Student loan payments: get advice and actual numbers here Forum

[runinthefront]

Debt: 300k (180k me, 120k spouse)
Salary: Year 1 = clerking, so like $60k me, $60k spouse. Year 2: 170k me, 65k spouse (in a state with no state income tax), plus $50k clerkship bonus.
Payments: ???
Plan: Is this advisable? Live off my spouse's salary, and throw my biglaw salary at loans before I burn out or get pushed out (after maxing out 401K, IRA, home down payment fund, etc). We would live off about $70k for what, 4 years, before the entire balance is paid off? This seems simple, and since it seems simple I'm led to believe it is stupid. Is it?
Random: I plan to go into BigFed some day

What is the best approach to tackle this?

Does that mean you would be working biglaw hours for four years off of the equivalent of $30-35k a year?

[Anonymous User]

Debt: 300k (180k me, 120k spouse)
Salary: Year 1 = clerking, so like $60k me, $60k spouse. Year 2: 170k me, 65k spouse (in a state with no state income tax), plus $50k clerkship bonus.
Payments: ???
Plan: Is this advisable? Live off my spouse's salary, and throw my biglaw salary at loans before I burn out or get pushed out (after maxing out 401K, IRA, home down payment fund, etc). We would live off about $70k for what, 4 years, before the entire balance is paid off? This seems simple, and since it seems simple I'm led to believe it is stupid. Is it?
Random: I plan to go into BigFed some day

What is the best approach to tackle this?

Does that mean you would be working biglaw hours for four years off of the equivalent of $30-35k a year?

I assume you got that number from my spouse's after-tax income? When you put it like that.... Any recommendations?

[XxSpyKEx]

Debt: 300k (180k me, 120k spouse)
Salary: Year 1 = clerking, so like $60k me, $60k spouse. Year 2: 170k me, 65k spouse (in a state with no state income tax), plus $50k clerkship bonus.
Payments: ???
Plan: Is this advisable? Live off my spouse's salary, and throw my biglaw salary at loans before I burn out or get pushed out (after maxing out 401K, IRA, home down payment fund, etc). We would live off about $70k for what, 4 years, before the entire balance is paid off? This seems simple, and since it seems simple I'm led to believe it is stupid. Is it?
Random: I plan to go into BigFed some day

What is the best approach to tackle this?

You might as well just say that you're going to be in Texas (none of the other states without income tax pay $170k /year for a 2nd year associate). I recognize Texas is a pretty cheap place to live, but why work so hard to repay loans when you'll simply be able to have them forgiven via PSLF?

[Danger Zone]

Debt: 300k (180k me, 120k spouse)
Salary: Year 1 = clerking, so like $60k me, $60k spouse. Year 2: 170k me, 65k spouse (in a state with no state income tax), plus $50k clerkship bonus.
Payments: ???
Plan: Is this advisable? Live off my spouse's salary, and throw my biglaw salary at loans before I burn out or get pushed out (after maxing out 401K, IRA, home down payment fund, etc). We would live off about $70k for what, 4 years, before the entire balance is paid off? This seems simple, and since it seems simple I'm led to believe it is stupid. Is it?
Random: I plan to go into BigFed some day

What is the best approach to tackle this?

You might as well just say that you're going to be in Texas (none of the other states without income tax pay $170k /year for a 2nd year associate). I recognize Texas is a pretty cheap place to live, but why work so hard to repay loans when you'll simply be able to have them forgiven via PSLF?

Can we stop pretending that "just do pslf" isn't irresponsible advice for most people

[XxSpyKEx]

Debt: 300k (180k me, 120k spouse)
Salary: Year 1 = clerking, so like $60k me, $60k spouse. Year 2: 170k me, 65k spouse (in a state with no state income tax), plus $50k clerkship bonus.
Payments: ???
Plan: Is this advisable? Live off my spouse's salary, and throw my biglaw salary at loans before I burn out or get pushed out (after maxing out 401K, IRA, home down payment fund, etc). We would live off about $70k for what, 4 years, before the entire balance is paid off? This seems simple, and since it seems simple I'm led to believe it is stupid. Is it?
Random: I plan to go into BigFed some day

What is the best approach to tackle this?

You might as well just say that you're going to be in Texas (none of the other states without income tax pay $170k /year for a 2nd year associate). I recognize Texas is a pretty cheap place to live, but why work so hard to repay loans when you'll simply be able to have them forgiven via PSLF?

Can we stop pretending that "just do pslf" isn't irresponsible advice for most people

If you're going to go into a PSLF qualifying job, it's obviously the better move than throwing your entire salary into student loans for 4-5 years. In that situation, you'd be way better off having invested the money towards retirement (or something better than repaying student loans that would have eventually have gotten forgiven anyways). Obviously, fed gvt is competitive, and only Danger Zone can realistically assess whether he's competitive for it. But for all we know, he's clerking at the DC Circuit and going to be working at some top firm in the practice area he's wanting to be in.

[Anonymous User]

I'm considering switching over to a PSLF job.

Republican congressmen, the President, and the DOE have previously proposed capping PSLF at $57k. There doesn't seem to be any cap now. Is one inevitable? Were current borrowers grandfathered in without the cap under the previous proposals?

FYI, just saw his article on the front page of the WSJ: http://www.wsj.com/articles/loan-binge- ... 1439951900

[Johann]

I'm considering switching over to a PSLF job.

Republican congressmen, the President, and the DOE have previously proposed capping PSLF at $57k. There doesn't seem to be any cap now. Is one inevitable? Were current borrowers grandfathered in without the cap under the previous proposals?

FYI, just saw his article on the front page of the WSJ: http://www.wsj.com/articles/loan-binge- ... 1439951900

Nobody knows for sure, but student loans are getting more favorable not less. Check the tide of public perception, and a retroactive PSLF restriction would be nearly impossible to pass.

[Johann]

Can we stop pretending that "just do pslf" isn't irresponsible advice for most people

Why would you think this? I've worked for a full year now without paying a single dollar to student loans in biglaw. Then my payment turns into something along the lines of $300 a month because stub year until December 2016. I'm contributing $18,500 to my 401k and have a personal exemption that means in December of 2016 (still a full year away) I will just then start to pay loan money on 10% of $115000 after the poverty threshold in PAYE. My payments will be $1000 a month on a salary of over $200k. My refinanced payments on a $260k debt would have been around $2,600 a month for the 10 year plan and $2,000 a month for the 20 year plan.

It's all about cash flow. Now, I'm looking at getting an investment property that can make an additional $300 of cash flow a month with the money I've saved up. I've also made roughly 5% on a chunk of change I stuck in the market. By this time next year, I will have paid almost $60,000 less to loans than I would have under a refi with SoFI at sub 4%.

[Danger Zone]

You're saying you did all of this without refinancing? In other words, your loans have been accruing 6.8-7.9% interest over that time? And if you aren't paying a dime into it, can I assume your loans are in deferment or forbearance? Meaning all of that interest will capitalize into principal at the end of the period and then interest will stat accruing on that as well.

If you realistically believe you can consistently get 8% returns, more power to you, but most people can't. That's why paying off loans is the smarter investment. Also, retirement accounts aren't liquid assets, so this has nothing to do with liquidity.

[PMan99]

You're saying you did all of this without refinancing? In other words, your loans have been accruing 6.8-7.9% interest over that time? And if you aren't paying a dime into it, can I assume your loans are in deferment or forbearance? Meaning all of that interest will capitalize into principal at the end of the period and then interest will stat accruing on that as well.

If you realistically believe you can consistently get 8% returns, more power to you, but most people can't. That's why paying off loans is the smarter investment. Also, retirement accounts aren't liquid assets, so this has nothing to do with liquidity.

It doesn't capitalize on PAYE. I don't know what's possible, but if you could get on PAYE and then forebear it wouldn't accrue. If you did forebearance and then PAYE I think it would accrue, though not 100% sure on the last part.


The math makes sense if you expect the 9% S&P return rate to be perpetual. At the end of the period his loans will be like $400k, which ends up being say a $150k tax bill. Socking away $3k a year with 9% growth will get you 150k at the end of the period (yes this ignores whatever cap gains will be). So you pay 3k a year into a fund, plus 12k a year in loan payments, it ends up being 300k over the life of the loan but over a much longer time than 300k over 4 years, meaning you come out ahead accounting for the time value.

There are many potential risks and upsides: taxes go up, deflation, inflation, black swan, tax bomb goes away, etc.

[bdubs]

Of the 5,686 hospitals in the U.S., 73% are nonprofits or government owned, according to the American Hospital Association, thus qualifying their employees to have loan balances forgiven after 10 years.

http://www.wsj.com/articles/loan-binge- ... 1439951900

I'm f'ing annoyed by not realizing that any doctor that works at a "nonprofit" hospital gets their loans forgiven after 10 years on PAYE. Seriously?!?! WTF.

At least to get PSLF from law school you have to take a job that pays significantly less. "Nonprofit" hospitals don't operate on that model. Just another reason for lawyers with massive debt to be jealous and depressed at the same time.

[Attax]

Debt: $40,000
Payments: $400/month
Term: 10 years
Salary: $55,000/yr (before overtime)
Plan: Pay that minimum.
Thought: Drop out now and cut your losses.

[Johann]

You're saying you did all of this without refinancing? In other words, your loans have been accruing 6.8-7.9% interest over that time? And if you aren't paying a dime into it, can I assume your loans are in deferment or forbearance? Meaning all of that interest will capitalize into principal at the end of the period and then interest will stat accruing on that as well.

If you realistically believe you can consistently get 8% returns, more power to you, but most people can't. That's why paying off loans is the smarter investment. Also, retirement accounts aren't liquid assets, so this has nothing to do with liquidity.

Think about it this way - the richest people in the world try to avoid paying taxes just for a year or two. It's always about buying time. PAYE lets you pay based on last years tax return which is based on last years income. It's a permanent 2 year deferral. You guys should look into time value of money before you shit all over 7.5%. Plus, i don't have to beat 7.5%, I have to beat the difference which is about 3-4%. Time value of money, investments, non capitalized interest vs capitalized returns, etc to beat 4% is pretty basic.

[Old Gregg]

Don't forget tax bomb...

[Anonymous User]

Debt: 300k
Just graduated with a big law job starting in Oct. trying to figure out repayment options, and I could use some help. I'm pretty confused about what I qualify for, hoping for PAYE, but hung up on the pre-2007 Oct 1 new borrower requirement.

I took out a subsidized Stafford loan in my first year of undergrad that was disbursed that year, half on 8/22/2007 and half on 1/16/2008, for $3,500. It was not a direct loan. Since then, I graduated, took a year off, and went to graduate school, where I have taken on a substantial amount of student loan debt. Does this mean that my 8/22/2007 disbursement of $1,750 disqualifies me from using PAYE to service the rest (essentially ALL) of my loans?

[Anonymous User]

Debt: 80k
Income: 145k
Other factors: low rent, about to buy a new car, no other large liabilities, would like to buy a house in two years or so.

I'm in the process of SoFi-ing my loan (will also look to competitors for a better rate). I'm probably going to go with a fixed 10 year rate. This is the correct path right?

[Johann]

Debt: 80k
Income: 145k
Other factors: low rent, about to buy a new car, no other large liabilities, would like to buy a house in two years or so.

I'm in the process of SoFi-ing my loan (will also look to competitors for a better rate). I'm probably going to go with a fixed 10 year rate. This is the correct path right?

yes for everything but id go variable.

[Danger Zone]

Debt: 80k
Income: 145k
Other factors: low rent, about to buy a new car, no other large liabilities, would like to buy a house in two years or so.

I'm in the process of SoFi-ing my loan (will also look to competitors for a better rate). I'm probably going to go with a fixed 10 year rate. This is the correct path right?

yes for everything but id go variable.

Agree. It's impossible to accurately predict future rates, but given the recent market turmoil, it seems a safe bet that the Fed will be keeping rates low for at least the next few years.

[Deschutes]

For those on PAYE:

Does income (re)certification last for an entire 12-month period? I'm being asked to recert to stay on PAYE, but I'll be starting at a higher paying job soon. Should I wait until the very last moment to recert (to maximize the utility of the previous year of lower income), or does such gamesmanship not even matter?

[071816]

when does doing Sofi make sense? asking for myself.

[Danger Zone]

when does doing Sofi make sense? asking for myself.

When paying rates below 6.8-7.9% makes sense

i.e. Always

[071816]

when does doing Sofi make sense? asking for myself.

When paying rates below 6.8-7.9% makes sense

i.e. Always

really? so there's no downside to doing a refi? I was too lazy to look into it.

[JenDarby]

Down to $169,947.77! Thanks CommonBond!

[Johann]

when does doing Sofi make sense? asking for myself.

When paying rates below 6.8-7.9% makes sense

i.e. Always

really? so there's no downside to doing a refi? I was too lazy to look into it.

When you don't work in the public sector of for a non profit and you know your gonna make more than 10x your expected yearly payment under a 20 year payment government payment plan in your career Is the shortcut. But depends on lots of things due to PAYE. Read the last 40 pages and you'll see me having the same debate with zweit, buckeyesguy or something an now DZ. comparing the interest rates is not nearly the level of detail and analysis you need to delve.

[Johann]

Down to $169,947.77! Thanks CommonBond!

Congrats.