Student loan payments: get advice and actual numbers here Forum

[XxSpyKEx]

$220k debt

I'm currently on REPAYE. I wasn't eligible for PAYE because I have one loan that I took out 30 days before the October 2007 cut-off. My partner has no debt. We'd like to get married in the next year or two, but I'm concerneced with the REPAYE marriage penalty. IBR doesn't have a marriage penalty, but it's 15% discretionary income versus 10% on REPAYE. Is it just a matter of deciding which payment plan puts me at a lower monthly payment?

could get a civil union. i considered that for a while.

Or have the marriage ceremony, simply don't file for a marriage license with the state, and continue to file as "single" (assuming you don't live in one of the few states that still recognizes common law marriage). You can accomplish virtually everything you get through marriage with wills, so filing for a marriage license with the state is kind of pointless and dumb if you're on REPAYE imo. No one's going to think you're any less married regardless of whether you file for a marriage license with the state (as a practical, no one besides you and your partner will even know, unless you tell them).

[RaceJudicata]

$220k debt

I'm currently on REPAYE. I wasn't eligible for PAYE because I have one loan that I took out 30 days before the October 2007 cut-off. My partner has no debt. We'd like to get married in the next year or two, but I'm concerneced with the REPAYE marriage penalty. IBR doesn't have a marriage penalty, but it's 15% discretionary income versus 10% on REPAYE. Is it just a matter of deciding which payment plan puts me at a lower monthly payment?

could get a civil union. i considered that for a while.

Or have the marriage ceremony, simply don't file for a marriage license with the state, and continue to file as "single" (assuming you don't live in one of the few states that still recognizes common law marriage). You can accomplish virtually everything you get through marriage with wills, so filing for a marriage license with the state is kind of pointless and dumb if you're on REPAYE imo. No one's going to think you're any less married regardless of whether you file for a marriage license with the state (as a practical, no one besides you and your partner will even know, unless you tell them).

True, but not everyone (myself included) want to create some legal equivalent to marraige, but would rather actually file a marriage certificate.. Personally -- and I think many will agree -- I'll take the financial burdens associated with being married in order to become legally wed in my state. Maybe that is some silly, archaic view, but I don't think so.

[XxSpyKEx]

$220k debt

I'm currently on REPAYE. I wasn't eligible for PAYE because I have one loan that I took out 30 days before the October 2007 cut-off. My partner has no debt. We'd like to get married in the next year or two, but I'm concerneced with the REPAYE marriage penalty. IBR doesn't have a marriage penalty, but it's 15% discretionary income versus 10% on REPAYE. Is it just a matter of deciding which payment plan puts me at a lower monthly payment?

could get a civil union. i considered that for a while.

Or have the marriage ceremony, simply don't file for a marriage license with the state, and continue to file as "single" (assuming you don't live in one of the few states that still recognizes common law marriage). You can accomplish virtually everything you get through marriage with wills, so filing for a marriage license with the state is kind of pointless and dumb if you're on REPAYE imo. No one's going to think you're any less married regardless of whether you file for a marriage license with the state (as a practical, no one besides you and your partner will even know, unless you tell them).

True, but not everyone (myself included) want to create some legal equivalent to marraige, but would rather actually file a marriage certificate.. Personally -- and I think many will agree -- I'll take the financial burdens associated with being married in order to become legally wed in my state. Maybe that is some silly, archaic view, but I don't think so.

Sounds pretty silly to me, but that's just my opinion (imo the oftentimes large amount of money that you save by not legally getting married is better spent on doing things together--like taking a trip together, etc.)

[Tiago Splitter]

Yeah I certainly won't be getting married anytime soon but to each his own.

[Johann]

Yep only reason I ended up getting married was for the 1 year tax benefit (biglaw and basically 0 earner)and because SOs student loans increased a shitload. Had she kept working, I would not have.

[HonestAdvice]

This may have been asked, but what changes is Trump expected to make to thinks like income based repayment and lrap?

[Tiago Splitter]

This may have been asked, but what changes is Trump expected to make to thinks like income based repayment and lrap?

He tossed out a 15 year/12.5% version of PAYE, which basically means don't expect anything to change any time soon.

[HonestAdvice]

This may have been asked, but what changes is Trump expected to make to thinks like income based repayment and lrap?

He tossed out a 15 year/12.5% version of PAYE, which basically means don't expect anything to change any time soon.

Thanks. My fear is it eventually cut like 18 years into a 20 year repayment period. Unless the payments cut drastically into the principal, you wind up owing more than you did out of law school because you have most of the principal and 18 years of interest.

[Tiago Splitter]

This may have been asked, but what changes is Trump expected to make to thinks like income based repayment and lrap?

He tossed out a 15 year/12.5% version of PAYE, which basically means don't expect anything to change any time soon.

Thanks. My fear is it eventually cut like 18 years into a 20 year repayment period. Unless the payments cut drastically into the principal, you wind up owing more than you did out of law school because you have most of the principal and 18 years of interest.

Yeah it sucks but it is simple interest. Your bed is made so either you gotta pay a lot now or a lot later. Either way you have to live below your means.

[HonestAdvice]

This may have been asked, but what changes is Trump expected to make to thinks like income based repayment and lrap?

He tossed out a 15 year/12.5% version of PAYE, which basically means don't expect anything to change any time soon.

Thanks. My fear is it eventually cut like 18 years into a 20 year repayment period. Unless the payments cut drastically into the principal, you wind up owing more than you did out of law school because you have most of the principal and 18 years of interest.

Yeah it sucks but it is simple interest. Your bed is made so either you gotta pay a lot now or a lot later. Either way you have to live below your means.

But if it's forgiven then it's done, and you're free, right? There may be an income tax hit if you have a lot of principal left, and it's treated as income, but you would be paying 30% of your principal instead of 100% (depending on tax bracket).

[Tiago Splitter]

There is no distinction between principal and interest. It's all taxable. 30 percent seems generous especially given the dollar amounts people are potentially looking at.

[1styearlateral]

This may have been asked, but what changes is Trump expected to make to thinks like income based repayment and lrap?

He tossed out a 15 year/12.5% version of PAYE, which basically means don't expect anything to change any time soon.

Thanks. My fear is it eventually cut like 18 years into a 20 year repayment period. Unless the payments cut drastically into the principal, you wind up owing more than you did out of law school because you have most of the principal and 18 years of interest.

Yeah it sucks but it is simple interest. Your bed is made so either you gotta pay a lot now or a lot later. Either way you have to live below your means.

But if it's forgiven then it's done, and you're free, right? There may be an income tax hit if you have a lot of principal left, and it's treated as income, but you would be paying 30% of your principal instead of 100% (depending on tax bracket).

This is correct. So, in some cases, it might be better to pay as little as possible over the course of your repayment program (i.e., only paying a percentage of accrued interest). However, if you're making boku bucks in NYC or another major market, there's no way to avoid the $1,200/mo. repayment.

[1styearlateral]

There is no distinction between principal and interest. It's all taxable. 30 percent seems generous especially given the dollar amounts people are potentially looking at.

Yeah, I think they don't distinguish between principal and interest; it's whatever is owed at the end of your repayment period. But paying 30% of $250k is a lot better than paying $250k, even if you're only making sub-$1,000/mo. payments for 30 years.

[Anonymous User]

As a disclaimer, I know I'm jumping ahead of myself and that I could get no-offered, but I like having decisions made in advance. I'm looking at either graduating with $45k or $67k in debt (with an average interest rate of 5.5 percent), depending on whether I throw SA money at 3L tuition and COL or focus on retirement investments. Has anyone already done the math for this type of situation already? I'm correct in thinking that there are minor tax advantages to taking out the extra year of loans, right? Looking at refinancing as soon as possible, if that makes a difference. I'm really just trying to figure out how to maximize my net worth through this whole process, since I figure I'll be stuck repaying the whole amount no matter what happens.

[Tiago Splitter]

As a disclaimer, I know I'm jumping ahead of myself and that I could get no-offered, but I like having decisions made in advance. I'm looking at either graduating with $45k or $67k in debt (with an average interest rate of 5.5 percent), depending on whether I throw SA money at 3L tuition and COL or focus on retirement investments. Has anyone already done the math for this type of situation already? I'm correct in thinking that there are minor tax advantages to taking out the extra year of loans, right? Looking at refinancing as soon as possible, if that makes a difference. I'm really just trying to figure out how to maximize my net worth through this whole process, since I figure I'll be stuck repaying the whole amount no matter what happens.

This wasn't my view in school and it might not be the best move but I'd toss $5500 from your summer money in to a Roth IRA. Might as well use your tax-advantaged space while you can.

[Tiago Splitter]

There is no distinction between principal and interest. It's all taxable. 30 percent seems generous especially given the dollar amounts people are potentially looking at.

Yeah, I think they don't distinguish between principal and interest; it's whatever is owed at the end of your repayment period. But paying 30% of $250k is a lot better than paying $250k, even if you're only making sub-$1,000/mo. payments for 30 years.

It certainly is but the baseline for me is more like 40-50%. That's what I am assuming I'll owe in 18 years if I'm still on this path.

[Anonymous User]

As a disclaimer, I know I'm jumping ahead of myself and that I could get no-offered, but I like having decisions made in advance. I'm looking at either graduating with $45k or $67k in debt (with an average interest rate of 5.5 percent), depending on whether I throw SA money at 3L tuition and COL or focus on retirement investments. Has anyone already done the math for this type of situation already? I'm correct in thinking that there are minor tax advantages to taking out the extra year of loans, right? Looking at refinancing as soon as possible, if that makes a difference. I'm really just trying to figure out how to maximize my net worth through this whole process, since I figure I'll be stuck repaying the whole amount no matter what happens.

This wasn't my view in school and it might not be the best move but I'd toss $5500 from your summer money in to a Roth IRA. Might as well use your tax-advantaged space while you can.

Planning to do this, but with a regular IRA. Planning to retire fairly early, so there should be years where my income drops close to zero, and I can convert it then. Are there any rules that would get in the way of that? Relatedly, I made the mistake of contributing to a Roth before law school, when I should have done a regular IRA and converted during law school. There isn't any way to go back and correct that, is there?

[Tiago Splitter]

You can only recharacterize a conversion up until your tax deadline so if it happened before 2016 you're out of luck.

I'm not sure I see the benefit of taking an ira deduction on relatively small summer income now and converting a much larger balance later.

[Mr. Peanutbutter]

There is no distinction between principal and interest. It's all taxable. 30 percent seems generous especially given the dollar amounts people are potentially looking at.

Yeah, I think they don't distinguish between principal and interest; it's whatever is owed at the end of your repayment period. But paying 30% of $250k is a lot better than paying $250k, even if you're only making sub-$1,000/mo. payments for 30 years.

It certainly is but the baseline for me is more like 40-50%. That's what I am assuming I'll owe in 18 years if I'm still on this path.

Do you think tax rates will be that high or are you confusing that he meant 30% tax on the forgiven amount, not that only 30% will need to be forgiven?

[Anonymous User]

You can only recharacterize a conversion up until your tax deadline so if it happened before 2016 you're out of luck.

I'm not sure I see the benefit of taking an ira deduction on relatively small summer income now and converting a much larger balance later.

My thinking is that the larger balance from the initial $5.5k contribution will only be $20k at most by the time I am moving it, but I get that the difference will probably be fairly trivial.

[Tiago Splitter]

There is no distinction between principal and interest. It's all taxable. 30 percent seems generous especially given the dollar amounts people are potentially looking at.

Yeah, I think they don't distinguish between principal and interest; it's whatever is owed at the end of your repayment period. But paying 30% of $250k is a lot better than paying $250k, even if you're only making sub-$1,000/mo. payments for 30 years.

It certainly is but the baseline for me is more like 40-50%. That's what I am assuming I'll owe in 18 years if I'm still on this path.

Do you think tax rates will be that high or are you confusing that he meant 30% tax on the forgiven amount, not that only 30% will need to be forgiven?

I'm talking about tax rates. Not that I'm any kind of prophet but you might as well be conservative. Someone in California would be looking at close to 50 percent now.

[Mr. Peanutbutter]

I don't understand state income taxes that well. Would they really count CODI for state income tax? That would blow so fucking hard, but I guess you could move to Florida or Washington state or whatever for a few years.

[Tiago Splitter]

Yeah my plan in year 20 is to take a sabbatical and live in a no income tax state. We'll see how easy that is.

[Anonymous User]

Hey guys - reading this thread has been very helpful so just wanna thank the community off the bat. I'm an 0L but I'm very specific circumstances so want to get some feeedback.

I'll be 27 when I start LS a this fall, and I've been working for the past few years since graduating. Because of a great deal of luck and some hard work, I've been able to save up around $600k. I'm not exactly sure what I'd like to do after law school, but I think I'd like to work for the government or clerk and also perhaps try my hand at big law for a few years. Pretty undefined I know but I suspect I'll realize where I'm headed once Im in the thick of it. Now, my question is how should I approach paying for law school. I see several options.

Considering law school will cost somewhere betwee $230-300k before interest (I've gotten no scholarships or need based aid from the schools I'm considering):

1. Invest in some dividend generating stocks. Earn around 6-7% if I can swing it, pay off some off the debt with the dividend income as I go along. I think this is a decent idea.

2. Not pay anything but invest the money wisely and let it grow in the meantime. A lot of assets + a lot of debt when I'm done. This feels scarier.

3. Pay it off in full as I go. This seems like the worst idea unless I absolutely hate the idea of debt and want 100% flexibility when I'm done, which I don't.

I know this is all pretty loose but hopefully enough to get some tips. Thanks in advance.

Edit: if my post is confusing or unclear (likely) I'm happy to clarify.

[RaceJudicata]

Hey guys - reading this thread has been very helpful so just wanna thank the community off the bat. I'm an 0L but I'm very specific circumstances so want to get some feeedback.

I'll be 27 when I start LS a this fall, and I've been working for the past few years since graduating. Because of a great deal of luck and some hard work, I've been able to save up around $600k. I'm not exactly sure what I'd like to do after law school, but I think I'd like to work for the government or clerk and also perhaps try my hand at big law for a few years. Pretty undefined I know but I suspect I'll realize where I'm headed once Im in the thick of it. Now, my question is how should I approach paying for law school. I see several options.

Considering law school will cost somewhere betwee $230-300k before interest (I've gotten no scholarships or need based aid from the schools I'm considering):

1. Invest in some dividend generating stocks. Earn around 6-7% if I can swing it, pay off some off the debt with the dividend income as I go along. I think this is a decent idea.

2. Not pay anything but invest the money wisely and let it grow in the meantime. A lot of assets + a lot of debt when I'm done. This feels scarier.

3. Pay it off in full as I go. This seems like the worst idea unless I absolutely hate the idea of debt and want 100% flexibility when I'm done, which I don't.

I know this is all pretty loose but hopefully enough to get some tips. Thanks in advance.

Edit: if my post is confusing or unclear (likely) I'm happy to clarify.

Why, may I ask, are you going to law school? (It doesn't seem like you have any particular goal in mind). And please - for the love of god - tell me that you are going to a T14 school with this nest egg...

As for advice, I'll defer to others...but I suspect the sentiment will be to skip law school altogether so you don't have to worry about trashing this pile of $$