Student loan payments: Actual numbers

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 12:33 pm

Anonymous User wrote: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?

Definitely don't consolidate. It's okay to pay the lump sum if it's what you want to do. Whether it's optimal or not is a different can of worms.

You can refinance federal loans.

Anonymous User wrote:Any downsides to our plan of paying it down as aggressively as possible? are there any considerations I should take into account?

It just depends on what you want. It may be more financially beneficial to refinance and pay it over a longer time because refi rates are fairly low right now, while taking money you would have paid towards the debt and investing it. You could do a similar plan with an income-based plan as well. Of course, refi risks losing federal protections such (which is primarily the flexibility to switch to an income-based plan should you either lose your job or take a much lower paying job). Even if you pay aggressively, you'd still save money by refinancing though that still comes with losing federal protections.

By paying it down aggressively you are foregoing other options (retirement investing, saving for a house down payment, etc). If that's what you want that's fine (I'm doing something similar), but it is a choice you're making by paying down debt aggressively.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 12:41 pm

bk1 wrote:
Anonymous User wrote: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?

Definitely don't consolidate. It's okay to pay the lump sum if it's what you want to do. Whether it's optimal or not is a different can of worms.

You can refinance federal loans.

Anonymous User wrote:Any downsides to our plan of paying it down as aggressively as possible? are there any considerations I should take into account?

It just depends on what you want. It may be more financially beneficial to refinance and pay it over a longer time because refi rates are fairly low right now, while taking money you would have paid towards the debt and investing it. You could do a similar plan with an income-based plan as well. Of course, refi risks losing federal protections such (which is primarily the flexibility to switch to an income-based plan should you either lose your job or take a much lower paying job). Even if you pay aggressively, you'd still save money by refinancing though that still comes with losing federal protections.

By paying it down aggressively you are foregoing other options (retirement investing, saving for a house down payment, etc). If that's what you want that's fine (I'm doing something similar), but it is a choice you're making by paying down debt aggressively.


Thank you, I sincerely appreciate it. Gives me peace of mind to know there aren't any glaring mistakes in our plan that I didn't consider. We do want to pay it down aggressively and keep those federal protections in case one of us gets laid off or something. Our hope is that we will use a portion of my wife stocks to fund the down payment on a house in 2 years, and in the meantime use our incomes/bonuses to pay this debt off as fast as possible. Thanks again!

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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 12:46 pm

bk1 wrote:
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.

So this year (stub year) I should be sure to pay the maximum amount I can deduct to get the maximum benefit since I likely won't ever be able to claim it again?

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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 12:48 pm

The max is only $2500 but yea I'd advise paying it if you would have otherwise paid that interest early next year anyways.

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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 12:51 pm

bk1 wrote:The max is only $2500 but yea I'd advise paying it if you would have otherwise paid that interest early next year anyways.

What a piddly deduction. This matched with mortgage interest deduction makes me wanna go generation warrior.

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 12:52 pm

bk1 wrote:
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.


Depends on your loan balance, view of the market, and desire to get out of debt, but if you have moderate debt (say around $100k), think President Trump/Brexit/Chinese economic collapse are going to send us into a recession, and prefer to be debt-free than holding cash, it's something of a cherry on top. Think about it: if you were already a year or two into a 5-year plan, and you refi to 1RB for the lower interest rates, this is essentially just rewarding you for what you were already going to do. But otherwise, yes, I agree. And the bear market counter-argument would be that you won't have cash on hand to buy low.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 12:53 pm

Can you only take the $2500 student loan interest deduction if you take itemized deductions rather than standard? Do people in their stub year usually have enough itemized deductions to take those over the standard?

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 12:55 pm

Mlk&Ckies wrote:
bk1 wrote:The max is only $2500 but yea I'd advise paying it if you would have otherwise paid that interest early next year anyways.

What a piddly deduction. This matched with mortgage interest deduction makes me wanna go generation warrior.


Piddling indeed. Not to mention you get phased out at $80k/$160k and the deduction is only worth the max multiplied by your marginal tax rate (so $700 tops in any given year). It's pretty absurd that the tax system would treat two people working as biglaw 1As, one whose parents paid for everything and one who had to take out $200k loans to pay for school (which equals nearly $15,000 in interest the first year on a 10-year repayment of 7.65% loans), in the exact same manner.

What does "generation warrior" mean and how does one "go" it?

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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 12:56 pm

Anonymous User wrote:Can you only take the $2500 student loan interest deduction if you take itemized deductions rather than standard? Do people in their stub year usually have enough itemized deductions to take those over the standard?


https://www.irs.gov/taxtopics/tc456.html

You don't have to itemize

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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 12:57 pm

swampthang wrote:
Mlk&Ckies wrote:
bk1 wrote:The max is only $2500 but yea I'd advise paying it if you would have otherwise paid that interest early next year anyways.

What a piddly deduction. This matched with mortgage interest deduction makes me wanna go generation warrior.


Piddling indeed. Not to mention you get phased out at $80k/$160k and the deduction is only worth the max multiplied by your marginal tax rate (so $700 tops in any given year). It's pretty absurd that the tax system would treat two people working as biglaw 1As, one whose parents paid for everything and one who had to take out $200k loans to pay for school (which equals nearly $15,000 in interest the first year on a 10-year repayment of 7.65% loans), in the exact same manner.

What does "generation warrior" mean and how does one "go" it?

Mortgage deduction benefits boomers. Student loans primarily fuck millennials.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 12:59 pm

Mlk&Ckies wrote:
Anonymous User wrote:Can you only take the $2500 student loan interest deduction if you take itemized deductions rather than standard? Do people in their stub year usually have enough itemized deductions to take those over the standard?


https://www.irs.gov/taxtopics/tc456.html

You don't have to itemize


Awesome, thank you.

Fairly upset with my tax professor from last year who absolutely told me it was an itemized deduction.

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Re: Student loan payments: Actual numbers

Postby Mlk&Ckies » Mon Sep 19, 2016 1:00 pm

Anonymous User wrote:
Mlk&Ckies wrote:
Anonymous User wrote:Can you only take the $2500 student loan interest deduction if you take itemized deductions rather than standard? Do people in their stub year usually have enough itemized deductions to take those over the standard?


https://www.irs.gov/taxtopics/tc456.html

You don't have to itemize


Awesome, thank you.

Fairly upset with my tax professor from last year who absolutely told me it was an itemized deduction.

Thank you for your bravery, anon.

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 1:02 pm

Mlk&Ckies wrote:
swampthang wrote:
Mlk&Ckies wrote:
bk1 wrote:The max is only $2500 but yea I'd advise paying it if you would have otherwise paid that interest early next year anyways.

What a piddly deduction. This matched with mortgage interest deduction makes me wanna go generation warrior.


Piddling indeed. Not to mention you get phased out at $80k/$160k and the deduction is only worth the max multiplied by your marginal tax rate (so $700 tops in any given year). It's pretty absurd that the tax system would treat two people working as biglaw 1As, one whose parents paid for everything and one who had to take out $200k loans to pay for school (which equals nearly $15,000 in interest the first year on a 10-year repayment of 7.65% loans), in the exact same manner.

What does "generation warrior" mean and how does one "go" it?

Mortgage deduction benefits boomers. Student loans primarily fuck millennials.


So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 1:40 pm

swampthang wrote:Depends on your loan balance, view of the market, and desire to get out of debt, but if you have moderate debt (say around $100k), think President Trump/Brexit/Chinese economic collapse are going to send us into a recession, and prefer to be debt-free than holding cash, it's something of a cherry on top. Think about it: if you were already a year or two into a 5-year plan, and you refi to 1RB for the lower interest rates, this is essentially just rewarding you for what you were already going to do. But otherwise, yes, I agree. And the bear market counter-argument would be that you won't have cash on hand to buy low.

That's fair. I mean I couldn't pay it off even if I wanted to (it would require me to pay off over a quarter million in 4 years). I think for the 5 year it might make sense if you can swing it, but for the 7/10/15 year plans it would require a lot.

swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 2:04 pm

bk1 wrote:
swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).


Tell me about it. And coming from HYS and working in the V25-V50 space, it always amazes me how many people fall into this bucket. I'll have classmates or co-workers who are nice, down-to-earth, and I'll mention loans and they'll say "oh, my grandma paid for law school" or "my parents were refinancing their house so they just rolled my loans in, too." It's all jealousy, I'd love to be in that position myself. It's just funny, it's only when you get into that top echelon and make a little money that you realize how far away you are from being actually "rich." I'm just hanging my hat on this study of fund managers.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 2:17 pm

Thought I could solicit some advice...

Entering a 180k job next fall. Don't plan on sticking around for more than 4-5 years...but obviously, that could change if I like (or hate) the job.

I will graduate with 130k in debt all in. 10k ish undergrad, 10k ish credit card and a small car note, and 110k law school debt.

What is the best way to pay this down? Hit it hard in my first several years? Or refinance and pay down over time?

I'm torn between making payments over time (and being able to invest) or just ridding myself of the debt as quickly as possible.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 2:35 pm

swampthang wrote:
bk1 wrote:
swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).


Tell me about it. And coming from HYS and working in the V25-V50 space, it always amazes me how many people fall into this bucket. I'll have classmates or co-workers who are nice, down-to-earth, and I'll mention loans and they'll say "oh, my grandma paid for law school" or "my parents were refinancing their house so they just rolled my loans in, too." It's all jealousy, I'd love to be in that position myself. It's just funny, it's only when you get into that top echelon and make a little money that you realize how far away you are from being actually "rich." I'm just hanging my hat on this study of fund managers.


Not to de-rail, but I couldn't agree with this more. I am a second year and somehow, I still feel poor. Sure, I have some savings. But tons of debt and I don't rage on the weekends, so I am always curious where all my money goes. Then I look and learn that life is just expensive.

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 2:40 pm

Anonymous User wrote:Thought I could solicit some advice...

Entering a 180k job next fall. Don't plan on sticking around for more than 4-5 years...but obviously, that could change if I like (or hate) the job.

I will graduate with 130k in debt all in. 10k ish undergrad, 10k ish credit card and a small car note, and 110k law school debt.

What is the best way to pay this down? Hit it hard in my first several years? Or refinance and pay down over time?

I'm torn between making payments over time (and being able to invest) or just ridding myself of the debt as quickly as possible.


Depends how high the interest rates are. What immediately jumps out is the credit card debt, which can carry interest rates in the 20's. That should go immediately. Regarding student loans, pay it off now vs. refinance is a false dichotomy. Unless you highly value the federal loan benefits (forebearance, IBR, PAYE), it probably makes sense to refinance anyway and save ~5% in interest payments. From there, it's finding a balance between paying loans off in a reasonable amount of time, having a cash cushion, and investing. The only situations where I wouldn't refinance are if you think you're likely to end up in government, public interest, or another low-paying job in the next 5 years, or if you're otherwise risk averse (anything from financial background to zero corporate work experience). Otherwise, if you don't value the insurance option of federal loans, I say why throw money away on higher interest rates.

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 2:45 pm

Anonymous User wrote:
swampthang wrote:
bk1 wrote:
swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).


Tell me about it. And coming from HYS and working in the V25-V50 space, it always amazes me how many people fall into this bucket. I'll have classmates or co-workers who are nice, down-to-earth, and I'll mention loans and they'll say "oh, my grandma paid for law school" or "my parents were refinancing their house so they just rolled my loans in, too." It's all jealousy, I'd love to be in that position myself. It's just funny, it's only when you get into that top echelon and make a little money that you realize how far away you are from being actually "rich." I'm just hanging my hat on this study of fund managers.


Not to de-rail, but I couldn't agree with this more. I am a second year and somehow, I still feel poor. Sure, I have some savings. But tons of debt and I don't rage on the weekends, so I am always curious where all my money goes. Then I look and learn that life is just expensive.


And I don't mean to trivialize the fact that we make an objective ton of money. When people back home ask and I tell them my wife and I pay $2,000 for a (relatively) modest 600sf 1BR apartment in the Northeast, their eyes pop out. I have a decently large immediate family, and I'm certain I make more in one year than the rest my family combined. So I'm very aware that by any general financial accounting, I'm doing just fine. But yeah, life in a coastal city is expensive. Loans are expensive. Paying the same tax rates (or really higher vs. those who are single) as my colleagues from prep school backgrounds and not getting any student loan deduction is expensive. The Cravath salary bump was joyous news! But when it actually flows through to your paycheck, you realize that it never really adds up that fast. Do you budget? I have an Excel budget spreadsheet and try to keep it fresh via Mint. That at least helps me understand where everything goes. Accordingly, trying to cut back on the booze. :wink:

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Re: Student loan payments: Actual numbers

Postby bk1 » Mon Sep 19, 2016 2:49 pm

Anonymous User wrote:Thought I could solicit some advice...

Entering a 180k job next fall. Don't plan on sticking around for more than 4-5 years...but obviously, that could change if I like (or hate) the job.

I will graduate with 130k in debt all in. 10k ish undergrad, 10k ish credit card and a small car note, and 110k law school debt.

What is the best way to pay this down? Hit it hard in my first several years? Or refinance and pay down over time?

I'm torn between making payments over time (and being able to invest) or just ridding myself of the debt as quickly as possible.

1. Get rid of your CC debt asap and stop carrying a balance. Then build an emergency fund.
2. If you're comfortable with losing federal protections, refi.
3. Refi and paying aggressively aren't mutually exclusive. Whether you should pay aggressively depends on your priorities. If you prioritize being debt-free over saving for retirement, saving for a house down payment, investing generally, etc, then pay aggressively. You say that you're torn, but you really have to prioritize what's important to you. Maybe seek a middle path by being somewhat aggressive but still making some investments?
4. If you're paying aggressively, focus on the highest interest debt first (whether that's car loan, student loan, or whatever).

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 3:01 pm

swampthang wrote:
Anonymous User wrote:
swampthang wrote:
bk1 wrote:
swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).


Tell me about it. And coming from HYS and working in the V25-V50 space, it always amazes me how many people fall into this bucket. I'll have classmates or co-workers who are nice, down-to-earth, and I'll mention loans and they'll say "oh, my grandma paid for law school" or "my parents were refinancing their house so they just rolled my loans in, too." It's all jealousy, I'd love to be in that position myself. It's just funny, it's only when you get into that top echelon and make a little money that you realize how far away you are from being actually "rich." I'm just hanging my hat on this study of fund managers.


Not to de-rail, but I couldn't agree with this more. I am a second year and somehow, I still feel poor. Sure, I have some savings. But tons of debt and I don't rage on the weekends, so I am always curious where all my money goes. Then I look and learn that life is just expensive.


And I don't mean to trivialize the fact that we make an objective ton of money. When people back home ask and I tell them my wife and I pay $2,000 for a (relatively) modest 600sf 1BR apartment in the Northeast, their eyes pop out. I have a decently large immediate family, and I'm certain I make more in one year than the rest my family combined. So I'm very aware that by any general financial accounting, I'm doing just fine. But yeah, life in a coastal city is expensive. Loans are expensive. Paying the same tax rates (or really higher vs. those who are single) as my colleagues from prep school backgrounds and not getting any student loan deduction is expensive. The Cravath salary bump was joyous news! But when it actually flows through to your paycheck, you realize that it never really adds up that fast. Do you budget? I have an Excel budget spreadsheet and try to keep it fresh via Mint. That at least helps me understand where everything goes. Accordingly, trying to cut back on the booze. :wink:


My mortgage (just bought) and student loans send something close to 6,500 out the door on the first every month. Furnishing a new home is insanely expensive. We budget, but we more force savings. So something like 3k/month goes to a bank we never look at, but that is from mine and my SOs salary.Oh and the downpay was not much for people thinking I save plenty already having a down. Professional lending programs basically give mortgages with nothing down these days. (No, I am not in NY, but market paying city).

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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 3:10 pm

Anonymous User wrote:My mortgage (just bought) and student loans send something close to 6,500 out the door on the first every month. Furnishing a new home is insanely expensive. We budget, but we more force savings. So something like 3k/month goes to a bank we never look at, but that is from mine and my SOs salary.Oh and the downpay was not much for people thinking I save plenty already having a down. Professional lending programs basically give mortgages with nothing down these days. (No, I am not in NY, but market paying city).


^^Tell me more. Given our income and likely purchase price, I haven't seen anything less than 10% down, but I'm happy to be proven wrong.

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Re: Student loan payments: Actual numbers

Postby zot1 » Mon Sep 19, 2016 3:11 pm

swampthang wrote:
Anonymous User wrote:
swampthang wrote:
bk1 wrote:
swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).


Tell me about it. And coming from HYS and working in the V25-V50 space, it always amazes me how many people fall into this bucket. I'll have classmates or co-workers who are nice, down-to-earth, and I'll mention loans and they'll say "oh, my grandma paid for law school" or "my parents were refinancing their house so they just rolled my loans in, too." It's all jealousy, I'd love to be in that position myself. It's just funny, it's only when you get into that top echelon and make a little money that you realize how far away you are from being actually "rich." I'm just hanging my hat on this study of fund managers.


Not to de-rail, but I couldn't agree with this more. I am a second year and somehow, I still feel poor. Sure, I have some savings. But tons of debt and I don't rage on the weekends, so I am always curious where all my money goes. Then I look and learn that life is just expensive.


And I don't mean to trivialize the fact that we make an objective ton of money. When people back home ask and I tell them my wife and I pay $2,000 for a (relatively) modest 600sf 1BR apartment in the Northeast, their eyes pop out. I have a decently large immediate family, and I'm certain I make more in one year than the rest my family combined. So I'm very aware that by any general financial accounting, I'm doing just fine. But yeah, life in a coastal city is expensive. Loans are expensive. Paying the same tax rates (or really higher vs. those who are single) as my colleagues from prep school backgrounds and not getting any student loan deduction is expensive. The Cravath salary bump was joyous news! But when it actually flows through to your paycheck, you realize that it never really adds up that fast. Do you budget? I have an Excel budget spreadsheet and try to keep it fresh via Mint. That at least helps me understand where everything goes. Accordingly, trying to cut back on the booze. :wink:


Not to derail, but this is why I left a big city and never looked back.

When I realized I could be putting my money into a mortgage versus throwing it away in rent for decades (I work in gov't so no real option of buying within several years of employment), I went with the former. I'm in a better place financially as a result of leaving. Don't regret that.

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Sep 19, 2016 3:14 pm

bk1 wrote:
Anonymous User wrote:Thought I could solicit some advice...

Entering a 180k job next fall. Don't plan on sticking around for more than 4-5 years...but obviously, that could change if I like (or hate) the job.

I will graduate with 130k in debt all in. 10k ish undergrad, 10k ish credit card and a small car note, and 110k law school debt.

What is the best way to pay this down? Hit it hard in my first several years? Or refinance and pay down over time?

I'm torn between making payments over time (and being able to invest) or just ridding myself of the debt as quickly as possible.

1. Get rid of your CC debt asap and stop carrying a balance. Then build an emergency fund.
2. If you're comfortable with losing federal protections, refi.
3. Refi and paying aggressively aren't mutually exclusive. Whether you should pay aggressively depends on your priorities. If you prioritize being debt-free over saving for retirement, saving for a house down payment, investing generally, etc, then pay aggressively. You say that you're torn, but you really have to prioritize what's important to you. Maybe seek a middle path by being somewhat aggressive but still making some investments?
4. If you're paying aggressively, focus on the highest interest debt first (whether that's car loan, student loan, or whatever).


Thank you, this is super helpful. I'm more interested in saving for a down payment than paying them off immediately... I live in a city where buying a decent condo is doable (aka not nyc or san francisco). So I think i'll go for some sort of middle ground after knocking out cc debt

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swampthang
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Re: Student loan payments: Actual numbers

Postby swampthang » Mon Sep 19, 2016 3:49 pm

zot1 wrote:
swampthang wrote:
Anonymous User wrote:
swampthang wrote:
bk1 wrote:
swampthang wrote:So does that mean the few of us able to get a job that lets us pay off our student loans are going to be kings? Or are we just in the back of the line behind those who went for free? Boomers also get the double benefit of the fact that house prices always go up (or at least they're hedged by convincing milennials of that fact so they can unload their crappy old houses at a profit).

It's those who didn't take out debt in the first place that are kings (grumbles about his fellow associates who are looking to buy houses already).


Tell me about it. And coming from HYS and working in the V25-V50 space, it always amazes me how many people fall into this bucket. I'll have classmates or co-workers who are nice, down-to-earth, and I'll mention loans and they'll say "oh, my grandma paid for law school" or "my parents were refinancing their house so they just rolled my loans in, too." It's all jealousy, I'd love to be in that position myself. It's just funny, it's only when you get into that top echelon and make a little money that you realize how far away you are from being actually "rich." I'm just hanging my hat on this study of fund managers.


Not to de-rail, but I couldn't agree with this more. I am a second year and somehow, I still feel poor. Sure, I have some savings. But tons of debt and I don't rage on the weekends, so I am always curious where all my money goes. Then I look and learn that life is just expensive.


And I don't mean to trivialize the fact that we make an objective ton of money. When people back home ask and I tell them my wife and I pay $2,000 for a (relatively) modest 600sf 1BR apartment in the Northeast, their eyes pop out. I have a decently large immediate family, and I'm certain I make more in one year than the rest my family combined. So I'm very aware that by any general financial accounting, I'm doing just fine. But yeah, life in a coastal city is expensive. Loans are expensive. Paying the same tax rates (or really higher vs. those who are single) as my colleagues from prep school backgrounds and not getting any student loan deduction is expensive. The Cravath salary bump was joyous news! But when it actually flows through to your paycheck, you realize that it never really adds up that fast. Do you budget? I have an Excel budget spreadsheet and try to keep it fresh via Mint. That at least helps me understand where everything goes. Accordingly, trying to cut back on the booze. :wink:


Not to derail, but this is why I left a big city and never looked back.

When I realized I could be putting my money into a mortgage versus throwing it away in rent for decades (I work in gov't so no real option of buying within several years of employment), I went with the former. I'm in a better place financially as a result of leaving. Don't regret that.


If you're working in government, this makes more sense than working in the private sector where the astronomically higher salaries can often make the higher COL worth the cost. Department heads in my rural Middle American home county make six figures. These are lifelong bureaucrats who got their degrees at regional schools you've never heard of. That's nuts to me. And while I'm glad that moving has allowed you to meet your personal financial goals, I disagree with your assessment that renting is "throwing money away." First off, most of my mortgage payment would be going to interest payments right now anyway, so only 1/3 wouldn't be similarly "thrown away" as expenses. Second, rent buys you a lot of things: it buys you the flexibility to pick up and move with limited financial downside. I'm looking at maybe a month or two of lost rent vs. trying to sell in a down market, 6% agents' fees, closing costs, etc. That mobility premium is especially valuable when you're younger and more up in the air. Rent buys me an insurance policy against both maintenance items (when my appliances break, I call my landlord and have him pay to fix them) and changes to the real estate market value-- I may not enjoy any upside in real estate appreciation, but I also don't participate in the downside when the next housing correction wipes out 15% of that vaunted equity. So while buying a house is certainly the right call in many circumstances, and makes sense as a longer term goal, especially if you're comfortable staying in the same place, it's not correct to make a blanket statement that rent is "throwing money away."




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