Student loan payments: get advice and actual numbers here Forum

[Mr. Peanutbutter]

I haven't entered repayment yet, so check with someone who has actually used/done it, but it seems like a nice consolation prize to big lawyers given that you only get to use the deduction during your stub year.

Also, I plan on using it by paying off as much of my accrued interest (roughly $18k) before it capitalizes, and that'll definitely be above $2,500. I don't know how it would work if the interest has already capitalized, although the way it's worded makes it sound like you just need to make $2,500 in payments or whatever.

[Danger Zone]

This is a silly analysis that presumes people have no idea how to budget

Of course it's a silly analysis. As I said:

I think it's really dumb to try to pay down your student loans really quickly while the rest of your financial life is a dumpster fire.

Knowing how to budget doesn't mean that the budget magically fulfills itself. There's no point in dumping extra money in the student loans when you haven't developed the discipline to consistently and predictably spend less than you make, month in and month out.

Yeah, can we stipulate that you shouldn't pay your loans in advance if you can't pay your credit card bills? doesnt really merit discussion.

You'd be surprised how many people try to rationalize away paying extra on their loans and carrying a credit card balance. However, I agree that the discussion that has already happened is more than enough, and it was really started by me stretching to find a negative for the avalanche method. Case closed.

What you're saying is really fucking obvious and not contributing anything to this thread. Please stop. TYIA.

[Calvin Murphy]

I haven't entered repayment yet, so check with someone who has actually used/done it, but it seems like a nice consolation prize to big lawyers given that you only get to use the deduction during your stub year.

Also, I plan on using it by paying off as much of my accrued interest (roughly $18k) before it capitalizes, and that'll definitely be above $2,500. I don't know how it would work if the interest has already capitalized, although the way it's worded makes it sound like you just need to make $2,500 in payments or whatever.

I'm not entirely positive that it means that you only have to make $2,500 in payments--IRS might treat a payment on principal as part principal and part interest in proportion to the amount of principal originally existing vs. amount of principal that is the result of capitalized interest.

In any case, I think laxbrah said he'll have paid $500 before the end of the year in TOTAL...so he definitely isn't at the $2,500 cap.

My loan company told me that any payments made before repayment begins and after 180 days (or whatever the time limit for returning loans is) from disbursement is applied first to any outstanding fees, then to any existing interest, then to principal.

I assume that any payment over the minimum for people who are out of deferment is the same (i.e. if your required monthly payment is $500 and you pay $3,000, you'll have payed $500 split in whatever manner the repayment plan calls for from that minimum payment plus $2,500 in interest--assuming, of course, that you had more than $2,500 in interest to begin with).

[lacrossebrother]

PAYEment is now shorthand for minimum monthly payment pursuant to a PAYE repayment plan.
----
Is there any chance that if I pay in excess of my PAYEment, that my PAYEment in the following month would be reduced?

[lacrossebrother]

Also what are my reporting obligations re: collecting a bonus?

[fourtyacslaw]

So, I've gone through this thread a few times to try and begin planning for how I am going to handle my repayment since I will be graduating in May. To be honest, it's a lot to digest, and I wanted to post to see if anyone might help by letting me know what my best approach may be.

Debt: ~$90k (at repayment)
Income: $160k
Other Info: No undergrad or credit card debt. Car is paid off. Will be living in a relatively low COL city (Houston). Fiancée will be helping with bills and makes ~$55k (she has no debt). I'll be living rent-free from Aug. - Nov. '16.

My original thought was simply the pay-of-as-quickly-as-possible plan. With this approach, is it realistic to think I could be debt-free within 1.5 - 2 years? Also, is immediate refinancing (and losing the fed. loan protections) a better option for those with this approach?

Most importantly, is there anything about my situation that would make a different strategy better? I know this depends largely upon personal preferences/aversion to risk, but is there anything I might be looking past that I should be mindful of?

[JenDarby]

At 90k there's no question you should refinance. With that income and low loan balance you will get a good rate and could even lock in a good fixed rate for 5 or 10 years. One way or another you're going to pay all of that off (unless every worst case scenario happens, in which case you're fucked anyways). Rather than pay off quickly with tons of interest accruing you'd at least have the option to pay off more slowly while ultimately paying the same amount (or ideally less if you do pay off quickly).

[UnfrozenCaveman]

For 90k in student loan debt person attempting to repay in 1.5-2yrs:

Refinancing is probably fine. If you pay it down that quickly, it probably won't make much difference anyway though.

Re: the federal protections, paying down quickly would seem to negate most of those benefits except for the possibility of death/disability after you get married. Term life insurance to cover that amount would make up the difference any way and wouldn't cost so much as to wipe out any gains from refinancing.

[Anonymous User]

So, I've gone through this thread a few times to try and begin planning for how I am going to handle my repayment since I will be graduating in May. To be honest, it's a lot to digest, and I wanted to post to see if anyone might help by letting me know what my best approach may be.

Debt: ~$90k (at repayment)
Income: $160k
Other Info: No undergrad or credit card debt. Car is paid off. Will be living in a relatively low COL city (Houston). Fiancée will be helping with bills and makes ~$55k (she has no debt). I'll be living rent-free from Aug. - Nov. '16.

My original thought was simply the pay-of-as-quickly-as-possible plan. With this approach, is it realistic to think I could be debt-free within 1.5 - 2 years? Also, is immediate refinancing (and losing the fed. loan protections) a better option for those with this approach?

Most importantly, is there anything about my situation that would make a different strategy better? I know this depends largely upon personal preferences/aversion to risk, but is there anything I might be looking past that I should be mindful of?

I had about the same amount of debt, and paid it off in about 2.5 years in a very very high COL area, so your goal seems realistic. I ended up not refinancing because I was having potentially life-threatening health problems at the time, so I wanted the federal protections for my husband. And like others have said, it doesn't make a ton of difference if you are paying it off quickly.

[JenDarby]

Granted my debts 160k, but I save $600 a month in accruing interest having refinanced, so it's not insignificant. If your debts lower I think it makes even more not less sense to refinance.

There's no reason you shouldn't be able to pay off 90k on a 10 year plan. Your monthly payment will be around $1000 or maybe a bit less. Take the interest savings and pay off sooner or not.

[El Pollito]

90 debt? please exit this thread

[fourtyacslaw]

Thank you for the advice, everyone. It sounds like the consensus is to refinance and go forward with the plan to pay down quickly. My only concern is a less-than-ideal credit score (~670), but hopefully I can still get a better rate than what I have currently. Also, would not have thought of the term life insurance as a safeguard, so thanks for throwing that out there.

90 debt? please exit this thread

Uh...okay? I didn't realize there was a threshold for entry.

[NycReturn]

Do people tend to refinance over the summer, when you start work, or in January after your last loan was disbursed?

[El Pollito]

Thank you for the advice, everyone. It sounds like the consensus is to refinance and go forward with the plan to pay down quickly. My only concern is a less-than-ideal credit score (~670), but hopefully I can still get a better rate than what I have currently. Also, would not have thought of the term life insurance as a safeguard, so thanks for throwing that out there.

90 debt? please exit this thread

Uh...okay? I didn't realize there was a threshold for entry.

it was a joke and you won't be able to refi with that credit score (not a joke)

[fourtyacslaw]

it was a joke and you won't be able to refi with that credit score (not a joke)

Haha gotcha. My sarcasm meter must be off today.

As for the refinancing, shit. I figured they weighed salary and debt to the point where my score wouldn't be a complete deal breaker. Could my fiancee potentially cosign? Her credit score is 750+, but she has a relatively short credit history (FWIW).

[Mr. Peanutbutter]

My credit score is pretty shitty, too, but hopefully I can just wait a year or two and try to bring it up and refi. Most of my bad shit is from ~5 years ago.

[JenDarby]

You can always try to refinance and with at least common bond and DBR you have an after the fact option to add someone to cosign. And yes, a fiancé can cosign. The credit pull has no significant effect here so I would still go for it. (To the above, if it's REALLY shitty and you won't have someone cosign then waiting a year is probably a good idea).

[bear patrol]

Do people tend to refinance over the summer, when you start work, or in January after your last loan was disbursed?

I refinanced in the summer before starting work. SOFI allowed me to refinance 3 months before my expected start date, which was awesome because the interest stopped accruing at the higher government rate (for me it was about 7%) and I locked in the lower rate (about 3%) for an extra 3 months.

[kpterrifico]

just another data point for fourtyacslaw: I graduated w/ ~70k in 2013, and paid it off in 15 months. most months i paid only $1400. But after both my stub year and first year bonuses came in, i made huge lump payments. (the first, to finish off my highest interest loan. the second, to finish off my loans completely). i was done by february of my second year.

i'm in a lower COL market than NYC... but I didn't live terribly cheaply. My feeling is that if you're lucky enough to have a market-paying gig and sub-100k in loans, payoff in a couple years is super doable. And if you value being debt-free as much as I do, I say it's totally worth it to prioritize loans over investments for your first couple years.

[Anonymous User]

Can anyone give me a good idea about timeframe for paying off my loans? Current 3L with job offer in hand.

I'll have about ~140k in loans. I'll be making 145k/yr in a lower COL city. Take home will be about 7600-7800 after taxes. I don't plan to live too luxuriously, but I would like a relatively nice apartment for my area (~1500/month). I plan on paying about $3k/month to these loans. Calculators online are telling me about 4.5 years, but those aren't taking into account increases in salary + bonuses (both of which I'd put towards these loans). Anyone in a similar situation that was able to pay off in say <3 years?

[Mr. Peanutbutter]

(To the above, if it's REALLY shitty and you won't have someone cosign then waiting a year is probably a good idea).

Yeah, we're talking sub-600. I graduate in May and have paid off my credit cards and a small (~$500) charge off from a card I had forgotten about. I'm not sure how long it takes for things to fall off and for my score to recover to a point where my rate will be worth it to refi. I'm hoping by my second or third year in practice my score will be good enough, and I'll have a better idea about future plans, to make it worth it.

And there's no one in my family who would cosign 200k+

e: I definitely kick myself for my irresponsible mid-20s when I read about how much you're saving each month in interest.

[El Pollito]

(To the above, if it's REALLY shitty and you won't have someone cosign then waiting a year is probably a good idea).

Yeah, we're talking sub-600. I graduate in May and have paid off my credit cards and a small (~$500) charge off from a card I had forgotten about. I'm not sure how long it takes for things to fall off and for my score to recover to a point where my rate will be worth it to refi. I'm hoping by my second or third year in practice my score will be good enough, and I'll have a better idea about future plans, to make it worth it.

And there's no one in my family who would cosign 200k+

e: I definitely kick myself for my irresponsible mid-20s when I read about how much you're saving each month in interest.

i really doubt you will be able to refi by then.

[UnfrozenCaveman]

For those of you who copped sub 4% refinance rates, was your plan to pay off quickly?

I ask because I think that you could only get sub 4% with a variable rate, and I suspect interest rates (federal funds rate) will rise soon affecting other rates to which the variable rate loans are pegged (e.g. SoFi is pegged to LIBOR which will likely rise with the federal funds rate). Would anyone then advise going for the higher but fixed interest rate if they can get it before the variable rates rise?

[Mr. Peanutbutter]

i really doubt you will be able to refi by then.

damn

[Danger Zone]

For those of you who copped sub 4% refinance rates, was your plan to pay off quickly?

I ask because I think that you could only get sub 4% with a variable rate, and I suspect interest rates (federal funds rate) will rise soon affecting other rates to which the variable rate loans are pegged (e.g. SoFi is pegged to LIBOR which will likely rise with the federal funds rate). Would anyone then advise going for the higher but fixed interest rate if they can get it before the variable rates rise?

Yeah fixed is probably a good bet right now, especially for risk averse lawyer types.