freedom, lack of stress etc that comes with no SL debt.

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Re: Student loan payments: Actual numbers

Postby AVBucks4239 » Fri Jan 15, 2016 12:12 pm

krads153 wrote:Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.


Make a financial plan and stick to it.

You cannot time the market. Nobody can. This might be the next 2008 or it might be the next 2010-2013. You have no idea. Guys on CNBC have no idea. Goldman Sachs has no idea.

Time in the market, not timing the market.

This is all basic stuff here guys.

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Re: Student loan payments: Actual numbers

Postby lacrossebrother » Fri Jan 15, 2016 12:16 pm

AVBucks4239 wrote:
krads153 wrote:Anyway, not to bring up the argument of paying down loans v. investing again..but with the way the stock market is going...this is exactly why paying down loans may be better. This shit is supposedly going to be as bad as 2008 according to some.


Make a financial plan and stick to it.

You cannot time the market. Nobody can. This might be the next 2008 or it might be the next 2010-2013. You have no idea. Guys on CNBC have no idea. Goldman Sachs has no idea.

Time in the market, not timing the market.

This is all basic stuff here guys.

this whole, "can't time the market" thing has gone way too far is total puffery put out by institutions who have absolute interests in keeping you invested.
the market is clearly in free-fall now. doing "nothing" is timing the market just as much as buying in or out assuming your transaction costs are free. if you really think that there's an equal chance that the market goes up in the next month as down, sure, don't stray. but I have absolutely no idea you could come to that conclusion.




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