Student loan payments: Actual numbers

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lacrossebrother
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Re: Student loan payments: Actual numbers

Postby lacrossebrother » Sat Mar 28, 2015 8:09 pm

We established you can't avoid the tax bomb by reducing your assets. You need other debt.

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Sat Mar 28, 2015 8:12 pm

im just going to keep watching johanndumbass write his shitty financial future out in this thread. i should just make a tumblr out of this shit

v5junior
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Re: Student loan payments: Actual numbers

Postby v5junior » Sat Mar 28, 2015 8:13 pm

Jason Taverner wrote:
v5junior wrote:Then consider that DRB will let you refinance when you have your full-time offer letter, so you can refinance in January (or earlier maybe? no personal experience earlier than January though) of your 3L year.


Hey, I learned something new from this thread! Thank you! (seriously)

I'm still not exactly sure what I'm going to do re: loans. I don't plan on following Johann's advice because (1) Johann, and (2) I'm not sure my monthly payment would be different under PAYE (so it would just amount to making minimum payments on my loans, something I'm not thrilled about)

My problem is more balancing the protection you get from having federal loans w/ the interest savings you get through refinancing. If I plan on trying to sink as much as I can into loans and not other investments (I get that's sub-optimal) is there really much a benefit to re-financing? The more quickly you pay back your loans, the less you're paying for the 'insurance' of the federal protections, yeah?

I've made a few spreadsheets with different interest rates/seeing what happens when I refinance different amounts, but I'm still not sure what would be best.


I think you've done the correct analysis. Once you have a difference in savings based on (a) interest rate, (b) debt load, and (c) repayment term, it's just a question of personal preference.

While I agree that if you pay the loans back faster, you're paying less for the insurance of federal protections, that also means that the insurance is worth less--e.g., it's much easier to predict your earning potential over 3 years, so if you think you can pay them back in 3 years, the PAYE safety net isn't worth as much. The refinancing companies also give better interest rates for 5 year repayment terms than 10 year repayment terms, so there's that to consider.

So, taking all of that into account, I'd look at the difference you'll end up repaying between the two repayment plans, and consider whether the safety net is worth that to you. This depends on a number of things, such as your potential exit options, parental support, debt load, savings, etc.

I think one thing that's worth considering is refinancing some but not all of your loans. If you refinance some portion of your GradPLUS loans which you feel comfortable repaying even without big law, you can hedge a bit. Personally, I've got a mix of fixed/variable/federal/private loans.

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JohannDeMann
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Re: Student loan payments: Actual numbers

Postby JohannDeMann » Sat Mar 28, 2015 8:17 pm

lacrossebrother wrote:We established you can't avoid the tax bomb by reducing your assets. You need other debt.


No that is the opposite of what we established. 450k in debt 0 assets is no tax bomb. tax bomb up to assets.

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XxSpyKEx
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Re: Student loan payments: Actual numbers

Postby XxSpyKEx » Sat Mar 28, 2015 8:18 pm

JohannDeMann wrote:
If you aren't doing it for your kids, then just buy a bunch of cars with your cash to avoid the tax bomb. Or buy a lot of stock options that are out of the money at the time. You can also prepay for college educations etc.
Edit - prepaid college surely would count as an asset now that I think about it. But I'm not sure about options. And cars depreciate like 50% rolling off the lot.


Cars don't count as assets? I mean, if this works, you could just buy 20 exotic cars that cost $1M+ each, file your taxes, and then flip them. Some cars are difficult enough to get that they actually appreciate in value (particularly older cars--like classic Ferraris). Somehow I find it hard to believe that the IRS wouldn't take your dealer garage of exotic cars, though.

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JohannDeMann
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Re: Student loan payments: Actual numbers

Postby JohannDeMann » Sat Mar 28, 2015 8:20 pm

It's the value of the car. I used cars because I assume a 100k mercedes rolls off the lot and loses 50% value like all cars.

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XxSpyKEx
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Re: Student loan payments: Actual numbers

Postby XxSpyKEx » Sat Mar 28, 2015 8:28 pm

Old Gregg wrote:im just going to keep watching johanndumbass write his shitty financial future out in this thread. i should just make a tumblr out of this shit


The thing is that he actually has a good point re: PAYE that makes a lot of sense for most recent grads (i.e. biglaw is fucking miserable, so how do you know you're going to be able to stick around for long enough to repay $250k in loans and that it's worth it to lose the option of PSLF before you've even started working as an associate?). But everyone on here's reaction seems to be: "OMG, I have to pay between 6.7-7.9% interest on my student loans for a year or more when I could get this AMAZING variable rate loan that has no possibility of increasing in the near future and lock in 3% rates!! Why wouldn't I do that and just assume I'm going to work in biglaw until I pay off my loans? What could possibly go wrong with that plan?!?!?"

JohannDeMann wrote:It's the value of the car. I used cars because I assume a 100k mercedes rolls off the lot and loses 50% value like all cars.


So you write off the depreciation from your vehicle against your income? If you actually are losing money, why does this make more sense than simply paying the taxes?

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Mar 30, 2015 4:47 pm

this may seem like an obvious question, but if you refinance does that make you ineligible for public interest loan forgiveness? like if i wanna quit my job after 3 years and get a public interest gig will i be screwed?

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Re: Student loan payments: Actual numbers

Postby Indifference » Mon Mar 30, 2015 4:56 pm

Anonymous User wrote:this may seem like an obvious question, but if you refinance does that make you ineligible for public interest loan forgiveness? like if i wanna quit my job after 3 years and get a public interest gig will i be screwed?


Q8 Are private, nonfederal education loans eligible for PSLF?
A8 No. Private and other nonfederal education loans are not eligible for PSLF, nor can they be
consolidated into a Direct Consolidation Loan.

https://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness-common-questions.pdf

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JenDarby
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Re: Student loan payments: Actual numbers

Postby JenDarby » Mon Mar 30, 2015 5:12 pm

Thanks, CommonBond.

Image

Image

(I specified in a survey that I like jerky)

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Mar 30, 2015 5:14 pm

mujiali wrote:
Anonymous User wrote:this may seem like an obvious question, but if you refinance does that make you ineligible for public interest loan forgiveness? like if i wanna quit my job after 3 years and get a public interest gig will i be screwed?


Q8 Are private, nonfederal education loans eligible for PSLF?
A8 No. Private and other nonfederal education loans are not eligible for PSLF, nor can they be
consolidated into a Direct Consolidation Loan.

https://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness-common-questions.pdf


yea but are those loans considered private once you use so-fi etc to refinance? even if they were all originally fed?

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Re: Student loan payments: Actual numbers

Postby Anonymous User » Mon Mar 30, 2015 5:40 pm

Three questions:

1. Is the compounding difference for private vs. fed loans? If so, how does a 4.75% fixed rate 10-year DRB loan compare with a 6.5% fixed rate 10-year federal loan?

2. Assuming that DRB and SoFi offer the same interest rates (e.g., 3% for a 5-year variable rate loan), is there any advantage to taking one over the other? DRB uses the 3-month LIBOR while SoFi uses the 1-month LIBOR...so that favors DRB, right? (At least if we are assuming that the LIBOR is likely to rise over the next 5 years?) Any other advantages/disadvantages?

3. Any general feels about when variable makes sense over fixed? It should be a pretty easy calculation for someone who has a guess about when and how high LIBOR will rise. E.g., is variable worth a 1% premium (e.g., a 3% interest rate instead of 4% interest rate) over a 5-year repayment? Specifically, I'm looking at a 1.3% premium over about 2.5 years (I'm planning on paying down the loans more quickly) -- thoughts about how likely it is that LIBOR will rise ~2% over the next 2-3 years? Obviously this is an individual decision based on risk tolerance, but it'd be good to hear from some of the more finance-knowledgeable folks here with guesses about what the LIBOR is likely to do over the next couple years. I know my risk tolerance but don't have a good sense of how much risk variable actually entails in the current economic climate.

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A. Nony Mouse
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Re: Student loan payments: Actual numbers

Postby A. Nony Mouse » Mon Mar 30, 2015 11:10 pm

Anonymous User wrote:
mujiali wrote:
Anonymous User wrote:this may seem like an obvious question, but if you refinance does that make you ineligible for public interest loan forgiveness? like if i wanna quit my job after 3 years and get a public interest gig will i be screwed?


Q8 Are private, nonfederal education loans eligible for PSLF?
A8 No. Private and other nonfederal education loans are not eligible for PSLF, nor can they be
consolidated into a Direct Consolidation Loan.

https://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness-common-questions.pdf


yea but are those loans considered private once you use so-fi etc to refinance? even if they were all originally fed?

Yes.

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skers
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Re: Student loan payments: Actual numbers

Postby skers » Mon Mar 30, 2015 11:18 pm

Anyone thinking of re-financing right at graduation or is there any real reason to wait?

KM2016
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Re: Student loan payments: Actual numbers

Postby KM2016 » Tue Mar 31, 2015 12:25 am

skers wrote:Anyone thinking of re-financing right at graduation or is there any real reason to wait?


I did it right away. Most companies will honor any grace periods you have on your loans. Unfortunately Grad Plus Direct loans don't have a grace period, so I started paying those right away, then payments went up when the grace periods for my other loans ran out.

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A. Nony Mouse
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Re: Student loan payments: Actual numbers

Postby A. Nony Mouse » Tue Mar 31, 2015 12:33 am

KM2016 wrote:
skers wrote:Anyone thinking of re-financing right at graduation or is there any real reason to wait?


I did it right away. Most companies will honor any grace periods you have on your loans. Unfortunately Grad Plus Direct loans don't have a grace period, so I started paying those right away, then payments went up when the grace periods for my other loans ran out.

By grace period, do you mean that 6-month gap between graduation and payments starting? I had that on Grad Plus loans.

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Re: Student loan payments: Actual numbers

Postby KM2016 » Tue Mar 31, 2015 12:53 am

A. Nony Mouse wrote:
KM2016 wrote:
skers wrote:Anyone thinking of re-financing right at graduation or is there any real reason to wait?


I did it right away. Most companies will honor any grace periods you have on your loans. Unfortunately Grad Plus Direct loans don't have a grace period, so I started paying those right away, then payments went up when the grace periods for my other loans ran out.

By grace period, do you mean that 6-month gap between graduation and payments starting? I had that on Grad Plus loans.


I have Direct PLUS Graduate loans, and they have no grace period. Perhaps you had them deferred? Either that, or the government really likes you.

"There is no grace period for Direct PLUS Loans—the repayment period for a PLUS Loan begins on the day after the final loan disbursement is made. However, if you're a graduate or professional student PLUS borrower (or if you're a parent PLUS borrower who is also a student), you can defer repayment while you're enrolled in school at least half time and (for Direct PLUS Loans first disbursed on or after July 1, 2008) for an additional 6 months after you graduate or drop below half-time enrollment."

Source = http://www.direct.ed.gov/leaving.html

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A. Nony Mouse
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Re: Student loan payments: Actual numbers

Postby A. Nony Mouse » Tue Mar 31, 2015 1:45 am

Oh, I guess it must have been a deferment. I always thought that you had to request a deferment (the quote above implies that - "you can defer payment"), and I definitely didn't request this, but it looks like they automatically apply it for the 6 months after you graduate (see below). Never mind. (I do have some direct subsidized/unsubsidized that did have a grace period, so I thought that's what it all was.)

However, if you are a graduate or professional student, your loan will be placed into deferment while you are enrolled at least half-time and for an additional six months after you cease to be enrolled at least half-time.

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Re: Student loan payments: Actual numbers

Postby Stevoman » Tue Mar 31, 2015 3:58 pm

Some of these numbers in here are both scary and leave me bewildered. How is it that many of you are bringing in biglaw pay and have barely made a dent in your loans? Isn't the whole point of biglaw to kill yourself short-term so you can make serious progress on the loans?

I'm graduating in May and have a biglaw job lined up. I've crafted a budget and, based on my loan amortization table, will have my loans ($80k) paid off by May 2017. Am I missing something and being completely unrealistic here?

Anyways, my question here: I have a mix of private (6.8%) and Federal (mostly 5.4%, one 7.9%) loans. I am thinking of refinancing the private loans with Sofi and killing those first, then dumping everything into the Federal loans. My thought is that, while one of the Federal loans is a higher interest rate, I want to keep as many Federal as I can for the repayment options, if needed. Do you think the cost of the interest is worth that, or should I just refinance them all if I think I can pay them off in <2 years?

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Old Gregg
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Re: Student loan payments: Actual numbers

Postby Old Gregg » Tue Mar 31, 2015 4:21 pm

Some of these numbers in here are both scary and leave me bewildered. How is it that many of you are bringing in biglaw pay and have barely made a dent in your loans? Isn't the whole point of biglaw to kill yourself short-term so you can make serious progress on the loans?


a lot of people are in their mid-20s and want to have somewhat of a life. and to not live like a pauper.

exitoptions
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Re: Student loan payments: Actual numbers

Postby exitoptions » Tue Mar 31, 2015 4:29 pm

Old Gregg wrote:
Some of these numbers in here are both scary and leave me bewildered. How is it that many of you are bringing in biglaw pay and have barely made a dent in your loans? Isn't the whole point of biglaw to kill yourself short-term so you can make serious progress on the loans?


a lot of people are in their mid-20s and want to have somewhat of a life. and to not live like a pauper.


Yeah, you might run into problems with the plan to just pay off debt as quickly as possible. I had the same goal, but between clerking, getting married, buying a house, and now having a kid, I haven't paid off much of my debt even though I have had a substantial income for part of my post-grad time. You can either choose to postpone big life goals for a few years, or pay your debts really quickly. For many people the costs of postponing are greater than paying more debt service.

I also delayed refinancing my federal loans (with crazy 6.8% interest) while I was clerking to see if I ended up going to a government job. That didn't help, as I was basically treading water, making interest-only payments. I would suggest that if you know now that you are planning to stay in the private sector for a while you should refinance everything asap.

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fats provolone
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Re: Student loan payments: Actual numbers

Postby fats provolone » Tue Mar 31, 2015 5:10 pm

everyone seems to be forgetting that you might die in 20 years. or, even more likely, life won't be worth living in 2035. what's the point of being debt free then?

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smaug
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Re: Student loan payments: Actual numbers

Postby smaug » Tue Mar 31, 2015 5:17 pm

fats provolone wrote:everyone seems to be forgetting that you might die in 20 years. or, even more likely, life won't be worth living in 2035. what's the point of being debt free then?

debtors will be the first to go when the robots take over

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Tiago Splitter
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Re: Student loan payments: Actual numbers

Postby Tiago Splitter » Tue Mar 31, 2015 5:22 pm

fats provolone wrote:everyone seems to be forgetting that you might die in 20 years. or, even more likely, life won't be worth living in 2035. what's the point of being debt free then?

Good to have you back. I had almost considered refinancing my loans.

exitoptions
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Re: Student loan payments: Actual numbers

Postby exitoptions » Tue Mar 31, 2015 5:22 pm

fats provolone wrote:everyone seems to be forgetting that you might die in 20 years. or, even more likely, life won't be worth living in 2035. what's the point of being debt free then?


There are also a few betting on some 70s-80s style inflation wiping out their debts. Death is probably a better bet, however.




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