Student loan payments: get advice and actual numbers here Forum

[Anonymous User]

My debt will be roughly 90k and I'll be making 95k or so before taxes. I'm in a southern market but I have been told I will still lose about 30k after taxes. My firm will match my 401k up to 3% and then contributes half for the next 2%. Is the move then to put 5% of income in a 401k and then agreesively pay down my loans. I'm single so my thought was I might be able to live on like 30k and put everything else to 401k and loans. Is that the best strategy?

[Johann]

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.

you should def stop by to laugh at my debt north of $500k

[sener212]

Fyi all, The interest on my SOFI variable student loan just went up for the first time since I refinanced back in January...

[JenDarby]

Fyi all, The interest on my SOFI variable student loan just went up for the first time since I refinanced back in January...

From what to what?

[Johann]

My debt will be roughly 90k and I'll be making 95k or so before taxes. I'm in a southern market but I have been told I will still lose about 30k after taxes. My firm will match my 401k up to 3% and then contributes half for the next 2%. Is the move then to put 5% of income in a 401k and then agreesively pay down my loans. I'm single so my thought was I might be able to live on like 30k and put everything else to 401k and loans. Is that the best strategy?

yeah matching 401k is 100% return and then 50% return on your money. so contributing 5% to 401k is your number 1 priority. thats all pretax money though so just assuming 100k for easy math means 5 goes to that putting you at 95 which is maybe like 65 after tax. id refinance to try and get a 5 year sub 3% rate. then just make payments and invest in the market/save the money for a hosue downpayment or something.

another thing probably not being talked about enough (and sorta rightfully so because most markets are NYC or SV) is the fact that punting your loan responsibility down the road 2 years allows you to buy property earlier and save rental money. this can be a pretty huge because you are getting real estate returns as a form of investment while also avoiding pissing money away to rent and gaining equity. tough to know what the return is but decent property investments return about 10% after tax after 20 years as an investment property, so this doesnt include the fact of not pissing away rental money. you could be looking at a near 20% return if you live in a pretty terrible rental market (which usually happens in smaller places where there is not as much rental ocmpetition and units on the market).

edit - being dumb. ignore the 20% comment. 10% would be right because that factors in rental payments received from renters in the investment which would nott be happening in your own house. so a 10% return seems about right.

[gk101]

My debt will be roughly 90k and I'll be making 95k or so before taxes. I'm in a southern market but I have been told I will still lose about 30k after taxes. My firm will match my 401k up to 3% and then contributes half for the next 2%. Is the move then to put 5% of income in a 401k and then agreesively pay down my loans. I'm single so my thought was I might be able to live on like 30k and put everything else to 401k and loans. Is that the best strategy?

absolutely do the 401k contributions first. I would suggest saving up an emergency fund next before aggressively paying down loans or anything

also, the 30k number sounds good but most likely won't happen

[sener212]

Fyi all, The interest on my SOFI variable student loan just went up for the first time since I refinanced back in January...

From what to what?

3.0% --> 3.3%

[JenDarby]

Agree with all of the above. I would definitely recommend refinancing since paying off that debt load is very feasible and holding onto it for 20 years seems pretty silly.

That being said, living off 30k/yr post tax dollars in not NY/SF market is extremely doable unless you have expensive habits/interests/tastes.

[JenDarby]

Fyi all, The interest on my SOFI variable student loan just went up for the first time since I refinanced back in January...

From what to what?

3.0% --> 3.3%

At least not a terrible increase, though I'm hoping CommonBond does not follow suit.

and lol. That made me check the disclosure statements on my loan. If I pay it back over the 10 year refinancing term I will only pay $38,512.91 in interest! In addition to the 17k that accrued during law school that I already paid back!

[lawhopeful10]

Rookie question here but how does refinancing your loans work? I get that you lower your interest rate but what is the insentive for the loan disburser to lower your rate from the standard 6 or so %. Also if you refinance at say 3% for five years can you pay it off faster if you want? Thanks in advance

[JenDarby]

Rookie question here but how does refinancing your loans work? I get that you lower your interest rate but what is the insentive for the loan disburser to lower your rate from the standard 6 or so %. Also if you refinance at say 3% for five years can you pay it off faster if you want? Thanks in advance

The company you refinance with gets 3% off 200k instead of 0% off 0k.

Yes all the major companies allow for prepayment with no penalty. You can ask re refinance to a different company or with the same company down the road for a better rate.

[lawhopeful10]

Rookie question here but how does refinancing your loans work? I get that you lower your interest rate but what is the insentive for the loan disburser to lower your rate from the standard 6 or so %. Also if you refinance at say 3% for five years can you pay it off faster if you want? Thanks in advance

The company you refinance with gets 3% off 200k instead of 0% off 0k.

Yes all the major companies allow for prepayment with no penalty. You can ask re refinance to a different company or with the same company down the road for a better rate.

That makes sense if it's an amount you couldn't pay off but I'm talking about federal loans that you can't discharge. So if you have like 70k of loans but make enough to repay it at 6% why drop you to 3%. I guess even there they would be worried you might just not pay?

[Tiago Splitter]

Rookie question here but how does refinancing your loans work? I get that you lower your interest rate but what is the insentive for the loan disburser to lower your rate from the standard 6 or so %. Also if you refinance at say 3% for five years can you pay it off faster if you want? Thanks in advance

The company you refinance with gets 3% off 200k instead of 0% off 0k.

Yes all the major companies allow for prepayment with no penalty. You can ask re refinance to a different company or with the same company down the road for a better rate.

That makes sense if it's an amount you couldn't pay off but I'm talking about federal loans that you can't discharge. So if you have like 70k of loans but make enough to repay it at 6% why drop you to 3%. I guess even there they would be worried you might just not pay?

The refi company isn't the original loan servicer. So the new company gains your business by offering a lower rate.

[JenDarby]

Rookie question here but how does refinancing your loans work? I get that you lower your interest rate but what is the insentive for the loan disburser to lower your rate from the standard 6 or so %. Also if you refinance at say 3% for five years can you pay it off faster if you want? Thanks in advance

The company you refinance with gets 3% off 200k instead of 0% off 0k.

Yes all the major companies allow for prepayment with no penalty. You can ask re refinance to a different company or with the same company down the road for a better rate.

That makes sense if it's an amount you couldn't pay off but I'm talking about federal loans that you can't discharge. So if you have like 70k of loans but make enough to repay it at 6% why drop you to 3%. I guess even there they would be worried you might just not pay?

The fed loan service providers don't drop your rates.

You refinance with independent loan servicers who have nothing to do otherwise with your student loans. They would otherwise get zero dollars from you.

Those independent service providers get the money they loan by doing things such as borrowing money from Bank syndicates at lower rates than they get back from borrowers.

It's like when you have a credit card debt with one company and receive a balance transfer offer. That other company will get less interest, but they werent getting shit from you before.

[lawhopeful10]

O okay makes sense. Thanks for explaining.

[Anonymous User]

Current 2L here, trying to get a grasp of my loans with my zero knowledge of how any of this works.
Salary: I have a SA position lined up in NYC, should make about $30k from that this summer. Assuming I get an offer after, I'll have a salary of $160k.
Debt: By the time I graduate I will have $156,500 in loans at 6.6% interest (I think?). I might also be married by then, too - but my SO makes very little (maybe $30k a year by the time I graduate).

So how do I start to gain knowledge about how I approach this? On the one hand, could I live off of $40k and pay $60 a year, and be paid off in 3 years? That seems too simple - what am I missing? Any suggested resources? I've tried going through this thread but am completely confused. :/ Thanks in advance for any advice!

Edit: Forgot another question - what should I do with my $30k this summer? Should I pay off loans from my 1L year, or just not take out as many for 3L year? Or something else? Thanks!

[Anonymous User]

Plus loans have an origination fee of something like 5%. If you have a choice, I would ordinarily use any cash to avoid taking out new plus loans rather than paying off existing loans. This becomes more complicated when the new loans have a lower interest rate than the old loans, though, and this is the case with 15-16 loans (which are at 5.84%/6.84%) as compared to 14-15 loans (which are at 6.21%/7.21%). In this case, it winds up being pretty much a wash. I think most people expect that interest rates for loans in the 16-17 academic year, which will be set based on the 10 year treasury rate next summer, will be higher, so you'd probably be better off using the money to reduce the amount you take out for 3L year, but there is a lot of uncertainty involved in that.

Also of interest, if you make a payment on a plus loan in the first 120 days after disbursement, it will be treated as a cancellation of that amount rather than an ordinary payment, so the origination fee and any interest that has accrued on that amount will be undone. This means you should probably take out the maximum cost of attendance and then just make a payment on the loan within the first 120 days with whatever you ultimately don't need. This ends up being the equivalent of only taking out the smaller loan amount, but you don't need to estimate your future needs months in advance and you can minimize the risks of estimating too low.

[Anonymous User]

Looking for a little help/advice. Just graduated and my debt is ~$180k (damn you interest...). Going into a public interest/government job where I'll make about $53k. Before I found this thread I just assumed I'd use my schools LRAP (which seems nice... but also seems to cap at $14k a year, which means I think I'd still be on the hook for like $10k a year in payments because my monthly payment is $2k? not sure), but everyone here seems to suggest PSLF. Is that the best option for me no matter what? Also not sure about the refinancing stuff... all my loans are government.

[Tiago Splitter]

Looking for a little help/advice. Just graduated and my debt is ~$180k (damn you interest...). Going into a public interest/government job where I'll make about $53k. Before I found this thread I just assumed I'd use my schools LRAP (which seems nice... but also seems to cap at $14k a year, which means I think I'd still be on the hook for like $10k a year in payments because my monthly payment is $2k? not sure), but everyone here seems to suggest PSLF. Is that the best option for me no matter what? Also not sure about the refinancing stuff... all my loans are government.

Go on Pay As You Earn. You'll only pay 10% of your discretionary income, which after a full year should only be a few thousand bucks and it sounds like the school will cover that. Assuming you do PSLF-eligible work for 120 months everything else will get forgiven.

[barkschool]

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.

you should def stop by to laugh at my debt north of $500k

$500k just from school or does this include home debt?

[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.

you should def stop by to laugh at my debt north of $500k

$500k just from school or does this include home debt?

I think he's estimating how high his debt will be with 8-9 years of interest tacked on and minimal PAYE payments.

[Anonymous User]

My god Johan is such a fucking idiot

Edit: this is old gregg

[El Pollito]

yeah i couldn't stomach the idea of growing debt under PAYE and caved on "throw money at it"

[JenDarby]

yeah i couldn't stomach the idea of growing debt under PAYE and caved on "throw money at it"

I've recently felt slightly sad about my massive monthly loan payments, but I am comforted by the fact that I only have 9 years (unless I can crush it even sooner) left instead of 19 years. 19 more years of law school loan payments sounds miserable.

[Old Gregg]

yeah i couldn't stomach the idea of growing debt under PAYE and caved on "throw money at it"

I've recently felt slightly sad about my massive monthly loan payments, but I am comforted by the fact that I only have 9 years (unless I can crush it even sooner) left instead of 19 years.

And no tax bomb

But aww yiss Donald trump will remove that shit