Student loan payments: get advice and actual numbers here Forum

[Paul Campos]

I'd suggest that people who are going into big law jobs wait a year or so after they start before committing to refinancing federal student loan debt into programs that eliminate the option to use PAYE.

[JenDarby]

There is a forum called "Student Doctor Network" which has a Financial Aid sub forum.

There are some interesting and more developed opinions on PAYE and other repayment methods for people who will be servicing even higher debt loads.

Mind linking to those opinions?

While I know this is on topic, I worry about linking a genuine forum to TLS because of the tendency to troll. It's pretty easy to google though.

When I am at a computer I will post some of the more useful points that I came across.

[Dafaq]

I just made my first tuition payment….1700. Strategy is to pay off the debt (85k) in 5 years. After taxes/401k I have a little under $6K to survive in a large metro, but not NYC/LA metro expensive (COL here is upper-moderate). Anyone else dealing with this general kind of scenario? If so, are you aiming for a 5 year payout, or something else?

[fats provolone]

anyone else making minimum PAYE payments and counting on government collapse by 2034?

[Anonymous User]

seeing as how you can't get anywhere near a 4% fixed rate on your student loans (the max repayment if 15 years, and that's at closer to 7.5%)

Checking in.

Debt: $260k (sticker T14)
Salary: $160k
Payment plan: currently standard 10-year.

I'm looking at SoFi refinancing and the options they have and was wondering if anyone had input on what's the most advisable one to choose.

Current estimated payments: $3k/month. First month payment is only $2,200 for some reason?

SoFi estimates:
10-year fixed: $2.7k/month
15-year fixed: $2.1k/month
10-year variable: $2.5k/month
15-year variable: $1.8k/month

That 10 year fixed number corresponds to about a 5% interest rate, and I've seen lower.

5% may be the best they could get with that much debt. I had excellent credit and $250,000 in debt and got around 4.5%.

[Anonymous User]

$160K total debt
Salary $71K

just made 1st payment of $272 PAYE plan.

sigh.

[Anonymous User]

$160K total debt
Salary $71K

just made 1st payment of $272 PAYE plan.

sigh.

Dammit, I make less than that and have less debt than that and my payment is $650-ish a month. Fuck IBR. (Of course if your payment is based on your 2L salary/not a full year's salary, then never mind. But if that's based on your annual salary, fuck.)

[beach_terror]

Anyone have advice re: retirement saving (Roth, etc.) vs student loan repayment? I'm sitting at about 148 in debt and qualify for my firm's retirement stuff on Jan 1. We don't do traditional matching afaik, the parents just discretionarily contribute x amount (3-5k) during bonus time depending on how good of a year. Bonus should help me knock the debt down to the low/mid 130s.

[Dr. Review]

Anyone have advice re: retirement saving (Roth, etc.) vs student loan repayment? I'm sitting at about 148 in debt and qualify for my firm's retirement stuff on Jan 1. We don't do traditional matching afaik, the parents just discretionarily contribute x amount (3-5k) during bonus time depending on how good of a year. Bonus should help me knock the debt down to the low/mid 130s.

Someone with more savvy about this than I have can chime in, but I think that conventional wisdom is that contribution to a pre-tax savings plan generally does more work for you than paying down loans. This is because it gets whatever the market return would be (3-10% or whatever) in addition to the savings resulting from tax bracket shifting (from 28% bracket or whatever to retirement income bracket).

[camelcrema]

Has anyone who refinanced with SoFi tried to accelerate payment/pay off early? Do they allow that?

[Doritos]

Has anyone who refinanced with SoFi tried to accelerate payment/pay off early? Do they allow that?

Yes they do. You could refinance and write them a check for the entire amount the next day. No prepayment penalties.

[bdubs]

Can anyone who refinanced with Sofi tell me how long it took from change to funding status to actually having their loans paid off?

[beach_terror]

Anyone have advice re: retirement saving (Roth, etc.) vs student loan repayment? I'm sitting at about 148 in debt and qualify for my firm's retirement stuff on Jan 1. We don't do traditional matching afaik, the parents just discretionarily contribute x amount (3-5k) during bonus time depending on how good of a year. Bonus should help me knock the debt down to the low/mid 130s.

Someone with more savvy about this than I have can chime in, but I think that conventional wisdom is that contribution to a pre-tax savings plan generally does more work for you than paying down loans. This is because it gets whatever the market return would be (3-10% or whatever) in addition to the savings resulting from tax bracket shifting (from 28% bracket or whatever to retirement income bracket).

Thanks. I should probably wait until I get my bonus/raise and then figure out what I can do. I hate having the debt looming over my head, but my job is very secure compared to most other lawyers. The other issue is the tax rates are likely to increase during our lifetime, so some partners are suggesting I do 1/2 pretax and 1/2 post into a Roth. Blergh

[bk1]

Anyone have advice re: retirement saving (Roth, etc.) vs student loan repayment? I'm sitting at about 148 in debt and qualify for my firm's retirement stuff on Jan 1. We don't do traditional matching afaik, the parents just discretionarily contribute x amount (3-5k) during bonus time depending on how good of a year. Bonus should help me knock the debt down to the low/mid 130s.

Someone with more savvy about this than I have can chime in, but I think that conventional wisdom is that contribution to a pre-tax savings plan generally does more work for you than paying down loans. This is because it gets whatever the market return would be (3-10% or whatever) in addition to the savings resulting from tax bracket shifting (from 28% bracket or whatever to retirement income bracket).

Thanks. I should probably wait until I get my bonus/raise and then figure out what I can do. I hate having the debt looming over my head, but my job is very secure compared to most other lawyers. The other issue is the tax rates are likely to increase during our lifetime, so some partners are suggesting I do 1/2 pretax and 1/2 post into a Roth. Blergh

A couple things:

1. You may be ineligible for Roth (check the income limits).

2. You can only contribute ~5.5k to a Roth per year. The conventional wisdom is that for high earners there's no reason not to max that out. I also believe you can convert a Roth to a traditional IRA at by paying the taxes if that would be beneficial to you.

[GOATlawman]

1. You may be ineligible for Roth (check the income limits).

false.
No income limit on Roth 401(K)
IRA can be converted to Roth IRA at any income level. (See http://www.rothira.com/roth-ira-conversion-rules)

[Anonymous User]

seeing as how you can't get anywhere near a 4% fixed rate on your student loans (the max repayment if 15 years, and that's at closer to 7.5%)

Checking in.

Debt: $260k (sticker T14)
Salary: $160k
Payment plan: currently standard 10-year.

I'm looking at SoFi refinancing and the options they have and was wondering if anyone had input on what's the most advisable one to choose.

Current estimated payments: $3k/month. First month payment is only $2,200 for some reason?

SoFi estimates:
10-year fixed: $2.7k/month
15-year fixed: $2.1k/month
10-year variable: $2.5k/month
15-year variable: $1.8k/month

That 10 year fixed number corresponds to about a 5% interest rate, and I've seen lower.

5% may be the best they could get with that much debt. I had excellent credit and $250,000 in debt and got around 4.5%.

I got ~ 4% with around 800 credit score, 100k salary and 175k debt.

[NycReturn]

Anyone have advice re: retirement saving (Roth, etc.) vs student loan repayment? I'm sitting at about 148 in debt and qualify for my firm's retirement stuff on Jan 1. We don't do traditional matching afaik, the parents just discretionarily contribute x amount (3-5k) during bonus time depending on how good of a year. Bonus should help me knock the debt down to the low/mid 130s.

Someone with more savvy about this than I have can chime in, but I think that conventional wisdom is that contribution to a pre-tax savings plan generally does more work for you than paying down loans. This is because it gets whatever the market return would be (3-10% or whatever) in addition to the savings resulting from tax bracket shifting (from 28% bracket or whatever to retirement income bracket).

Thanks. I should probably wait until I get my bonus/raise and then figure out what I can do. I hate having the debt looming over my head, but my job is very secure compared to most other lawyers. The other issue is the tax rates are likely to increase during our lifetime, so some partners are suggesting I do 1/2 pretax and 1/2 post into a Roth. Blergh

A couple things:

1. You may be ineligible for Roth (check the income limits).

2. You can only contribute ~5.5k to a Roth per year. The conventional wisdom is that for high earners there's no reason not to max that out. I also believe you can convert a Roth to a traditional IRA at by paying the taxes if that would be beneficial to you.

For #2: "convert a Roth to a traditional IRA by paying taxes"

?!?! Please don't give advice to people on something (especially financially) if you don't know what you're talking about. A person contributes post-tax dollars to a Roth IRA/401K and then the money grows tax free and there's no tax on withdrawals that meet basic requirements. A Traditional IRA, you can contribute pre-tax dollars and generally take a deduction on that years return (with income limitations). When you withdraw the money (after meeting certain requirements to avoid penalties), you pay taxes on it then. Paying taxes to convert a Roth IRA to a Traditional IRA may be the worst tax advice I've ever seen someone give.


To the person asking the question: whether you should contribute to a retirement savings plan or pay off student loans, this is generally a personal question and is very fact dependent for determining whether there is actually a correct choice.

Such factors include:
-Student loan interest rate (the higher the rate, the faster you should pay it off)
-Income (if you'll have low levels of taxable income for a few years, you may be able to deduct the student loan interest anyway so less of a rush; additionally, if you're borderline, you may be able to contribute to a 401K decreasing your MAGI, thus allowing you to deduct your student loan interest)
-Risk Averse (you may just want to pay off your debt as soon as possible, and there isn't anything wrong with that)
-Job Stability (If you have an unstable job, you should probably build up a safety net, but then might be a good idea to pay off loans quicker)
-Opinion on future tax rate changes (another poster pointed this out: if you think rates are going up, then taking a deduction at the lower rate to pay a higher rate later on is less appealing)

Feel free to PM me if you want more specific advice

[Tiago Splitter]

Calm down dipshit. It was obviously a typo.

[beach_terror]

Such factors include:
-Student loan interest rate (the higher the rate, the faster you should pay it off)
-Income (if you'll have low levels of taxable income for a few years, you may be able to deduct the student loan interest anyway so less of a rush; additionally, if you're borderline, you may be able to contribute to a 401K decreasing your MAGI, thus allowing you to deduct your student loan interest)
-Risk Averse (you may just want to pay off your debt as soon as possible, and there isn't anything wrong with that)
-Job Stability (If you have an unstable job, you should probably build up a safety net, but then might be a good idea to pay off loans quicker)
-Opinion on future tax rate changes (another poster pointed this out: if you think rates are going up, then taking a deduction at the lower rate to pay a higher rate later on is less appealing)

Feel free to PM me if you want more specific advice

Let's do this here so people like me who don't know anything about this can hopefully take something away from it.

Loan interest rate: 4.2% (SoFi) @ 150k
Income: 115k, bonus 20-30k
Risk aversion: med/high (I was at 180k in loans at the start of my employment in fall 2013)
Job stability: high for law - I work at a smaller firm and my group relies on me to do a lot of things. We're swamped at all times and my performance reviews are always very good.
Tax rates: my knowledge of anything politics comes from The West Wing, so yeah, dunno.

[NycReturn]

Such factors include:
-Student loan interest rate (the higher the rate, the faster you should pay it off)
-Income (if you'll have low levels of taxable income for a few years, you may be able to deduct the student loan interest anyway so less of a rush; additionally, if you're borderline, you may be able to contribute to a 401K decreasing your MAGI, thus allowing you to deduct your student loan interest)
-Risk Averse (you may just want to pay off your debt as soon as possible, and there isn't anything wrong with that)
-Job Stability (If you have an unstable job, you should probably build up a safety net, but then might be a good idea to pay off loans quicker)
-Opinion on future tax rate changes (another poster pointed this out: if you think rates are going up, then taking a deduction at the lower rate to pay a higher rate later on is less appealing)

Feel free to PM me if you want more specific advice

Let's do this here so people like me who don't know anything about this can hopefully take something away from it.

Loan interest rate: 4.2% (SoFi) @ 150k
Income: 115k, bonus 20-30k
Risk aversion: med/high (I was at 180k in loans at the start of my employment in fall 2013)
Job stability: high for law - I work at a smaller firm and my group relies on me to do a lot of things. We're swamped at all times and my performance reviews are always very good.
Tax rates: my knowledge of anything politics comes from The West Wing, so yeah, dunno.

Unless you're married to someone with little or no income, it's really going to be a personal preference between building up retirement savings and paying off loans.
Two other factors for you to consider:
1) If your employer's 'retirement bonus' is dependent on you contributing to a 401k, then you probably should.
2) Again this is going to be generally personal, but you may decide that it makes sense for you to take a 401k loan when buying a house. Creating this option may be a nice benefit to you.

And the above misuse of Roth & Traditional IRA wasn't a typo; it was wrong. The poster may very well have mixed up the words he wanted to use, but it still shows a fundamental lack of knowledge on the topic. The person shouldn't be giving financial advice just to hear themselves speak.


Edit my reasoning for your facts:

1) Your interest rate isn't too high where there's a rush pay it off
2) Your income puts you in a level where you're not going to be able to deduct the SL interest (unless married to someone w/ little or no income)
3) While Med/High Risk aversion ins't a variable to just plug into a formula, it would shift more towards paying off faster
4) Same thing as #3 for stable job, but would shift more towards taking your time.
It's up to you to balance these things for what you want.

[bk1]

Calm your balls. It was mental slip. I was remembering that I had read somewhere it was possible to do Roth-->traditional (the opposite of what people normally do) but couldn't recall how it was accomplished.

[r6_philly]

Benefits of paying toward retirement accts vs. student loans:

1. If you can qualify for IBR, losing your high income doesn't mean you will be crushed by repayment, if you stretch out 25 years of low payments you get them forgiven. But your retirement saving stays yours. Student loan payments are gone.
2. Retirement accts are generally shielded from creditors. If you default on everything you owe they can't take payment from it generally. Same as #1, what you save will always be available to you.
3. You pay less taxes
4. Fed loans are forgiven at death so you don't have to plan for dependents to payoff
5. I max out retirement. 401k limit is 17500, that amounts to over $4000 a year of income tax savings. That's almost $400 a month, which is about 1/3 of my monthly repayment. In other words, paying toward 401k reduces my repayment pressure by 30% or more. (I can't afford to do both)

I have a family so the income based plans are no brainers.

[Anonymous User]

seeing as how you can't get anywhere near a 4% fixed rate on your student loans (the max repayment if 15 years, and that's at closer to 7.5%)

That 10 year fixed number corresponds to about a 5% interest rate, and I've seen lower.

5% may be the best they could get with that much debt. I had excellent credit and $250,000 in debt and got around 4.5%.

I got ~ 4% with around 800 credit score, 100k salary and 175k debt.

Checking in here so we can all know what "market" rates are. It'd be awesome if more folks chipped in.

Income: 160k + bonus (10k probably)
Credit Score: ~775
Debt: 106k

CommonBond rate: 4.15% (with autopay)

[Anonymous User]

Checking in here so we can all know what "market" rates are. It'd be awesome if more folks chipped in.

Income: 160k + bonus (10k probably)
Credit Score: ~775
Debt: 106k

CommonBond rate: 4.15% (with autopay)

I'm the 4.5% anon.

Income: 160k
Credit Score: ~765
Debt: 250k at time of refinance
Rate: 4.25% (with autopay)

[Johann]

anyone else making minimum PAYE payments and counting on government collapse by 2034?

yep with 160k salary as well. im a risk seeker though so we will see. so far im coming out way ahead.