Anonymous User wrote:For you finance people out there:
Starting biglaw in the spring. Market paying non-NYC firm. Have about $200,000 in loans. about 150,000 of is @ 5.5%, the other $50,000 is at 7.2%.
I think I may want to be a prosecutor after a couple years of BigLaw, so I want the safety net of federal loans. But, I am not confident enough in REPAYE (or that I will become a prosecutor) that I want to go all in on that either. My thought is: refinance the high interest $50,000 @ 2.1% variable, put the remainder of $150,000 in PAYE. Pay a small REPAYE payment then put the rest toward the refinanced $50,000 to try and pay that off as quick as possible. That way, after 2 years of BIgLaw I'll have that high interest $50K loan paid off, leaving me with aprox. <$150K in federal loans. Then I can make the call from there if I want to jump to GOV and RePaye the rest, or stick in BigLaw a couple more years and pay the rest off. What do y'all think?
The hedging is probably one of the dumbest things in my opinion. Go all or none. The reason is simple:
The benfit of private refi is locking in a low interest rate is that it doesn't accrue as much interest, so must of these benefits are recognized in years 8-10 of the repayment rather than the first couple years.
The benfit of of federal loans is low payments initially to max cash flow, federal protections in case you get economy fucked, and flexibility in planning with a little bit of risk towards on the future of these policies.
By hedging and go half and half or 1/4 and 3/4 here, you lose the benefit of maxing cash flow to aggressively pay down a low interest rate and thereby lose the benefits of the low interest rates in the 8-10 year time frame. This is mathemmatically the dumbest way to go. Make a decision and stick to your guins.