Student loan payments: Actual numbers

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maxpower430
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Re: Student loan payments: Actual numbers

Postby maxpower430 » Sat Jun 25, 2016 7:44 pm

JohannDeMann wrote:
maxpower430 wrote:Hmm ok. Well, my situation is: married (SO makes about 1/3 what I do), $100k fed loans and 30k refi (10 year variable at 2.69% rn). I assume I should hop on now and start saving/investing my savings, and reasses once I have to recertify my income. Thoughts?

yeah with the way you have 30k refied already, I'd probably just refi them all. doing REPAYE for a year isnt really going to help you that much because your payments will probably be close to covering all the interest with you and your SO's income together.


interesting. refi'ing everything kinda freaks me out but the savings would be pretty large.

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Calvin Murphy
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Re: Student loan payments: Actual numbers

Postby Calvin Murphy » Sun Jun 26, 2016 12:52 pm

So...with the REPAYE interest subsidization, someone with $100,000-200,000 (or really anyone else...but this is the category I would think where the option is most attractive. Higher debt = ride it out to forgiveness; lower debt = it's getting paid off no matter what, so it's less of an issue) could use 2L summer year's tax #s for a year and stub year #s for a year, paying very little on his/her loans for two years while interest accrues at an effective rate of ~3.5-4% (slightly over half of the weighted average of the loans)?

That person could put the extra money into the market and, as long as they've beaten 3.5-4%, they come out on top by refinancing two years later? (And if they don't beat the market, they paid a small premium to buy two years of decision-making time?)

PepeSilvia
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Re: Student loan payments: Actual numbers

Postby PepeSilvia » Mon Jun 27, 2016 3:48 pm

Hi guys, I tried my best to search for an answer to this in the thread but it's tough to sort through 100+ pages of content. Hoping someone can help me out.

I have about $60k in debt and will be starting biglaw in September (180k). I'm wondering how aggressively I should try to pay all of my debt? My rent is ~$1,900, so about $2k with utilities each month. How much of my monthly paycheck should I allocate toward paying the debt? 2k? 3k? If I'm calculating correctly, seems like monthly take-home will be somewhere around $8,500 or just shy of $9,000. Take out the $2k for rent and utilities, and I'm left with about $6,500. What is a reasonable way of allocating this money?

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Mlk&Ckies
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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Jun 27, 2016 3:50 pm

Pay as much as you can and be debt free in less than two years. It should be a pretty simple situation.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Jun 27, 2016 3:51 pm

PepeSilvia wrote:Hi guys, I tried my best to search for an answer to this in the thread but it's tough to sort through 100+ pages of content. Hoping someone can help me out.

I have about $60k in debt and will be starting biglaw in September (180k). I'm wondering how aggressively I should try to pay all of my debt? My rent is ~$1,900, so about $2k with utilities each month. How much of my monthly paycheck should I allocate toward paying the debt? 2k? 3k? If I'm calculating correctly, seems like monthly take-home will be somewhere around $8,500 or just shy of $9,000. Take out the $2k for rent and utilities, and I'm left with about $6,500. What is a reasonable way of allocating this money?



30k in debt and 30k in savings/investments growing at 3-5% interest are worth more than 0k in debt and 0k in savings.

What i'm saying is don't just throw money at the debt and forget about savings. build up some savings, max out your 401k if the firm matches, use an IRA, if you can mange your investments to get a better return than the interest rate on your loans then pursue investments and only make minimum payments.

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Mon Jun 27, 2016 3:52 pm

PepeSilvia wrote:Hi guys, I tried my best to search for an answer to this in the thread but it's tough to sort through 100+ pages of content. Hoping someone can help me out.

I have about $60k in debt and will be starting biglaw in September (180k). I'm wondering how aggressively I should try to pay all of my debt? My rent is ~$1,900, so about $2k with utilities each month. How much of my monthly paycheck should I allocate toward paying the debt? 2k? 3k? If I'm calculating correctly, seems like monthly take-home will be somewhere around $8,500 or just shy of $9,000. Take out the $2k for rent and utilities, and I'm left with about $6,500. What is a reasonable way of allocating this money?

I'd look to refi and if you can get a nice low rate don't rush to pay off the debt. Build up a nice savings cushion. For you a variable rate loan makes even more sense because you can quickly build up savings and if the rate starts going up too quickly you can just pay it off.

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JenDarby
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Re: Student loan payments: Actual numbers

Postby JenDarby » Mon Jun 27, 2016 3:58 pm

Tiago Splitter wrote:
PepeSilvia wrote:Hi guys, I tried my best to search for an answer to this in the thread but it's tough to sort through 100+ pages of content. Hoping someone can help me out.

I have about $60k in debt and will be starting biglaw in September (180k). I'm wondering how aggressively I should try to pay all of my debt? My rent is ~$1,900, so about $2k with utilities each month. How much of my monthly paycheck should I allocate toward paying the debt? 2k? 3k? If I'm calculating correctly, seems like monthly take-home will be somewhere around $8,500 or just shy of $9,000. Take out the $2k for rent and utilities, and I'm left with about $6,500. What is a reasonable way of allocating this money?

I'd look to refi and if you can get a nice low rate don't rush to pay off the debt. Build up a nice savings cushion. For you a variable rate loan makes even more sense because you can quickly build up savings and if the rate starts going up too quickly you can just pay it off.

Agree with this. On a 10 year refi you should get a variable rate around 3% (if not less) which would put your monthly payments at around $575. I would build up a solid savings while making regular loan payments. You'll be able to save a ton and still pay more than the minimum once you have a solid foundation.

You're going to pay off 60k. With your salary I would refinance ASAP.

PepeSilvia
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Re: Student loan payments: Actual numbers

Postby PepeSilvia » Mon Jun 27, 2016 4:01 pm

JenDarby wrote:
Tiago Splitter wrote:
PepeSilvia wrote:Hi guys, I tried my best to search for an answer to this in the thread but it's tough to sort through 100+ pages of content. Hoping someone can help me out.

I have about $60k in debt and will be starting biglaw in September (180k). I'm wondering how aggressively I should try to pay all of my debt? My rent is ~$1,900, so about $2k with utilities each month. How much of my monthly paycheck should I allocate toward paying the debt? 2k? 3k? If I'm calculating correctly, seems like monthly take-home will be somewhere around $8,500 or just shy of $9,000. Take out the $2k for rent and utilities, and I'm left with about $6,500. What is a reasonable way of allocating this money?

I'd look to refi and if you can get a nice low rate don't rush to pay off the debt. Build up a nice savings cushion. For you a variable rate loan makes even more sense because you can quickly build up savings and if the rate starts going up too quickly you can just pay it off.

Agree with this. On a 10 year refi you should get a variable rate around 3% (if not less) which would put your monthly payments at around $575. I would build up a solid savings while making regular loan payments. You'll be able to save a ton and still pay more than the minimum once you have a solid foundation.

You're going to pay off 60k. With your salary I would refinance ASAP.



Wow, thanks so much for all of the quick replies.

Would it be financially irresponsible to just try to live like a pauper for the first year in biglaw and try to pay it all off?

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Mon Jun 27, 2016 4:06 pm

PepeSilvia wrote:Would it be financially irresponsible to just try to live like a pauper for the first year in biglaw and try to pay it all off?

Irresponsible might be too strong but biglaw is tough. If you want to leave early on (as many of us do) having some cash on hand to make the transition will help a lot. Remember that we're not telling you to blow all of your extra cash on fancy suits and sports cars. Just take what you would have put into loans and save it. You can always then pay off the loans ASAP if you want to down the road.

Also you only have a limited amount of tax-advantaged contributions available each year. At the very least take advantage of that and max out your 401k/IRA.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Jun 27, 2016 5:26 pm

First year big law with similar debt load - here is some info in case it is helpful:

I started last September with about 70k in debt and refinanced to a 5 year term with ~3% interest rate. Minimum payment is around 1100 but I pay 3k/month. I maxed out my IRA for 2015 (5500) and I max out my 401k (12% of my income). My take home each month is about 7500 after 401k contributions.

My debt is currently down to a little over 50k (really looking forward to being in the 40s, which will happen in a few weeks).

I built up a small emergency fund of 5k. All in all, it has been a good experience living like this financially - eat out with my SO at least once a week but do not make any big extravagant purchases. I am generally a frugal person but have an expensive apartment (2200/month) so hard to say I am very frugal.

I may start to save more because big law has been tough and I would like some flexibility to get out soon.

PepeSilvia
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Re: Student loan payments: Actual numbers

Postby PepeSilvia » Mon Jun 27, 2016 5:59 pm

Anonymous User wrote:First year big law with similar debt load - here is some info in case it is helpful:

I started last September with about 70k in debt and refinanced to a 5 year term with ~3% interest rate. Minimum payment is around 1100 but I pay 3k/month. I maxed out my IRA for 2015 (5500) and I max out my 401k (12% of my income). My take home each month is about 7500 after 401k contributions.

My debt is currently down to a little over 50k (really looking forward to being in the 40s, which will happen in a few weeks).

I built up a small emergency fund of 5k. All in all, it has been a good experience living like this financially - eat out with my SO at least once a week but do not make any big extravagant purchases. I am generally a frugal person but have an expensive apartment (2200/month) so hard to say I am very frugal.

I may start to save more because big law has been tough and I would like some flexibility to get out soon.



This is definitely helpful. Thank you.

Perhaps the toughest variable to figure out for me is how much $$$ I need to live each month in a city as expensive as NYC. Are you there? If so, what is a reasonable expectation for monthly living - food, entertainment, transit, etc.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Jun 27, 2016 6:01 pm

All,

Just looking to get some advice on whether or not I need to be more aggressive in my payment of loans. I graduated with 90K in student loans (I'm a second year associate) and have been pretty slow to pay them off. I re-financed with a 3.1% interest rate and now have about 53K remaining. I like my job and don't expect that I will leave anytime soon.

I max my 401(k) out every year, save about 1,000 in a wealth building account along and have about 15,000 saved in an emergency savings account. Should I halt my savings (in non-tax advantaged accounts) until I pay off my loans, or should I just keep paying double payments each month (my payment is 617/month at SoFi)? I keep thinking of how free I would feel if I just was more aggressive with my student payments, but I also have my payments so low now I am not too afraid of being destroyed if I get Lathamed.

Also, my apartment is expensive, but not so bad and after paying rent (and other bills), I have about 5,000 dollars excess each month.

Open to all thoughts.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Jun 27, 2016 6:11 pm

Just graduated with ~50k in student loans

Salary will be $130k/year, rent will be just under $2k/month

Goal is of course to pay off the debt as quickly as feasible while saving enough for emergencies. I am a financially illiterate K-JD... anyone have advice for where to start? Do I just wing it and pay as much over the minimum payment as I can each month?

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Jun 27, 2016 6:34 pm

Anonymous User wrote:All,

Just looking to get some advice on whether or not I need to be more aggressive in my payment of loans. I graduated with 90K in student loans (I'm a second year associate) and have been pretty slow to pay them off. I re-financed with a 3.1% interest rate and now have about 53K remaining. I like my job and don't expect that I will leave anytime soon.

I max my 401(k) out every year, save about 1,000 in a wealth building account along and have about 15,000 saved in an emergency savings account. Should I halt my savings (in non-tax advantaged accounts) until I pay off my loans, or should I just keep paying double payments each month (my payment is 617/month at SoFi)? I keep thinking of how free I would feel if I just was more aggressive with my student payments, but I also have my payments so low now I am not too afraid of being destroyed if I get Lathamed.

Also, my apartment is expensive, but not so bad and after paying rent (and other bills), I have about 5,000 dollars excess each month.

Open to all thoughts.

Honestly, do what makes you happy as none of your potential choices would be bad. The min/max option is likely to make normal loan payments, max out IRA/401k, put the rest into a brokerage account (due to the low interest on your student loan). If you want to halt savings in the brokerage account, that's perfectly reasonable even if it isn't the most economically efficient option.

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Jun 27, 2016 6:37 pm

Anonymous User wrote:Just graduated with ~50k in student loans

Salary will be $130k/year, rent will be just under $2k/month

Goal is of course to pay off the debt as quickly as feasible while saving enough for emergencies. I am a financially illiterate K-JD... anyone have advice for where to start? Do I just wing it and pay as much over the minimum payment as I can each month?

Pay the minimum until you have an emergency fund (3-6 mos worth of expenses). After that, it may be more advantageous to max out retirement savings (IRA/401k) before putting more to your loans, but it depends on your loans' interest rates.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Jun 27, 2016 8:04 pm

bk1 wrote:
Anonymous User wrote:All,

Just looking to get some advice on whether or not I need to be more aggressive in my payment of loans. I graduated with 90K in student loans (I'm a second year associate) and have been pretty slow to pay them off. I re-financed with a 3.1% interest rate and now have about 53K remaining. I like my job and don't expect that I will leave anytime soon.

I max my 401(k) out every year, save about 1,000 in a wealth building account along and have about 15,000 saved in an emergency savings account. Should I halt my savings (in non-tax advantaged accounts) until I pay off my loans, or should I just keep paying double payments each month (my payment is 617/month at SoFi)? I keep thinking of how free I would feel if I just was more aggressive with my student payments, but I also have my payments so low now I am not too afraid of being destroyed if I get Lathamed.

Also, my apartment is expensive, but not so bad and after paying rent (and other bills), I have about 5,000 dollars excess each month.

Open to all thoughts.

Honestly, do what makes you happy as none of your potential choices would be bad. The min/max option is likely to make normal loan payments, max out IRA/401k, put the rest into a brokerage account (due to the low interest on your student loan). If you want to halt savings in the brokerage account, that's perfectly reasonable even if it isn't the most economically efficient option.


Thanks for the feedback. I figured as much (re: no decision being a bad one at this point) but wanted to make sure it wasn't just wishful thinking on my part. I think I'll probably end up splitting the difference and increasing student loan payment a little and saving a little.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jun 28, 2016 12:27 am

I was able to get a mortgage despite 200k+ in debt in a relatively low COL area.

Sharing because when I graduated last year, I really thought my student loan will keep me from getting a house for a long time. It didn't.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jun 28, 2016 11:08 am

PepeSilvia wrote:
Anonymous User wrote:First year big law with similar debt load - here is some info in case it is helpful:

I started last September with about 70k in debt and refinanced to a 5 year term with ~3% interest rate. Minimum payment is around 1100 but I pay 3k/month. I maxed out my IRA for 2015 (5500) and I max out my 401k (12% of my income). My take home each month is about 7500 after 401k contributions.

My debt is currently down to a little over 50k (really looking forward to being in the 40s, which will happen in a few weeks).

I built up a small emergency fund of 5k. All in all, it has been a good experience living like this financially - eat out with my SO at least once a week but do not make any big extravagant purchases. I am generally a frugal person but have an expensive apartment (2200/month) so hard to say I am very frugal.

I may start to save more because big law has been tough and I would like some flexibility to get out soon.



This is definitely helpful. Thank you.

Perhaps the toughest variable to figure out for me is how much $$$ I need to live each month in a city as expensive as NYC. Are you there? If so, what is a reasonable expectation for monthly living - food, entertainment, transit, etc.


happy to help. I am in DC, but the main thing that helps me is tracking expenses in Mint. I set some budgets and generally try to stay within those ranges. Food and entertainment varies by each person but I try to stick to $50/wk for groceries + another 50 for eating dinner out and am trying to cut down on my habit of eating out for lunch. I don't have cable and use my parents and SO's logins for netflix and hbo.

For a few weeks I was writing down all of my expenses to get a better handle on where my money is going, but then got lazy and just rely on Mint to track everything.

imalreadyamember?
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Re: Student loan payments: Actual numbers

Postby imalreadyamember? » Tue Jul 05, 2016 2:11 am

Tiago Splitter wrote:
PepeSilvia wrote:Would it be financially irresponsible to just try to live like a pauper for the first year in biglaw and try to pay it all off?

Irresponsible might be too strong but biglaw is tough. If you want to leave early on (as many of us do) having some cash on hand to make the transition will help a lot. Remember that we're not telling you to blow all of your extra cash on fancy suits and sports cars. Just take what you would have put into loans and save it. You can always then pay off the loans ASAP if you want to down the road.

Also you only have a limited amount of tax-advantaged contributions available each year. At the very least take advantage of that and max out your 401k/IRA.


Sorry for the ignorance, but isn't there a max salary for IRA/Roth that biglaw exceeds by a lot? I just figured I'd never have any sort of tax advantage because most have a salary cap (no pun intended, congrats on KD btw).

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Tue Jul 05, 2016 9:38 am

smaug wrote:i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.


Agreed. There is also the non-zero chance that following the election, there will be federal refinancing opportunities that will bring your PAYE rates as low as refinancing rates, or lower.

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JenDarby
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Re: Student loan payments: Actual numbers

Postby JenDarby » Tue Jul 05, 2016 10:04 am

Anonymous User wrote:
smaug wrote:i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.


Agreed. There is also the non-zero chance that following the election, there will be federal refinancing opportunities that will bring your PAYE rates as low as refinancing rates, or lower.

:lol: I would definitely be kicking myself for refinancing if the gov would have dropped my 7.2% average loans to sub 3%. Fortunately I feel confident the gov is not THAT generous

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Tue Jul 05, 2016 11:34 am

Very bad decision to bet your financial stability on the whims of the U.S. government. I think we're still waiting for the PAYE/IBR "tax bomb" to be overridden by legislation (hasn't happened yet and probably won't happen).

bern victim
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Re: Student loan payments: Actual numbers

Postby bern victim » Tue Jul 05, 2016 11:38 am

Old Gregg wrote:Very bad decision to bet your financial stability on the whims of the U.S. government. I think we're still waiting for the PAYE/IBR "tax bomb" to be overridden by legislation (hasn't happened yet and probably won't happen).

we're still a decade+ away from the first IBR loans being forgiven. it's not exactly a pressing concern.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Tue Jul 05, 2016 11:44 am

bern victim wrote:
Old Gregg wrote:Very bad decision to bet your financial stability on the whims of the U.S. government. I think we're still waiting for the PAYE/IBR "tax bomb" to be overridden by legislation (hasn't happened yet and probably won't happen).

we're still a decade+ away from the first IBR loans being forgiven. it's not exactly a pressing concern.

Doesn't the first PSLF forgiveness happen in 2017 though?

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JenDarby
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Re: Student loan payments: Actual numbers

Postby JenDarby » Tue Jul 05, 2016 11:45 am

bern victim wrote:
Old Gregg wrote:Very bad decision to bet your financial stability on the whims of the U.S. government. I think we're still waiting for the PAYE/IBR "tax bomb" to be overridden by legislation (hasn't happened yet and probably won't happen).

we're still a decade+ away from the first IBR loans being forgiven. it's not exactly a pressing concern.

I don't disagree with this sentiment, but anon suggesting that after the election the Feds might bring PAYE rates down as low as refinancing rates is pretty silly. No reason to do that when you can punt the tax bomb issue

PSLF has no tax bomb so it doesn't change the timeframe




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