Student loan payments: get advice and actual numbers here Forum

[bjohnsobf]

Post by Deschutes » Thu Aug 27, 2015 12:33 pm

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?

Yea recert at the last possible moment that you can still use the lower AGI tax return its last full 12 months with Fed Loan servicing. I'm making 0$ qualifying PSLF payments right now because its based off 3L earnings next year will prob be 0$ too because it will just be off Fall '14 earnings. There is something to the time value of money 2 year deferral argument Johann is pointing out

[Danger Zone]

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.

I'll concede there's obviously a lot more to look at than the interest rates, but the common TLS user will generally be best served by refinancing all or some of their debt.

Chimp, you should know you lose certain advantages of having fed govt loans, such as the ability to defer for hardship and stuff like that. You can put the loans in forbearance when they're refinanced but the terms generally aren't as favorable as the govt loan would be.

[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.

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.

I'll concede there's obviously a lot more to look at than the interest rates, but the common TLS user will generally be best served by refinancing all or some of their debt.

hmm I have less than 70k of debt and a job. doesn't seem worth looking into at this point.

[Tiago Splitter]

Less than 70k and a job that isn't PSLF-eligible means refinancing is a no-brainer.

[JenDarby]

Less than 70k and a job that isn't PSLF-eligible means refinancing is a no-brainer.

Yea that's a time where refinancing makes all the sense

[Danger Zone]

Less than 70k and a job that isn't PSLF-eligible means refinancing is a no-brainer.

Yea that's a time where refinancing makes all the sense

Ding ding ding. Listen to the people, chimp.

[Johann]

Less than 70k and a job that isn't PSLF-eligible means refinancing is a no-brainer.

Yep. For those that haven't followed the thread. My advice is always big debt (north of 200k) auto PAYE for a year to two. On the flip side, low debt like under 50-70 is probably in the auto refi category though I haven't ran the numbers for PSLF. But certainly private sector, 115 or below and decent salary would be auto refi.

[071816]

Less than 70k and a job that isn't PSLF-eligible means refinancing is a no-brainer.

Yea that's a time where refinancing makes all the sense

Ding ding ding. Listen to the people, chimp.

oh ok gotcha. i'll need to look into it then.

[Anonymous User]

Want to jump in here to let the world know that I just refinanced with First Republic Bank. I refinanced just shy of $200k for 10 years at a FIXED 3.45% rate. I was with SoFi (variable at 2.89%) before and haven't found anybody with fixed rates that are even close to First Republic Bank. Seemed like a no brainer to me...we'll see in 5 to 10 years.

[071816]

Want to jump in here to let the world know that I just refinanced with First Republic Bank. I refinanced just shy of $200k for 10 years at a FIXED 3.45% rate. I was with SoFi (variable at 2.89%) before and haven't found anybody with fixed rates that are even close to First Republic Bank. Seemed like a no brainer to me...we'll see in 5 to 10 years.

so how do you like working at first republic bank?

[Anonymous User]

Want to jump in here to let the world know that I just refinanced with First Republic Bank. I refinanced just shy of $200k for 10 years at a FIXED 3.45% rate. I was with SoFi (variable at 2.89%) before and haven't found anybody with fixed rates that are even close to First Republic Bank. Seemed like a no brainer to me...we'll see in 5 to 10 years.

so how do you like working at first republic bank?

Think whatever you want. Trying to help here. Nothing to gain or lose.

[071816]

Want to jump in here to let the world know that I just refinanced with First Republic Bank. I refinanced just shy of $200k for 10 years at a FIXED 3.45% rate. I was with SoFi (variable at 2.89%) before and haven't found anybody with fixed rates that are even close to First Republic Bank. Seemed like a no brainer to me...we'll see in 5 to 10 years.

so how do you like working at first republic bank?

Think whatever you want. Trying to help here. Nothing to gain or lose.

i was just kidding boss

[Johann]

Updating. To defend PAYE:

Worked for roughly a year. Started work with ~$10k in assets and $262k debt. After 1 year:
$6k cash
$85k assets all invested - been a pretty shitty year in the market but I was sitting on $25k cash when SPY dropped to $189 a share and was able to mitigate my losses there a lot. Down $250 overall. Also owned Google which helped some too (12% gain last 9 months after buying).
$10k in my 401k (not sure how much is this down but probably 10%. Got lucky with some timing there too because I was putting in 5% of my salary earlier in the year to max cash flow and just recently upped to 20% to fill out my full 18.5k allowed and the market crashed right when i switched from 5% to 20% contribution.)

Loan balance:
I've accrued $13000 in interest and now owe $275k.
I've made $0 in payments in the past year.
In January I'll start paying based on a $40k (I think this will be $200 a month in payments) salary with $170k income.
I'm a little over 5% of the way in qualifying payments to loan forgiveness because of a weird situation but we will just 5% of the way to loan forgiveness.

My tax bomb as of today would be $0 because my debt still exceeds assets. Debt is calculated as of the day before your debt is forgiven. Check the IRS worksheets.

[JenDarby]

While I simultaneously hope I am not still posting on TLS in 8-9 years, it would interesting to compare then where those refinanced and those with 20 year PAYE enlistments are debt wise.

[grand inquisitor]

i could be wrong, but i thought the tax bomb was calculated like cancellation of indebtedness in general? that would mean it is forgiven just to the extent the debt exceeds your assets. but, again, i haven't looked into this--what you wrote just looked wrong to me.

[Old Gregg]

While I simultaneously hope I am not still posting on TLS in 8-9 years, it would interesting to compare then where those refinanced and those with 20 year PAYE enlistments are debt wise.

at this point i refuse to post anything because it would make johandumbass's financial picture look so bad that it would be the worst case of internet bragging on TLS to date.

paye vs. refi is a constant debate. in my situation, refi made sense (i also didnt have option of PAYE), so i did very well with it. i wonder to this day if i wouldve taken PAYE given option, but probably not.

[Old Gregg]

i could be wrong, but i thought the tax bomb was calculated like cancellation of indebtedness in general? that would mean it is forgiven just to the extent the debt exceeds your assets. but, again, i haven't looked into this--what you wrote just looked wrong to me.

ooooh how much joy ill get when johanndumbass turns out to be wrong.

[Anonymous User]

My tax bomb as of today would be $0 because my debt still exceeds assets. Debt is calculated as of the day before your debt is forgiven. Check the IRS worksheets.

If you exclude the cancellation of indebtedness income because of insolvency, don't you have to take a corresponding basis reduction in your assets?

[dixiecupdrinking]

i could be wrong, but i thought the tax bomb was calculated like cancellation of indebtedness in general? that would mean it is forgiven just to the extent the debt exceeds your assets. but, again, i haven't looked into this--what you wrote just looked wrong to me.

Yes, this is obviously right. The windfall otherwise would be insane. I just looked it up as a gut check. Look at IRS Publication 4681, Example 2 under "Insolvency."

[Tiago Splitter]

i could be wrong, but i thought the tax bomb was calculated like cancellation of indebtedness in general? that would mean it is forgiven just to the extent the debt exceeds your assets. but, again, i haven't looked into this--what you wrote just looked wrong to me.

Yes, this is obviously right. The windfall otherwise would be insane. I just looked it up as a gut check. Look at IRS Publication 4681, Example 2 under "Insolvency."

Yeah the IRS writes it in a way that makes Johann seem right but then example 2 rains on the parade.

I'm all in on PAYE but that's mostly because I like to spend money. I think the long term differences between PAYE and refi are overstated for most people, but if I make good money for the next decade or more PAYE is gonna cost me a lot more than paying it down ASAP.

[Johann]

yeah i always forget about that shit. whatevs im 90% tax bomb is gonna be legislated away and if its not its not too hard to plan around with trusts and gifts

[grand inquisitor]

yeah i always forget about that shit. whatevs im 90% tax bomb is gonna be legislated away and if its not its not too hard to plan around with trusts and gifts

this is actually going to be an exhibit in your tax evasion prosecution. hello AUSA! no complicity here!

[A. Nony Mouse]

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?

Technically, yes, but IIRC REPAYE goes into effect Dec 15 (?) of this year, and gets rid of the new borrower requirement. So you can switch to REPAYE once that goes into effect. Until then, you can use IBR (higher income cap but same basic idea).

[JenDarby]

Just browsing simplicity job postings, which I occassionally do, and I try not to even give gov positions a second look. I'd be so pissed if I was ever PSLF eligible.

[Old Gregg]

yeah i always forget about that shit. whatevs im 90% tax bomb is gonna be legislated away and if its not its not too hard to plan around with trusts and gifts

Relying on Congress to get you out of debt. Sounds like a sound financial strategy. Maybe buying a boat will also help?