Student loan payments: Actual numbers

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swampthang
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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 12, 2016 2:18 pm

bk1 wrote:
Mlk&Ckies wrote:If you're gonna be on PAYE with a big law salary, the benefit isn't what could hypothetically be forgiven in 20 years (don't listen to johann). The benefit is that the lower payments give you time to get your financial house of cards in order and it's insurance for if you don't think your salary will stay at that level for as long as you need to pay off your loans.

As far as refinancing, that's a risk that's going to be really personal. For me, the risks of interest rates increasing more than another percentage point over the next year scares me less than the risk of not liking my job or being bad at it. At least for now, getting on PAYE gives me the peace of mind that if I don't like my lifestyle, I can conceivably do something else and not be totally financially devastated.

As far as which plan is best, if you qualify for PAYE that's better than REPAYE I'm pretty sure, although I haven't really looked at the details in a while.

I agree it's a personal risk assessment, but I feel like being able to refi again to a longer term is a sufficient hedge. Unless you think you're going to potentially ride out to forgiveness, I lean towards refi sooner rather than later.

It's not just the risk of interest rates rising, but also paying the 6-7% interest on your current loan (rather than the refi rate) up until the time you refi. I've already saved nearly 10k in interest purely from the first year of my refi.


Agreed, especially with the bolded.

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Nebby
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Re: Student loan payments: Actual numbers

Postby Nebby » Mon Sep 12, 2016 2:22 pm

This thread reminds me that the Fed better not raise the rates until I refi my private loans from undergrad (I don't actually know if this rate raise would affect my refi rates but I assume it will)

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Nebby
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Re: Student loan payments: Actual numbers

Postby Nebby » Fri Sep 16, 2016 11:23 am

I am participating in my school's LRAP which will cover all my federal loan obligations. I am thinking of setting up a savings account that is solely for depositing the LRAP funds and then using that account for paying the federal loans. I was going to go with Ally since they've got a 1% interest rate. Anyone else do this or think this is an okay idea?

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swampthang
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Re: Student loan payments: Actual numbers

Postby swampthang » Fri Sep 16, 2016 12:02 pm

Nebby wrote:I am participating in my school's LRAP which will cover all my federal loan obligations. I am thinking of setting up a savings account that is solely for depositing the LRAP funds and then using that account for paying the federal loans. I was going to go with Ally since they've got a 1% interest rate. Anyone else do this or think this is an okay idea?


Danger Zone thinks otherwise.

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Danger Zone
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Re: Student loan payments: Actual numbers

Postby Danger Zone » Fri Sep 16, 2016 12:36 pm

No I don't. Ally is fine for that purpose, since it's not gonna be sitting around for too long anyway.

Besides, nebby doesn't care what I think.

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Re: Student loan payments: Actual numbers

Postby anonnymouse » Fri Sep 16, 2016 9:32 pm

Nebby wrote:This thread reminds me that the Fed better not raise the rates until I refi my private loans from undergrad (I don't actually know if this rate raise would affect my refi rates but I assume it will)

Seems like First Republic is going to continue to offer below-market interest rates on their refis (which aren't student loans, btw) in order to keep grabbing customers. I noticed that DRB has come up to market on their variable rates since I refi'd mine 18 months ago. I was able to get 3 Month Libor + 222 bps on a variable, which was still a good 50 bps above their lowest advertised rate, and now it looks like their best offer is a spread of 280 bps on variable. DRB has also farmed out their loan servicing to MOHELA as of August.

There are a ton of players now and at any given time, there's going to be at least one trying to nab you as a customer longer term but offering you decent rates. While you might not get sub-2% rates, you won't be too far off, even if the Fed raises a few times over the next year or two.

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Mlk&Ckies
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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Fri Sep 16, 2016 9:37 pm

Not to be pedantic, but it seems like a pedantic point to bring up in the first place: aren't refis "student loans" in that they're subject to the same restrictions?

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Fri Sep 16, 2016 10:01 pm

Mlk&Ckies wrote:Not to be pedantic, but it seems like a pedantic point to bring up in the first place: aren't refis "student loans" in that they're subject to the same restrictions?

Not always. Compare

SoFi wrote:SoFi loans are considered student loans for federal and state tax consideration.

Source: https://www.sofi.com/faq/

With

First Republic wrote:This product is not an education loan and may remove federal privileges and benefits associated with existing student loans.

Source: https://www.firstrepublic.com/student-loan-refinancing

I'm not entirely sure what creates this distinction, but I do think First Republic loans are different than other student loan refinance loans.

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Mlk&Ckies
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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Fri Sep 16, 2016 10:11 pm

bk1 wrote:
Mlk&Ckies wrote:Not to be pedantic, but it seems like a pedantic point to bring up in the first place: aren't refis "student loans" in that they're subject to the same restrictions?

Not always. Compare

SoFi wrote:SoFi loans are considered student loans for federal and state tax consideration.

Source: https://www.sofi.com/faq/

With

First Republic wrote:This product is not an education loan and may remove federal privileges and benefits associated with existing student loans.

Source: https://www.firstrepublic.com/student-loan-refinancing

I'm not entirely sure what creates this distinction, but I do think First Republic loans are different than other student loan refinance loans.


I assumed that language was referring to the loss of forebearance/income based plans/etc. not that the loans aren't restricted by the same basic rules. (No further origination fees, no discharge in bankruptcy, interest tax deduction etc)

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El Pollito
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Re: Student loan payments: Actual numbers

Postby El Pollito » Fri Sep 16, 2016 10:21 pm

jfc COA is ridic nowadays :shock:

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Fri Sep 16, 2016 10:26 pm

Mlk&Ckies wrote:I assumed that language was referring to the loss of forebearance/income based plans/etc. not that the loans aren't restricted by the same basic rules. (No further origination fees, no discharge in bankruptcy, interest tax deduction etc)

I don't think so. In addition to losing those things, First Republic goes on to say:

Additionally, you may be giving up certain tax benefits associated with the interest paid on student loans.

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Mlk&Ckies
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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Fri Sep 16, 2016 10:30 pm

bk1 wrote:
Mlk&Ckies wrote:I assumed that language was referring to the loss of forebearance/income based plans/etc. not that the loans aren't restricted by the same basic rules. (No further origination fees, no discharge in bankruptcy, interest tax deduction etc)

I don't think so. In addition to losing those things, First Republic goes on to say:

Additionally, you may be giving up certain tax benefits associated with the interest paid on student loans.


Hmmmmm interesting. So if things get bad enough and you're unemployed but don't have access to PAYE anymore you could just file for bankruptcy? Or is there some way a thing both is and isn't a student loan for different purposes?

I'm not playing dumb, I'm on my phone and a cursory google search isn't turning up results for me

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Fri Sep 16, 2016 11:13 pm

Mlk&Ckies wrote:Hmmmmm interesting. So if things get bad enough and you're unemployed but don't have access to PAYE anymore you could just file for bankruptcy? Or is there some way a thing both is and isn't a student loan for different purposes?

I'm not playing dumb, I'm on my phone and a cursory google search isn't turning up results for me

I think it's just an unsecured loan and is not an education loan for any reason. To me, I think that means you could discharge it in bk.

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swampthang
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Re: Student loan payments: Actual numbers

Postby swampthang » Sun Sep 18, 2016 2:44 pm

bk1 wrote:
Mlk&Ckies wrote:Hmmmmm interesting. So if things get bad enough and you're unemployed but don't have access to PAYE anymore you could just file for bankruptcy? Or is there some way a thing both is and isn't a student loan for different purposes?

I'm not playing dumb, I'm on my phone and a cursory google search isn't turning up results for me

I think it's just an unsecured loan and is not an education loan for any reason. To me, I think that means you could discharge it in bk.


That's what I've been told- it's an unsecured personal loan. I'm not really sure how or why they would change the nature of the loan, but I think the only difference (other than potentially easier bankruptcy dischargeability) is the inability to deduct interest payments. Considering that the interest deduction is completely phased out by $80k single/$160k married, is capped at $2,500 of interest, and is worth up to your marginal rate multiplied by the interest cap (so, 28% if married x $2,500 = $700), I think the lower interest more than makes up for that tradeoff.

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Calvin Murphy
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Re: Student loan payments: Actual numbers

Postby Calvin Murphy » Sun Sep 18, 2016 2:55 pm

swampthang wrote:
bk1 wrote:
Mlk&Ckies wrote:Hmmmmm interesting. So if things get bad enough and you're unemployed but don't have access to PAYE anymore you could just file for bankruptcy? Or is there some way a thing both is and isn't a student loan for different purposes?

I'm not playing dumb, I'm on my phone and a cursory google search isn't turning up results for me

I think it's just an unsecured loan and is not an education loan for any reason. To me, I think that means you could discharge it in bk.


That's what I've been told- it's an unsecured personal loan. I'm not really sure how or why they would change the nature of the loan, but I think the only difference (other than potentially easier bankruptcy dischargeability) is the inability to deduct interest payments. Considering that the interest deduction is completely phased out by $80k single/$160k married, is capped at $2,500 of interest, and is worth up to your marginal rate multiplied by the interest cap (so, 28% if married x $2,500 = $700), I think the lower interest more than makes up for that tradeoff.


Do they allow early repayment without penalty? (Something, to my understanding, that can't get rid of for student loans.)

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Sun Sep 18, 2016 3:05 pm

Calvin Murphy wrote:Do they allow early repayment without penalty? (Something, to my understanding, that can't get rid of for student loans.)

Yes. FR also offers a rebate if you pay within a certain time frame (4 years I think?), but it's relatively minor (2% of original balance?).

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 11:16 am

Class of 2013; CCN; Biglaw

Debt at Graduation: Law School ($87,000); Undergraduate ($11,000)
Factors: Full Ride for Law School (COA in New York though); Refinanced with SoFi (3.31%)
Current Debt: $49,000
Salary: $190,000 (Switched practice groups)
Monthly Payment ($543 minimum; I often pay double this amount and sometimes pay four times the required amount)

Cash: $15,000 savings; $5,000 checking
Taxable: $15,000 brokerage
Tax Advantaged: $53,000

Takeaway: Paying down debt is hard; especially when trying to stock away money for a rainy day. I'm trying to get better at this this year (one of my top goals) and will likely be throwing the full strength of my bonus at the debt.

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swampthang
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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 11:22 am

bk1 wrote:
Calvin Murphy wrote:Do they allow early repayment without penalty? (Something, to my understanding, that can't get rid of for student loans.)

Yes. FR also offers a rebate if you pay within a certain time frame (4 years I think?), but it's relatively minor (2% of original balance?).


Correct. No problems with prepayment, and 2% rebate if you pay it all off in 48 months.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 12:02 pm

Would appreciate some advice before I make a 40K payment on my 220K in fed loans.....

I have 220K in federal loans (grad plus, direct unsubsidized), from law school and undergrad. My loan servicer is Great Lakes. Made my first payment last month. Still have 4K in unpaid interest and the rest is principal. I haven't consolidated all of the separate loans, does this matter for federal loans?

Im about to make a large lump sum payment of 40K, is there anything I need to consider before doing so? Im aware that I need to apply it to the loans with the highest interest rates first (the grad plus loans are at 7.6% if I recall). But are there any tax or other implications I need to consider before doing this? I'm trying to pay it all off as fast as possible, hopefully 3 years. I'll still have sufficient savings for emergencies after this 40k payment.
Thank you very much for your time and insight, I sincerely appreciate it!

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Mlk&Ckies
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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 12:08 pm

Don't consolidate because then you can't pay the high interest loans first.

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 12:12 pm

Anonymous User wrote:Would appreciate some advice before I make a 40K payment on my 220K in fed loans.....

I have 220K in federal loans (grad plus, direct unsubsidized), from law school and undergrad. My loan servicer is Great Lakes. Made my first payment last month. Still have 4K in unpaid interest and the rest is principal. I haven't consolidated all of the separate loans, does this matter for federal loans?


If you have multiple loans at different interest rates, don't consolidate. All consolidation does is combine them into a single loan with an interest rate that is the weighted average of the individual loans. Consolidation removes your ability to pay down the highest interest rate loans first. If your loans were all at the same rate, then it wouldn't matter, but you appear to have multiple rates.

Anonymous User wrote:Im about to make a large lump sum payment of 40K, is there anything I need to consider before doing so? Im aware that I need to apply it to the loans with the highest interest rates first (the grad plus loans are at 7.6% if I recall). But are there any tax or other implications I need to consider before doing this? I'm trying to pay it all off as fast as possible, hopefully 3 years. I'll still have sufficient savings for emergencies after this 40k payment.
Thank you very much for your time and insight, I sincerely appreciate it!


Depending on your income, you may be able to deduct some of the student loan interest from your taxes. If you're a biglaw stub year, then you likely can deduct if you pay off at least 2500 in interest this year, but would be phased out of the deduction next year.

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 12:14 pm

swampthang wrote:
bk1 wrote:
Calvin Murphy wrote:Do they allow early repayment without penalty? (Something, to my understanding, that can't get rid of for student loans.)

Yes. FR also offers a rebate if you pay within a certain time frame (4 years I think?), but it's relatively minor (2% of original balance?).


Correct. No problems with prepayment, and 2% rebate if you pay it all off in 48 months.

That's so not worth it financially. Would require me to pay over 100k years earlier than I'd have to. Better off investing it.

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Mlk&Ckies
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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 12:21 pm

bk1 wrote:
Anonymous User wrote:Would appreciate some advice before I make a 40K payment on my 220K in fed loans.....

I have 220K in federal loans (grad plus, direct unsubsidized), from law school and undergrad. My loan servicer is Great Lakes. Made my first payment last month. Still have 4K in unpaid interest and the rest is principal. I haven't consolidated all of the separate loans, does this matter for federal loans?


If you have multiple loans at different interest rates, don't consolidate. All consolidation does is combine them into a single loan with an interest rate that is the weighted average of the individual loans. Consolidation removes your ability to pay down the highest interest rate loans first. If your loans were all at the same rate, then it wouldn't matter, but you appear to have multiple rates.

Anonymous User wrote:Im about to make a large lump sum payment of 40K, is there anything I need to consider before doing so? Im aware that I need to apply it to the loans with the highest interest rates first (the grad plus loans are at 7.6% if I recall). But are there any tax or other implications I need to consider before doing this? I'm trying to pay it all off as fast as possible, hopefully 3 years. I'll still have sufficient savings for emergencies after this 40k payment.
Thank you very much for your time and insight, I sincerely appreciate it!


Depending on your income, you may be able to deduct some of the student loan interest from your taxes. If you're a biglaw stub year, then you likely can deduct if you pay off at least 2500 in interest this year, but would be phased out of the deduction next year.


Did we ever find out whether you can deduct the interest that capitalizes after you graduate?

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 12:26 pm

bk1 wrote:
Anonymous User wrote:Would appreciate some advice before I make a 40K payment on my 220K in fed loans.....

I have 220K in federal loans (grad plus, direct unsubsidized), from law school and undergrad. My loan servicer is Great Lakes. Made my first payment last month. Still have 4K in unpaid interest and the rest is principal. I haven't consolidated all of the separate loans, does this matter for federal loans?


If you have multiple loans at different interest rates, don't consolidate. All consolidation does is combine them into a single loan with an interest rate that is the weighted average of the individual loans. Consolidation removes your ability to pay down the highest interest rate loans first. If your loans were all at the same rate, then it wouldn't matter, but you appear to have multiple rates.

Anonymous User wrote:Im about to make a large lump sum payment of 40K, is there anything I need to consider before doing so? Im aware that I need to apply it to the loans with the highest interest rates first (the grad plus loans are at 7.6% if I recall). But are there any tax or other implications I need to consider before doing this? I'm trying to pay it all off as fast as possible, hopefully 3 years. I'll still have sufficient savings for emergencies after this 40k payment.
Thank you very much for your time and insight, I sincerely appreciate it!


Depending on your income, you may be able to deduct some of the student loan interest from your taxes. If you're a biglaw stub year, then you likely can deduct if you pay off at least 2500 in interest this year, but would be phased out of the deduction next year.


Thank you very much.

Yes I have multiple loans with multiple rates. Its about 10 different loans with rates from 5% to 7.6%. I'm extremely clueless about all this stuff and am just now getting into it and doing the research. So it's ok for me to do this one large 40k lump sum payment for now? I see people mentioning refinancing in this thread, is this not an option for federal loans?

I graduated last may and FINALLY got a good job after essentially working for free for 8 months, I start in 2 weeks. Mid-size city with great cost of living, my salary is 90k with potential to be 110k depending on my hours worked. Wife salary is 110k and she has no debt. We have 60k in savings and my wife has 70K-100K in stocks that are vesting in 8 months. I'm aware that for tax purposes you're supposed to wait a year before cashing in stocks. Our plan is to pay down my 220K in student loans as fast as possible, making a roughly 5k payment per month, and then also putting all of our bonuses and any excess money towards it. We just want to get this over with. Any downsides to our plan of paying it down as aggressively as possible? are there any considerations I should take into account?

Really appreciate your insight. Learning a lot from this thread.

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 12:27 pm

Mlk&Ckies wrote:Did we ever find out whether you can deduct the interest that capitalizes after you graduate?

Yes, you can deduct it.
IRS wrote: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.




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