Student loan payments: Actual numbers

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ballouttacontrol
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Re: Student loan payments: Actual numbers

Postby ballouttacontrol » Sat Apr 30, 2016 9:09 am

are you free to go back and forth from PAYE and REPAYE, assuming you are eligible for both? If so, I assume qualifying payments under either one count for both programs, right?

As in, you pay on PAYE for 3 years, then switch to REPAYE, those 3 years of payments would still count towards your loan forgiveness at year 25 right? And if that's right, disregarding any future changes in law, what's to stop someone from making like 19 years of payments on the more favorable REPAYE (assuming very low income for 20 years), and then switching to PAYE for the earlier loan forgiveness? Nothing? I'm guessing I'm missing something but I don't know what.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Sat Apr 30, 2016 10:39 am

JohannDeMann wrote:
El Pollito wrote:yes but i need to have like 15 - 20K in the bank and of course i put it all to loans, so I've got a while before I can do it. my parents offered me the money but i feel weird involving them so i said no. i figured i'd repaye since it apparently subsidizes more interest than IBR unless I can't read, which is quite possible given the last few months at work.


yeah repaye > ibr across the board.


Does marriage change this? I'm ready to get on repaye for my undergrad loans, but I'm expecting to get married in the next year or so, and it seems like my payments under repaye would skyrocket after that while IBR wouldn't really change. Could I do repaye now and switch to IBR once were married?

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JohannDeMann
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Re: Student loan payments: Actual numbers

Postby JohannDeMann » Sat Apr 30, 2016 3:37 pm

Anonymous User wrote:
JohannDeMann wrote:
El Pollito wrote:yes but i need to have like 15 - 20K in the bank and of course i put it all to loans, so I've got a while before I can do it. my parents offered me the money but i feel weird involving them so i said no. i figured i'd repaye since it apparently subsidizes more interest than IBR unless I can't read, which is quite possible given the last few months at work.


yeah repaye > ibr across the board.


Does marriage change this? I'm ready to get on repaye for my undergrad loans, but I'm expecting to get married in the next year or so, and it seems like my payments under repaye would skyrocket after that while IBR wouldn't really change. Could I do repaye now and switch to IBR once were married?


good point. marriage is different. you'll want to confirm this but i think you can switch amongst any of the federal programs whenever you want. when you do IBR as a married, you can file separately. and you can actually still claim your household size as 2. its a really weird loophole/provision, but totally legit (you'll want to confirm this as well). so youll get hte benefit of the pverty threshold for 2 people reducing your AGI.

you're going to have to run some numbers to figure out for sure, because there is often times a benefit for married filing jointly in your tax return, so you should compare the tax savings to the loan payment savings/cash flow discrepancy.

but yes off the top of my head, if you are both high earners (and therefore a marriage penalty applies rather than marriage benefit) but only one of you has debt, you would get fucked by REPAYE because your salary to debt load would be twice as high, so you're paying ~2x for the same loan forgiveness benefit of one person. IBR would be the way to go for you, file separately, you get household size 2 still and SO makes no loan payments. loan payment based on 1 salary. and you avoid a marriage penalty. obviously, if you are not both high earners and both have debt, this analysis gets much crazier.

drop by with some numbers if you want to talk it out.

uvauvauva
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Re: Student loan payments: Actual numbers

Postby uvauvauva » Sun May 01, 2016 2:34 pm

I'm a second year big law (working on a fellowship before law school) started. My loans were under IBR before.

But - I have 264k in loans so far.

I've got about 160k saved towards paying this off (100K from my parents 60K from myself).

Advice on 100k? Don't really like big law to be honest with you. But can probably stick it out for another 2 years.

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barkschool
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Re: Student loan payments: Actual numbers

Postby barkschool » Sun May 01, 2016 3:08 pm

uvauvauva wrote:I'm a second year big law (working on a fellowship before law school) started. My loans were under IBR before.

But - I have 264k in loans so far.

I've got about 160k saved towards paying this off (100K from my parents 60K from myself).

Advice on 100k? Don't really like big law to be honest with you. But can probably stick it out for another 2 years.


I don;t understand, have you not paid that towards loans yet?

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JohannDeMann
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Re: Student loan payments: Actual numbers

Postby JohannDeMann » Sun May 01, 2016 3:36 pm

uvauvauva wrote:I'm a second year big law (working on a fellowship before law school) started. My loans were under IBR before.

But - I have 264k in loans so far.

I've got about 160k saved towards paying this off (100K from my parents 60K from myself).

Advice on 100k? Don't really like big law to be honest with you. But can probably stick it out for another 2 years.


If uyou don't like biglaw and are 250K+ in debt, this is a no-brainer. Do not pay a penny more than you have to loans. Keep the 100k and your 60k and do whatever you want with it - buy property, invest it in S&P500, let it sit in a savings count, whatever. Get on REPAYE/IBR/PAYE whatever you are eligible for and ride that shit out.

uvauvauva
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Re: Student loan payments: Actual numbers

Postby uvauvauva » Sun May 01, 2016 4:09 pm

barkschool wrote:
uvauvauva wrote:I'm a second year big law (working on a fellowship before law school) started. My loans were under IBR before.

But - I have 264k in loans so far.

I've got about 160k saved towards paying this off (100K from my parents 60K from myself).

Advice on 100k? Don't really like big law to be honest with you. But can probably stick it out for another 2 years.


I don;t understand, have you not paid that towards loans yet?


Yea. I haven't paid anything off. My first year out of law school I didn't have a job and I was working as a legal fellow. I got my job last year at my firm - and I have been at the firm for a year. 62k was all I saved up. I was on IBR previously.

uvauvauva
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Re: Student loan payments: Actual numbers

Postby uvauvauva » Sun May 01, 2016 4:10 pm

JohannDeMann wrote:
uvauvauva wrote:I'm a second year big law (working on a fellowship before law school) started. My loans were under IBR before.

But - I have 264k in loans so far.

I've got about 160k saved towards paying this off (100K from my parents 60K from myself).

Advice on 100k? Don't really like big law to be honest with you. But can probably stick it out for another 2 years.


If uyou don't like biglaw and are 250K+ in debt, this is a no-brainer. Do not pay a penny more than you have to loans. Keep the 100k and your 60k and do whatever you want with it - buy property, invest it in S&P500, let it sit in a savings count, whatever. Get on REPAYE/IBR/PAYE whatever you are eligible for and ride that shit out.


Isn't it better to stick it out and just pay it off so you have no debt?

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Sun May 01, 2016 4:18 pm

Nah. Liquidity is key if you plan on freeing yourself from those biglaw chains.

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JohannDeMann
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Re: Student loan payments: Actual numbers

Postby JohannDeMann » Sun May 01, 2016 4:56 pm

uvauvauva wrote:
JohannDeMann wrote:
uvauvauva wrote:I'm a second year big law (working on a fellowship before law school) started. My loans were under IBR before.

But - I have 264k in loans so far.

I've got about 160k saved towards paying this off (100K from my parents 60K from myself).

Advice on 100k? Don't really like big law to be honest with you. But can probably stick it out for another 2 years.


If uyou don't like biglaw and are 250K+ in debt, this is a no-brainer. Do not pay a penny more than you have to loans. Keep the 100k and your 60k and do whatever you want with it - buy property, invest it in S&P500, let it sit in a savings count, whatever. Get on REPAYE/IBR/PAYE whatever you are eligible for and ride that shit out.


Isn't it better to stick it out and just pay it off so you have no debt?


dangerzone is right. savings is the key here. honestly, even if you rode out a 200k salary for 20 years, it's questionable whether aggressive repayment or income-based repayment plans are the better option.

the fact you dont like biglaw and see yourself there forever, this is 100%/0% in no circumstances ever should you contribute that 100k of money. what if you go into govt or 501c3?!? what if you open your own shop and need some money to stick through the startup rough patch and have a very low salary for a little while (which under income based repayments would mean no to little loan repayment for that period of time.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Sun May 01, 2016 4:59 pm

JohannDeMann wrote:
dangerzone is right. savings is the key here. honestly, even if you rode out a 200k salary for 20 years, it's questionable whether aggressive repayment or income-based repayment plans are the better option.


Really? Can you explain this?

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star fox
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Re: Student loan payments: Actual numbers

Postby star fox » Sun May 01, 2016 5:06 pm

Anonymous User wrote:
JohannDeMann wrote:
dangerzone is right. savings is the key here. honestly, even if you rode out a 200k salary for 20 years, it's questionable whether aggressive repayment or income-based repayment plans are the better option.


Really? Can you explain this?

Student debt is unsecured, nothing really happens to you if you don't pay it off. Laws may even change to be more borrower-friendly. I think the only way you really lose when you have that much debt is if you end up making Partner, in which case you'd have enough money that the extra interest accrued is not a big deal. By not throwing excess money at student loans, you preserve the ability to do other things with it - invest it in a way that may accrue greater interest than your student loans, buy property and build equity in it as opposed to renting, have a substantial nest egg to hold you over if you are out of work, fulfill consumption desires to make your life feel less shitty.

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Sun May 01, 2016 5:08 pm

Anonymous User wrote:
JohannDeMann wrote:
dangerzone is right. savings is the key here. honestly, even if you rode out a 200k salary for 20 years, it's questionable whether aggressive repayment or income-based repayment plans are the better option.


Really? Can you explain this?

Assume your PAYE payments would cover interest only, or about 18 per year on 264k debt, which is a pretty safe estimate. So you pay 18k for 18 years, or 324k. Then after 20 years your 264k gets forgiven at let's say 40%, so add another 105k. So you pay 429k.

If you pay it off over seven years you'd pay about 336k. On the surface that seems like the better deal, but discounting all those PAYE payments made far into the future plus the tax bomb brings the present value down quite a bit. And you get a lot more flexibility by saving up the cash instead of putting it towards loans.

In this case, the situation is a little different because he has so much cash. If he wanted to stick it out for a couple years in biglaw and pay off the loans quickly it sounds like he probably could.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Sun May 01, 2016 5:08 pm

star fox wrote:
Anonymous User wrote:
JohannDeMann wrote:
dangerzone is right. savings is the key here. honestly, even if you rode out a 200k salary for 20 years, it's questionable whether aggressive repayment or income-based repayment plans are the better option.


Really? Can you explain this?

Student debt is unsecured, nothing really happens to you if you don't pay it off. Laws may even change to be more borrower-friendly. I think the only way you really lose when you have that much debt is if you end up making Partner, in which case you'd have enough money that the extra interest accrued is not a big deal. By not throwing excess money at student loans, you preserve the ability to do other things with it - invest it in a way that may accrue greater interest than your student loans, buy property and build equity in it as opposed to renting, have a substantial nest egg to hold you over if you are out of work, fulfill consumption desires to make your life feel less shitty.


Would I really be able to buy property if I have all that debt though (say 175-190k)? I figure I'll try and aggressively pay off my loans in 4-5 years and then have a massive windfall in terms of net worth and qol.

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Sun May 01, 2016 5:11 pm

Anonymous User wrote:Would I really be able to buy property if I have all that debt though? I figure I'll try and aggressively pay off my loans in 4-5 years and then have a massive windfall in terms of net worth and qol.

Yes you can buy property with student debt, but more importantly what job are you going to be doing that will provide a massive windfall? If you expect to make significant salaries over the next 20 years then you should look to pay off the debt quickly. But you said you expect to leave biglaw in the next two years so I'm not sure why you are so confident about your future income.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Sun May 01, 2016 5:11 pm

It sounds like you're determined to throw that money into loans, so go for it man. Whatever.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Sun May 01, 2016 5:12 pm

Tiago Splitter wrote:
Anonymous User wrote:Would I really be able to buy property if I have all that debt though? I figure I'll try and aggressively pay off my loans in 4-5 years and then have a massive windfall in terms of net worth and qol.

Yes you can buy property with student debt, but more importantly what job are you going to be doing that will provide a massive windfall? If you expect to make significant salaries over the next 20 years then you should look to pay off the debt quickly. But you said you expect to leave biglaw in the next two years so I'm not sure why you are so confident about your future income.


sorry, I should have mentioned that I am a different poster. and I do intend to stay in biglaw long term if I can

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star fox
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Re: Student loan payments: Actual numbers

Postby star fox » Sun May 01, 2016 5:17 pm

Anonymous User wrote:
star fox wrote:
Anonymous User wrote:
JohannDeMann wrote:
dangerzone is right. savings is the key here. honestly, even if you rode out a 200k salary for 20 years, it's questionable whether aggressive repayment or income-based repayment plans are the better option.


Really? Can you explain this?

Student debt is unsecured, nothing really happens to you if you don't pay it off. Laws may even change to be more borrower-friendly. I think the only way you really lose when you have that much debt is if you end up making Partner, in which case you'd have enough money that the extra interest accrued is not a big deal. By not throwing excess money at student loans, you preserve the ability to do other things with it - invest it in a way that may accrue greater interest than your student loans, buy property and build equity in it as opposed to renting, have a substantial nest egg to hold you over if you are out of work, fulfill consumption desires to make your life feel less shitty.


Would I really be able to buy property if I have all that debt though (say 175-190k)? I figure I'll try and aggressively pay off my loans in 4-5 years and then have a massive windfall in terms of net worth and qol.

I personally feel this is a riskier plan in that you have to assume you'll be in a high-paying job for greater than 4-5 years. Coming out of Year 5 with no debt but no cash isn't a great spot to be in, imo. You have to keep working at a high paying job to get to the point where you see the very high positive cash flow benefits.

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Re: Student loan payments: Actual numbers

Postby uvauvauva » Sun May 01, 2016 5:18 pm

Anonymous User wrote:
Tiago Splitter wrote:
Anonymous User wrote:Would I really be able to buy property if I have all that debt though? I figure I'll try and aggressively pay off my loans in 4-5 years and then have a massive windfall in terms of net worth and qol.

Yes you can buy property with student debt, but more importantly what job are you going to be doing that will provide a massive windfall? If you expect to make significant salaries over the next 20 years then you should look to pay off the debt quickly. But you said you expect to leave biglaw in the next two years so I'm not sure why you are so confident about your future income.


sorry, I should have mentioned that I am a different poster. and I do intend to stay in biglaw long term if I can


I mean….. if I leave my big law gig (i'm at a very high-ranking firm) and go to govt/in-house i'd probably be making 120-130k easily.

Think i'll pay it off. I don't like things hanging over my damn head.

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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Sun May 01, 2016 5:19 pm

Anonymous User wrote:
Tiago Splitter wrote:
Anonymous User wrote:Would I really be able to buy property if I have all that debt though? I figure I'll try and aggressively pay off my loans in 4-5 years and then have a massive windfall in terms of net worth and qol.

Yes you can buy property with student debt, but more importantly what job are you going to be doing that will provide a massive windfall? If you expect to make significant salaries over the next 20 years then you should look to pay off the debt quickly. But you said you expect to leave biglaw in the next two years so I'm not sure why you are so confident about your future income.


sorry, I should have mentioned that I am a different poster. and I do intend to stay in biglaw long term if I can

In that case it makes sense to pay it off, but I wouldn't rush into things. Better to build up some cash in case you absolutely must peace out rather than be chained to the desk for years in order to pay off debt.

Also to be fair at least right now you can usually refinance debt for a lower interest rate which I should have included in the math above.

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Sun May 01, 2016 5:20 pm

uvauvauva wrote:I mean….. if I leave my big law gig (i'm at a very high-ranking firm) and go to govt/in-house i'd probably be making 120-130k easily.

Think i'll pay it off. I don't like things hanging over my damn head.

I mean do whatever you gotta do. You'll be fine either way, but will feel like an absolute moron if you end up in a government gig where the government pays off your loans tax free after 10 years.

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JenDarby
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Re: Student loan payments: Actual numbers

Postby JenDarby » Sun May 01, 2016 5:21 pm

Idk I don't make (and never did make) biglaw money but with a decent salary I have no problem paying off my refinanced student loan debt. My lifestyle doesn't suffer. If I wasn't paying my loans off aggressively, there isn't really anything else I would want or need in my life. It's not THAT difficult to make loan payments, save some money and live a nice life off less than biglaw money unless you are paying a fuckton on rent and such. By moving out to NJ and having a shitty commute my rents around $1200 a month and I live just fine. I don't eat out often or go out and spend a lot of often, but that's not because I can't afford it, it's because that's just how I live. I wouldn't pay THAT much less on PAYE, and I am fairly client my salary will stay around this range.
Last edited by JenDarby on Sun May 01, 2016 5:23 pm, edited 1 time in total.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Sun May 01, 2016 5:22 pm

Tiago Splitter wrote:
uvauvauva wrote:I mean….. if I leave my big law gig (i'm at a very high-ranking firm) and go to govt/in-house i'd probably be making 120-130k easily.

Think i'll pay it off. I don't like things hanging over my damn head.

I mean do whatever you gotta do. You'll be fine either way, but will feel like an absolute moron if you end up in a government gig where the government pays off your loans tax free after 10 years.


Yea but getting married? Having that hang over me for the rest of my life? It's a lot. There are a lot of stuff combined with it.

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Sun May 01, 2016 5:25 pm

Anonymous User wrote:
Tiago Splitter wrote:
uvauvauva wrote:I mean….. if I leave my big law gig (i'm at a very high-ranking firm) and go to govt/in-house i'd probably be making 120-130k easily.

Think i'll pay it off. I don't like things hanging over my damn head.

I mean do whatever you gotta do. You'll be fine either way, but will feel like an absolute moron if you end up in a government gig where the government pays off your loans tax free after 10 years.


Yea but getting married? Having that hang over me for the rest of my life? It's a lot. There are a lot of stuff combined with it.

Look I agree it's not an easy decision. At the very least it involves guessing what your income will be many years out. But whatever happens if you work in biglaw for a few years and then go to the government for ten you will have been much better off not paying the debt.

Keep in mind that you can always just save a boatload of cash for a couple years and then if government turns out not to be realistic just pay off the debt then. It's not like you're forced into one or the other.

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JenDarby
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Re: Student loan payments: Actual numbers

Postby JenDarby » Sun May 01, 2016 5:27 pm

Tiago Splitter wrote:
Anonymous User wrote:
Tiago Splitter wrote:
uvauvauva wrote:I mean….. if I leave my big law gig (i'm at a very high-ranking firm) and go to govt/in-house i'd probably be making 120-130k easily.

Think i'll pay it off. I don't like things hanging over my damn head.

I mean do whatever you gotta do. You'll be fine either way, but will feel like an absolute moron if you end up in a government gig where the government pays off your loans tax free after 10 years.


Yea but getting married? Having that hang over me for the rest of my life? It's a lot. There are a lot of stuff combined with it.

Look I agree it's not an easy decision. At the very least it involves guessing what your income will be many years out. But whatever happens if you work in biglaw for a few years and then go to the government for ten you will have been much better off not paying the debt.

Keep in mind that you can always just save a boatload of cash for a couple years and then if government turns out not to be realistic just pay off the debt then. It's not like you're forced into one or the other.

You definitely need to consider all future options. Biglaw to Gov is a pretty common direction so with that on the table I probably wouldn't refinance or aggressively pay off my debt. There's next to zero chance I will end up in a gov job, and that did factor into my refinance decision.




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