Student loan payments: Actual numbers

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XxSpyKEx
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Re: Student loan payments: Actual numbers

Postby XxSpyKEx » Wed Dec 03, 2014 5:51 pm

Tiago Splitter wrote:
XxSpyKEx wrote:Ahh, okay, so as long as you didn't put money into a traditional IRA account, you won't get hit with additional taxes, even if you have $250k in a previous employer's 401k plan and $100k in a Roth IRA plan (both from the prior career)? If that's the case, backdoor IRA should be pretty doable for most people (i.e. why would anyone ever put any money into a traditional IRA account, when you could simply put the money into a Roth IRA/backdoor the money into a Roth IRA? Only thing I can think of is if the tax rules have changed and people invested into a traditional IRA before backdoor Roth IRA was available).

Until 2010 no one with an AGI over 100k was allowed to do a Roth conversion so this tactic is fairly new. The issue of having pre-tax money in an IRA will normally only affect people who are a little older and/or who participated in a qualified plan through their employer but then left that employer and rolled the money into an IRA. As was mentioned before you often roll your pre-tax money back into an employer plan, but not all plan sponsors allow for this.


Interesting. So if you have a quarter million in a traditional IRA, you'd basically be getting taxed twice on that $5,500 (since 98% of your IRA would be pre-tax money) to backdoor $5,500 into your Roth IRA. That makes sense why people with a significant traditional IRA (from a prior career) wouldn't want to try to backdoor money into Roth IRA (unless they could roll the traditional IRA money into an employer sponsored plan before doing the Roth conversion).

anonnymouse
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Re: Student loan payments: Actual numbers

Postby anonnymouse » Wed Dec 03, 2014 9:42 pm

XxSpyKEx wrote:why would anyone ever put any money into a traditional IRA account, when you could simply put the money into a Roth IRA/backdoor the money into a Roth IRA?

Traditional IRA is pre-tax (pay tax on withdrawals) while Roth IRA is post-tax (don't pay any tax on withdrawals). If someone is a high earner and has no access otherwise to tax-deferred accounts (e.g. 401k, 403b, etc), it might make sense to do a traditional IRA as a marginal rate arbitrage strategy. Since traditional IRAs are pre-tax, they lower your AGI today (reducing your tax burden today) and potentially lower it in the future if your marginal tax rate during withdrawals is lower than your marginal rate today.

That's why someone may want to contribute to a tIRA instead of a Roth IRA/backdoor Roth IRA. I can't imagine many people are in that situation though.

so ambivalent
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Re: Student loan payments: Actual numbers

Postby so ambivalent » Fri Dec 12, 2014 2:48 pm

Anonymous User wrote:Debt: about $98,000 ($72k scholarship + $45k from parents). Enjoy COA and interest, kiddos

Payments: about $1,150

Income: $70,000.

Plan: Standard (10 yrs)

Bonus points: Job can have large bonuses ($10k-$20k). Will sink most of those into loans. Lived with parents while studying for the bar which enabled me to get on my feet by saving

0Ls, this shit is not a fucking joke. I consider myself very lucky. Take home after loans is like $34,000. Tybg for no state income tax.


In pretty similar situation to you and my question is: why are you paying standard? Even though I am single and have no dependents my loans qualified for IBR (granted they included about $60k for law school and remainder for undergrad debt so that's a little different than you). Did you just decide you would rather do the standard and have less interest?
I'm also curious generally about whether people choose to go for standard (or more) payment on student loans vs. saving beyond a 401K or for something like a home down payment fund. I was told by a financial advisor to just pay the minimum on the loans and invest in retirement and other things (like a home fund).

so ambivalent
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Re: Student loan payments: Actual numbers

Postby so ambivalent » Fri Dec 12, 2014 2:51 pm

KM2016 wrote:
Anonymous User wrote:We live frugally, live close to work, don't own cars, bring lunch to work every day, haven't taken a decent vacation since I graduated, spend minimal on maintaining a professional business wardrobe ($500 a year), minimize dry cleaning (I put my button down shirts in the washer, which is actually better for them than dry cleaning), minimize grubhub purchases, don't pay for a housekeeper, etc.


While I commend you and your spouse for your discipline, this sounds brutal.


That just sounds normal to me. Like how most Americans live.

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Fri Dec 12, 2014 2:56 pm

so ambivalent wrote:
KM2016 wrote:
Anonymous User wrote:We live frugally, live close to work, don't own cars, bring lunch to work every day, haven't taken a decent vacation since I graduated, spend minimal on maintaining a professional business wardrobe ($500 a year), minimize dry cleaning (I put my button down shirts in the washer, which is actually better for them than dry cleaning), minimize grubhub purchases, don't pay for a housekeeper, etc.


While I commend you and your spouse for your discipline, this sounds brutal.


That just sounds normal to me. Like how most Americans live.


Most Americans don't work biglaw associate hours. While I'm not going to shed a tear for people making six figures, I think it's at least fair to acknowledge that when you are working those kinds of hours it is harder to do "normal" things (e.g. spend several hours every weekend cleaning rather than paying someone $30 or whatever to do it for you).

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bk1
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Re: Student loan payments: Actual numbers

Postby bk1 » Fri Dec 12, 2014 3:29 pm

I was talking about cleaning an apartment. And people work in other markets where they may spend more time working from home than they do in NYC. Plus some people have SOs who do spend more time at home, some people have pets or kids, so you can't always just get away with cleaning once a month. As for washing vs drycleaning/fluff+fold, you can wash 5-10 shirts in a single load for ~$2 (or less). Compare that to paying $10-20 to have someone else wash those shirts and doing that every 1-2 weeks, you can save a couple hundred dollars. It's obviously not a ton of money by itself, but the person who is doing that is often trying to save where they can and a few hundred here, a few hundred there starts to add up. Living close to work can be a frugal move if it then leads to avoiding owning a car (obviously doesn't necessarily apply to NYC).

In the end, I'm not entirely sure what the point of your nitpicking is though. Person A stated how they lived frugally, person B said that was what most Americans did, person C (me) stated that it's harder to do that when you work longer hours. Whether every little thing that the OP did was economically worth it and criticizing the first response for being overinclusive (the horror, they pointed out 9 things that were normal for an average person and 1 thing that wasn't, call the presses) just don't seem all that relevant.

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Flips88
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Re: Student loan payments: Actual numbers

Postby Flips88 » Wed Dec 17, 2014 6:43 pm

Put in my sofi app and got conditional approval and a rate quote of 4.16% (3.91% on auto pay). Anyone know how long I should expect before they have shit ready to sign and stuff?

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IrwinM.Fletcher
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Re: Student loan payments: Actual numbers

Postby IrwinM.Fletcher » Wed Dec 17, 2014 8:00 pm

Couple of days IIRC. If it's not ready by Friday or Monday you can give em a call and they'll tell you when to expect it.

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beach_terror
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Re: Student loan payments: Actual numbers

Postby beach_terror » Thu Dec 18, 2014 8:26 pm

Got a very nice bonus (20k net) today. I was 100% committed to paying down my loans immediately (~147k at 4.3% with SoFi right now), but now I'm not so sure. I have a buddy who is in wealth management who I trust (went to school together) that I would be comfortable giving most of it to see what he can do with it that way. I'm generally oblivious about investments in general, despite attempts to be more informed. It seems obvious, to me at least, that 4.3% is pretty easy to beat in the market if someone knows what they're doing. Any thoughts?

eta 2013 grad - was at 179k when I entered repayment.

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IrwinM.Fletcher
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Re: Student loan payments: Actual numbers

Postby IrwinM.Fletcher » Thu Dec 18, 2014 9:40 pm

beach_terror wrote:Got a very nice bonus (20k net) today. I was 100% committed to paying down my loans immediately (~147k at 4.3% with SoFi right now), but now I'm not so sure. I have a buddy who is in wealth management who I trust (went to school together) that I would be comfortable giving most of it to see what he can do with it that way. I'm generally oblivious about investments in general, despite attempts to be more informed. It seems obvious, to me at least, that 4.3% is pretty easy to beat in the market if someone knows what they're doing. Any thoughts?

eta 2013 grad - was at 179k when I entered repayment.


This is an oversimplification, but if you're in the 28% tax bracket, you'd need to get better than a 5.97% pre-tax rate of return to make it worth your while. That means you can look at paying off your debt as the equivalent of buying a risk-free bond yielding 5.97%. U.S. 30 years are yielding 2.81% and I saw some IBM bonds maturing in 2045 yesterday yielding 4.75%.

If you have a higher risk tolerance then blah blah blah equities, just don't let your broker buddy crush you with an annuity or mutual funds with a fat front load.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Fri Dec 19, 2014 1:26 am

Debt: $230k (took full amount, every time, with no scholarships-interest is no joke)
Payments: $2700 a month
Income: $160k
Plan: Paying ~$3k a month until I pay off my credit card and get my credit score back up, at which time I plan to refi and pay as much as I can (ideally half my monthly take home).

I need to refi ASAP because the weighted average interest rate on my loans is 7.1%. I plan to use sofi as I have been told you can keep a lot of protections. The only reason I haven't refinanced yet is because I want to have a 750+ credit score to get the best interest rate possible for a 10 year fixed (though I intend to pay it off quicker). Does anyone with more than $200k in loans have anecdotal experience re what interest rate they got in relation to their credit score? Another company told me their underwriters look at a variety of factors and some important ones were a 750+ credit score and less than $200k in debt (I am considering only refinancing less than $200k if it will overall get me a lower interest rate). Thanks in advance for any advice on this. Though I ultimately landed in the best possible firm to begin my career, so in that way I guess my education was "worth it," this debt is soul-crushing and I get anxious thinking about it.

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Fri Dec 19, 2014 1:27 am

dont do ten year fixed

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Fri Dec 19, 2014 1:30 am

zweitbester wrote:dont do ten year fixed


I can't risk how high the monthly payments are on a 5 year fixed, and I am too risk averse to opt for a variable rate. I don't care how low interest rates are right now, I will kill myself if I go for variable and am suddenly faced with double digit interest rates in 3 years. My debt is too high for me to pay off quickly enough to make a variable rate worth the risk.

Or am I missing your point??

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IrwinM.Fletcher
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Re: Student loan payments: Actual numbers

Postby IrwinM.Fletcher » Fri Dec 19, 2014 1:31 am

Anonymous User wrote:
zweitbester wrote:dont do ten year fixed


I can't risk how high the monthly payments are on a 5 year fixed, and I am too risk averse to opt for a variable rate. I don't care how low interest rates are right now, I will kill myself if I go for variable and am suddenly faced with double digit interest rates in 3 years. My debt is too high for me to pay off quickly enough to make a variable rate worth the risk.

Or am I missing your point??


Rate cap on my variable with Sofi is 7.99% duder

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Fri Dec 19, 2014 1:33 am

IrwinM.Fletcher wrote:
Anonymous User wrote:
zweitbester wrote:dont do ten year fixed


I can't risk how high the monthly payments are on a 5 year fixed, and I am too risk averse to opt for a variable rate. I don't care how low interest rates are right now, I will kill myself if I go for variable and am suddenly faced with double digit interest rates in 3 years. My debt is too high for me to pay off quickly enough to make a variable rate worth the risk.

Or am I missing your point??


Rate cap on my variable with Sofi is 7.99% duder


I'm not a dude, but that is really helpful to know. I have just been ruling variable out because I am so risk averse, so I haven't looked at the details. Still would suck to end up with 8% when you could have stuck with 5%, and if the difference is only 1-1.5%, anyway, I may still opt for less risk. I may look into this more just to be sure, though.

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Fri Dec 19, 2014 1:59 am

Risk averse to the point of financial retardation. Sounds like you'll be an amazing lawyer.

anonnymouse
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Re: Student loan payments: Actual numbers

Postby anonnymouse » Fri Dec 19, 2014 2:16 am

Just do sofi variable plus fixed for floating rate swap from your pwm bro's ficc desk, duder. Guys at my high school executed swaps for personal debt all the time, it was nbd.

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JohannDeMann
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Re: Student loan payments: Actual numbers

Postby JohannDeMann » Fri Dec 19, 2014 2:41 am

beach_terror wrote:Got a very nice bonus (20k net) today. I was 100% committed to paying down my loans immediately (~147k at 4.3% with SoFi right now), but now I'm not so sure. I have a buddy who is in wealth management who I trust (went to school together) that I would be comfortable giving most of it to see what he can do with it that way. I'm generally oblivious about investments in general, despite attempts to be more informed. It seems obvious, to me at least, that 4.3% is pretty easy to beat in the market if someone knows what they're doing. Any thoughts?

eta 2013 grad - was at 179k when I entered repayment.

Need to diversify and put that money to work on something other than your loans. Let your boy see what he can do with it if you trust him.

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fats provolone
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Re: Student loan payments: Actual numbers

Postby fats provolone » Fri Dec 19, 2014 3:49 am

you should invest it with the degen gambler thread

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Fri Dec 19, 2014 6:56 am

beach_terror wrote:Got a very nice bonus (20k net) today. I was 100% committed to paying down my loans immediately (~147k at 4.3% with SoFi right now), but now I'm not so sure. I have a buddy who is in wealth management who I trust (went to school together) that I would be comfortable giving most of it to see what he can do with it that way. I'm generally oblivious about investments in general, despite attempts to be more informed. It seems obvious, to me at least, that 4.3% is pretty easy to beat in the market if someone knows what they're doing. Any thoughts?

eta 2013 grad - was at 179k when I entered repayment.


At this point I have a similar debt load and if I receive a bonus I'm sinking the whole thing into my loans. Sure, you could get a better return than 4.3% but how much better? Personally, the freedom I gain from removing this albatross of debt is worth the few percentage points I could possibly earn above my interest rate.

Re: the other person asking about interest rates I think earlier in this thread (or perhaps it's another one) there were folks giving some numbers. Not positive where I was when I refinanced since there was variation among the bureaus but it was probably 720-750 at the time and I copped dat 4.2%.

Anonymous User
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Re: Student loan payments: Actual numbers

Postby Anonymous User » Fri Dec 19, 2014 12:16 pm

zweitbester wrote:Risk averse to the point of financial retardation. Sounds like you'll be an amazing lawyer.


Thanks for being unnecessarily rude. Gotta love how easy it is to say whatever you want to strangers when you're sitting behind a screen.

To everyone else who provided helpful input, I really appreciate it!

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Fri Dec 19, 2014 12:35 pm

Anonymous User wrote:
zweitbester wrote:Risk averse to the point of financial retardation. Sounds like you'll be an amazing lawyer.


Thanks for being unnecessarily rude. Gotta love how easy it is to say whatever you want to strangers when you're sitting behind a screen.

To everyone else who provided helpful input, I really appreciate it!


Wasn't trying to be rude or sarcastic. The same risk aversion that made you go to law school and take the huge debt load is making you make yet another questionable financial decision. My post was, as bluntly as possible, telling you to counter that urge to your best ability.

I'm happy to say it to your face. I can PM you my location, you can PM me yours, and we can hopefully set something up in the near future where I tell you to your face that you're pissing money away with a fixed rate.

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fats provolone
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Re: Student loan payments: Actual numbers

Postby fats provolone » Fri Dec 19, 2014 12:36 pm

and then fuck afterwards or..?

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Dr. Review
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Re: Student loan payments: Actual numbers

Postby Dr. Review » Fri Dec 19, 2014 12:37 pm

fite me irl

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Fri Dec 19, 2014 1:40 pm

I love it when people call me Internet tough guy. I love meeting people. Let's meet IRL and I'll still speak my mind. I think people on TLS know me well enough IRL to know that I'm not shy in expressing my opinion.

For better or worse ;)




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