Student loan payments: get advice and actual numbers here Forum

[lacrossebrother]

Oh well you changed your story

[AVBucks4239]

Talking out your ass. I make 160k and SO makes 60k + and we have not refinanced. It's all about cash flow. We've banned over 140k in 1 year. Literally everyone should do PAYE the first year out of law school. Stop being so scared of debt you fucks. This shit is infuriating people giving the wrong advice when they have nothing to show for it.

How the fuck have you saved 140k on a 220k income?

He/she will have to explain that to the IRS very soon (and he/she might be get a fine).

I don't get it. You don't think it's possible to live on $80,000 (of $220,000 gross) a year? Because that's laughably easy.

[JenDarby]

Talking out your ass. I make 160k and SO makes 60k + and we have not refinanced. It's all about cash flow. We've banned over 140k in 1 year. Literally everyone should do PAYE the first year out of law school. Stop being so scared of debt you fucks. This shit is infuriating people giving the wrong advice when they have nothing to show for it.

How the fuck have you saved 140k on a 220k income?

He/she will have to explain that to the IRS very soon (and he/she might be get a fine).

Are you questioning JDM's ability to live on $80,000 of his $220,000 gross a year? Because that's laughably easy.

If he's paying zero dollars in taxes, it's definitely easy.

[AVBucks4239]

Talking out your ass. I make 160k and SO makes 60k + and we have not refinanced. It's all about cash flow. We've banned over 140k in 1 year. Literally everyone should do PAYE the first year out of law school. Stop being so scared of debt you fucks. This shit is infuriating people giving the wrong advice when they have nothing to show for it.

How the fuck have you saved 140k on a 220k income?

He/she will have to explain that to the IRS very soon (and he/she might be get a fine).

Are you questioning JDM's ability to live on $80,000 of his $220,000 gross a year? Because that's laughably easy.

If he's paying zero dollars in taxes, it's definitely easy.

There's a laughable amount of ways to reduce AGI and get down to the 25% tax bracket for them.

I'm not going to speak for him but I bet he's maxing 401ks (and I think his SO works in gov't and thus can essentially contribute double), HSA, throwing money into 529s (maybe), and taking every deduction imaginable to have $70-80,000 saved before taxes are even considered. Add matches of like $10,000 total and call it $80,000 saved before taxes.

So that brings them down to $150,000 taxed at 25% and leaves them $112,500 after taxes. Save another $60,000, live off $52,500, call it a day.

[mvp99]

Talking out your ass. I make 160k and SO makes 60k + and we have not refinanced. It's all about cash flow. We've banned over 140k in 1 year. Literally everyone should do PAYE the first year out of law school. Stop being so scared of debt you fucks. This shit is infuriating people giving the wrong advice when they have nothing to show for it.

How the fuck have you saved 140k on a 220k income?

He/she will have to explain that to the IRS very soon (and he/she might be get a fine).

Are you questioning JDM's ability to live on $80,000 of his $220,000 gross a year? Because that's laughably easy.

If he's paying zero dollars in taxes, it's definitely easy.

There's a laughable amount of ways to reduce AGI and get down to the 25% tax bracket for them.

I'm not going to speak for him but I bet he's maxing 401ks (and I think his SO works in gov't and thus can essentially contribute double), HSA, throwing money into 529s (maybe), and taking every deduction imaginable to have $70-80,000 saved before taxes are even considered. Add matches of like $10,000 total and call it $80,000 saved before taxes.

So that brings them down to $150,000 taxed at 25% and leaves them $112,500 after taxes. Save another $60,000, live off $52,500, call it a day.

I assumed 25% is the effective rate and that everything you said is totally correct but it still doesn't answer how he/she paid down 140k in one year. Yes, it's possible to make aggressive payments but I think JohannDeMann was exaggerating and/or there is something he/she's not telling us (like using his/her savings which I think is probably a not-so-smart move).

[lymenheimer]

Pretty sure Johann isn't paying down much of anything. Dude's been pretty clear ITT that he's a PAYE advocate and riding the train. Maybe I missed something, though.

[AVBucks4239]

I assumed 25% is the effective rate and that everything you said is totally correct but it still doesn't answer how he/she paid down 140k in one year. Yes, it's possible to make aggressive payments but I think JohannDeMann was exaggerating and/or there is something he/she's not telling us (like using his/her savings which I think is probably a not-so-smart move).

JohannDeMann is paying as little towards his loans as humanly possible. He's saved $140k, not paid $140k in loans.

[dixiecupdrinking]

Maybe those numbers work out. Congrats on locking up half of your income in accounts you can't touch for 30-40 years, I guess.

[AVBucks4239]

Maybe those numbers work out. Congrats on locking up half of your income in accounts you can't touch for 30-40 years, I guess.

You should probably look up Rule 72(t) (for IRAs) and Roth ladder conversions (for 401ks).

[JenDarby]

There's a laughable amount of ways to reduce AGI and get down to the 25% tax bracket for them.

I'm not going to speak for him but I bet he's maxing 401ks (and I think his SO works in gov't and thus can essentially contribute double), HSA, throwing money into 529s (maybe), and taking every deduction imaginable to have $70-80,000 saved before taxes are even considered. Add matches of like $10,000 total and call it $80,000 saved before taxes.

So that brings them down to $150,000 taxed at 25% and leaves them $112,500 after taxes. Save another $60,000, live off $52,500, call it a day.

I don't generally disagree, but he's big law so no ones matching shit.

[mvp99]

I assumed 25% is the effective rate and that everything you said is totally correct but it still doesn't answer how he/she paid down 140k in one year. Yes, it's possible to make aggressive payments but I think JohannDeMann was exaggerating and/or there is something he/she's not telling us (like using his/her savings which I think is probably a not-so-smart move).

JohannDeMann is paying as little towards his loans as humanly possible. He's saved $140k, not paid $140k in loans.

Got it. Still, wow

[dixiecupdrinking]

Maybe those numbers work out. Congrats on locking up half of your income in accounts you can't touch for 30-40 years, I guess.

You should probably look up Rule 72(t) (for IRAs) and Roth ladder conversions (for 401ks).

Probably, but can you explain them to me?

[AVBucks4239]

Maybe those numbers work out. Congrats on locking up half of your income in accounts you can't touch for 30-40 years, I guess.

You should probably look up Rule 72(t) (for IRAs) and Roth ladder conversions (for 401ks).

Probably, but can you explain them to me?

72(t) involves SEPP distributions that allow you to take (I think) 4% of pre-tax assets until retirement age. It's complicated because you can't fuck the calculation up until 59.5 and if you do the entire thing gets taxed and 10% penalty. Still doable with a competent CPA, though.

Roth conversion ladder is a method by which you transfer assets from a pre-tax account to a post-tax account. You pay income tax on the conversion and then can withdraw those assets penalty free after five years just as you would if you contributed normally to a Roth. The math logic is that you are letting the pre-tax money work for you and, by the time you convert it, it's compounded enough that the transfer is worth it.

So say you earned $1.00 at work. If you take it out now and spend it, it's immediately worth .75. But if you invest it in a pre-tax account it's worth the entire $1.00. And if you keep that dollar invested for ten years and it gets a yearly return of 7%, then it's worth $1.97. Then when you transfer that you pay regular income tax on that dollar (call it 30% with state/local taxes) and it's worth $1.39. So that dollar is worth about .64 more than if you'd taken it out immediately and spent it. Then after five years that $1.36 has continued to grow to $1.91 (back to about where you started before the conversion), but because it's considered a contribution, you withdraw the entire $1.91 tax free.

Multiply that dollar times hundreds of thousands of pre-tax dollars and you see how using tax-advantaged accounts is more than likely in your best interests.

Also, if you stop working during your conversion period (i.e., you have money saved in taxable/saving/whatever to get you through those five years), your conversion will barely be taxed and that math becomes even more in your favor.

Madfientist, RootofGood, and Go Curry Cracker are some good blogs to read about maximizing pre-tax accounts to retire in your 40s. Worth a read.

[Tiago Splitter]

No one is doing 72t's that far before 59.5 unless they're nuts so that doesn't really affect dixie's point. That said you only can't touch retirement accounts if they are qualified and you don't lose your job. Which is not a bad problem to have.

Also 529 contributions are not pre tax at the federal level.

[Anonymous User]

$320K combined household PAYE-eligible student debt, $160k combined income, early 30s.

My fear is that actually attempting to pay off the debt will rob us of all cash for the next 10 years. This isn't really possible w/kids, desire to save for a house downpayment, emergency fund, and other expenses incurred in your 30s. Alternatively, we could PAYE for 20 years and keep some cash for the tax bomb.

Realistically, where is the line for paying the debt vs. riding the PAYE train?

I used to post your question all the time. I think it's an adjustable line depending on income/family situation, but you're well past the line. PAYE and get your AGI down for as long as humanly possible. Both of you max out your 401k ($37k), HSA, 529s, etc. and get your payments down. Then you'll be paying less on your loans and increasing your savings rate.

FWIW, the anonymous poster above who paid off $200k in debt could probably have well over half a million in investments (at least, given the high returns in 2012, 2013, etc.) had he/she acted rationally/logically instead of emotionally. But hey, personal finance is personal, and he/she probably feels pretty good about being debt free.

I'm the poster who paid off 200k debt. And yes, I feel much better about having no debt. Regardless, I don't think I qualified for PAYE anyway (given when I took out loans), but paying off debt means no tax bomb down the line.

My spouse and I are now positive six figure net worth and neither of us have any loans (spouse didn't have any in the first place). Now we can do pretty much whatever we want. We're lucky enough to some day inherit a few million (not going to provide more details) so we don't really have to worry about retirement to be frank. Any money that we save now is our money forever and we won't be screwed by the government pulling the rug from under us with any loans that we may have had (had we even qualified for PAYE in the first place).

What a little Pusey ass fucking bitch. You do realize your net worth that you earned would be 2x greater at the min had you been smart about your finances and done PAYE? But cool dude I guess inheriting a few million is suppose to make us jealous that you were stupid and still taken care of. No one gives a fuck and you fucked up. You should have done PAYE but you were a scared little bitch about some debt and let it dictate your decisions.

Huh? Can you even read? I never qualified for PAYE. I graduated a few years ago. Tell me how that PAYE train treats you in 10-20 years though. I'm curious to know. I personally would never want to owe 400k-500k (or even more, with your s/o's debt) and get fucked with a tax bomb though. You're also never going to have a high net worth at your savings/debt rate. (Oh, but wait, you're on that "I don't pay any taxes" tip, right?) Good luck being fucked for life.

You're the one bringing up jealousy....which only gives us one conclusion.

[dixiecupdrinking]

Maybe those numbers work out. Congrats on locking up half of your income in accounts you can't touch for 30-40 years, I guess.

You should probably look up Rule 72(t) (for IRAs) and Roth ladder conversions (for 401ks).

Probably, but can you explain them to me?

72(t) involves SEPP distributions that allow you to take (I think) 4% of pre-tax assets until retirement age. It's complicated because you can't fuck the calculation up until 59.5 and if you do the entire thing gets taxed and 10% penalty. Still doable with a competent CPA, though.

Roth conversion ladder is a method by which you transfer assets from a pre-tax account to a post-tax account. You pay income tax on the conversion and then can withdraw those assets penalty free after five years just as you would if you contributed normally to a Roth. The math logic is that you are letting the pre-tax money work for you and, by the time you convert it, it's compounded enough that the transfer is worth it.

So say you earned $1.00 at work. If you take it out now and spend it, it's immediately worth .75. But if you invest it in a pre-tax account it's worth the entire $1.00. And if you keep that dollar invested for ten years and it gets a yearly return of 7%, then it's worth $1.97. Then when you transfer that you pay regular income tax on that dollar (call it 30% with state/local taxes) and it's worth $1.39. So that dollar is worth about .64 more than if you'd taken it out immediately and spent it. Then after five years that $1.36 has continued to grow to $1.91 (back to about where you started before the conversion), but because it's considered a contribution, you withdraw the entire $1.91 tax free.

Multiply that dollar times hundreds of thousands of pre-tax dollars and you see how using tax-advantaged accounts is more than likely in your best interests.

Also, if you stop working during your conversion period (i.e., you have money saved in taxable/saving/whatever to get you through those five years), your conversion will barely be taxed and that math becomes even more in your favor.

Madfientist, RootofGood, and Go Curry Cracker are some good blogs to read about maximizing pre-tax accounts to retire in your 40s. Worth a read.

Thanks. Good info. I knew there were some loopholes with retirement accounts but not these specifics. I'm not sure I see the benefit of doing the Roth conversion ladder over just contributing to a Roth in the first place -- is it just the timing aspect, i.e. you can delay paying taxes on your contributions until a year when you presumably have a lower effective tax rate?

[AVBucks4239]

Thanks. Good info. I knew there were some loopholes with retirement accounts but not these specifics. I'm not sure I see the benefit of doing the Roth conversion ladder over just contributing to a Roth in the first place -- is it just the timing aspect, i.e. you can delay paying taxes on your contributions until a year when you presumably have a lower effective tax rate?

Boom.

[krads153]

ITT too many first years who will likely never make it to midlevel, assuming that they will make a large salary for life

[mvp99]

Maybe those numbers work out. Congrats on locking up half of your income in accounts you can't touch for 30-40 years, I guess.

You should probably look up Rule 72(t) (for IRAs) and Roth ladder conversions (for 401ks).

Probably, but can you explain them to me?

72(t) involves SEPP distributions that allow you to take (I think) 4% of pre-tax assets until retirement age. It's complicated because you can't fuck the calculation up until 59.5 and if you do the entire thing gets taxed and 10% penalty. Still doable with a competent CPA, though.

Roth conversion ladder is a method by which you transfer assets from a pre-tax account to a post-tax account. You pay income tax on the conversion and then can withdraw those assets penalty free after five years just as you would if you contributed normally to a Roth. The math logic is that you are letting the pre-tax money work for you and, by the time you convert it, it's compounded enough that the transfer is worth it.

So say you earned $1.00 at work. If you take it out now and spend it, it's immediately worth .75. But if you invest it in a pre-tax account it's worth the entire $1.00. And if you keep that dollar invested for ten years and it gets a yearly return of 7%, then it's worth $1.97. Then when you transfer that you pay regular income tax on that dollar (call it 30% with state/local taxes) and it's worth $1.39. So that dollar is worth about .64 more than if you'd taken it out immediately and spent it. Then after five years that $1.36 has continued to grow to $1.91 (back to about where you started before the conversion), but because it's considered a contribution, you withdraw the entire $1.91 tax free.

Multiply that dollar times hundreds of thousands of pre-tax dollars and you see how using tax-advantaged accounts is more than likely in your best interests.

Also, if you stop working during your conversion period (i.e., you have money saved in taxable/saving/whatever to get you through those five years), your conversion will barely be taxed and that math becomes even more in your favor.

Madfientist, RootofGood, and Go Curry Cracker are some good blogs to read about maximizing pre-tax accounts to retire in your 40s. Worth a read.

Really useful, thanks.

[krads153]

Talking out your ass. I make 160k and SO makes 60k + and we have not refinanced. It's all about cash flow. We've banned over 140k in 1 year. Literally everyone should do PAYE the first year out of law school. Stop being so scared of debt you fucks. This shit is infuriating people giving the wrong advice when they have nothing to show for it.

How the fuck have you saved 140k on a 220k income?

He/she will have to explain that to the IRS very soon (and he/she might be get a fine).

Are you questioning JDM's ability to live on $80,000 of his $220,000 gross a year? Because that's laughably easy.

If he's paying zero dollars in taxes, it's definitely easy.

There's a laughable amount of ways to reduce AGI and get down to the 25% tax bracket for them.

I'm not going to speak for him but I bet he's maxing 401ks (and I think his SO works in gov't and thus can essentially contribute double), HSA, throwing money into 529s (maybe), and taking every deduction imaginable to have $70-80,000 saved before taxes are even considered. Add matches of like $10,000 total and call it $80,000 saved before taxes.

So that brings them down to $150,000 taxed at 25% and leaves them $112,500 after taxes. Save another $60,000, live off $52,500, call it a day.

Can you break this down for us further on how you can save 140k on 220k income? My spouse and I both max out 401ks, etc. and make more than that combined but don't save 80k in pre-tax income a year (we have no dependents though)....There are limits on deductions as well, so I am skeptical.

Johann - if you can do it line by line, I'd like to see the breakdown. Otherwise, this sounds like make believe.

[AVBucks4239]

Huh? Can you even read? I never qualified for PAYE. I graduated a few years ago. Tell me how that PAYE train treats you in 10-20 years though. I'm curious to know. I personally would never want to owe 400k-500k (or even more, with your s/o's debt) and get fucked with a tax bomb though. You're also never going to have a high net worth at your savings/debt rate. (Oh, but wait, you're on that "I don't pay any taxes" tip, right?). Good luck being fucked for life.

You're the one bringing up jealousy....which only gives us one conclusion.

You likely qualified for IBR and with REPAYE you would have qualified for PAYE this December. The laws are only getting more lenient in this respect.

And Johann doesn't "owe $400-500,000." When you utilize PAYE effectively then the amount of the actual debt is almost entirely irrelevant (i.e., your payment is tied entirely to income, not the debt amount), sans the tax bomb. But like I said, the law is moving more favorably towards helping borrowers, and I can easily see a regulation kicking in to remove the tax bomb entirely.

And telling him that he's "never going to have a high net worth at your savings/debt rate" is laughable. Again, you fail to understand that the debt amount is an imaginary number. This isn't a secured note or anything, it's completely made up. Put another way, he doesn't owe $400-500k, he owes projected monthly payments (which he can keep low by reducing his AGI, so I bet they pay like $15-20k per year) and maybe a tax bomb. Add in TMV and the math isn't close. This is all something you failed to grasp when you decided to pay off your loans.

Anyway, Johann saved $140,000 of $220,000 gross for a savings rate of 64% this year. If he keeps this income stream and spending rate, he can retire after 11-12 years, maybe a few more years if he wants to plan for the tax bomb.

[lymenheimer]

Talking out your ass. I make 160k and SO makes 60k + and we have not refinanced. It's all about cash flow. We've banned over 140k in 1 year. Literally everyone should do PAYE the first year out of law school. Stop being so scared of debt you fucks. This shit is infuriating people giving the wrong advice when they have nothing to show for it.

How the fuck have you saved 140k on a 220k income?

He/she will have to explain that to the IRS very soon (and he/she might be get a fine).

Are you questioning JDM's ability to live on $80,000 of his $220,000 gross a year? Because that's laughably easy.

If he's paying zero dollars in taxes, it's definitely easy.

There's a laughable amount of ways to reduce AGI and get down to the 25% tax bracket for them.

I'm not going to speak for him but I bet he's maxing 401ks (and I think his SO works in gov't and thus can essentially contribute double), HSA, throwing money into 529s (maybe), and taking every deduction imaginable to have $70-80,000 saved before taxes are even considered. Add matches of like $10,000 total and call it $80,000 saved before taxes.

So that brings them down to $150,000 taxed at 25% and leaves them $112,500 after taxes. Save another $60,000, live off $52,500, call it a day.

Can you break this down for us further on how you can save 140k on 220k income? My spouse and I both max out 401ks, etc. and make more than that combined but don't save 80k in pre-tax income a year (we have no dependents though)....There are limits on deductions as well, so I am skeptical.

Johann - if you can do it line by line, I'd like to see the breakdown. Otherwise, this sounds like make believe.

Don't do it, Johann! It's a trap! Krads works for the IRS. He'll come after you!

[AVBucks4239]

Can you break this down for us further on how you can save 140k on 220k income? My spouse and I both max out 401ks, etc. and make more than that combined but don't save 80k in pre-tax income a year (we have no dependents though)....There are limits on deductions as well, so I am skeptical.

Johann - if you can do it line by line, I'd like to see the breakdown. Otherwise, this sounds like make believe.

To be clear, I'm not saying they saved $140,000 pre-tax. The $140k saved is probably a mix of maximizing pre-tax investments, taking every deduction imaginable to reduce AGI, paying as little towards their loans as possible, being smart about their other expenses, and then contributing to post-tax accounts.

[Old Gregg]

FYI Johann is generally full of shit and I always laugh viscerally at his posts. I've come close to asking that he be banned because if unsuspecting users who read this thread, but I now believe that if you believe anything that bag of ass posts, you deserve whatever consequences are visited upon you.

[krads153]

Huh? Can you even read? I never qualified for PAYE. I graduated a few years ago. Tell me how that PAYE train treats you in 10-20 years though. I'm curious to know. I personally would never want to owe 400k-500k (or even more, with your s/o's debt) and get fucked with a tax bomb though. You're also never going to have a high net worth at your savings/debt rate. (Oh, but wait, you're on that "I don't pay any taxes" tip, right?). Good luck being fucked for life.

You're the one bringing up jealousy....which only gives us one conclusion.

You likely qualified for IBR and with REPAYE you would have qualified for PAYE this December. The laws are only getting more lenient in this respect.

And Johann doesn't "owe $400-500,000." When you utilize PAYE effectively then the amount of the actual debt is almost entirely irrelevant (i.e., your payment is tied entirely to income, not the debt amount), sans the tax bomb. But like I said, the law is moving more favorably towards helping borrowers, and I can easily see a regulation kicking in to remove the tax bomb entirely.

And telling him that he's "never going to have a high net worth at your savings/debt rate" is laughable. Again, you fail to understand that the debt amount is an imaginary number. This isn't a secured note or anything, it's completely made up. Put another way, he doesn't owe $400-500k, he owes projected monthly payments (which he can keep low by reducing his AGI, so I bet they pay like $15-20k per year) and maybe a tax bomb. Add in TMV and the math isn't close. This is all something you failed to grasp when you decided to pay off your loans.

Anyway, Johann saved $140,000 of $220,000 gross for a savings rate of 64% this year. If he keeps this income stream and spending rate, he can retire after 11-12 years, maybe a few more years if he wants to plan for the tax bomb.

Yeah, except for people who graduated years ago - you're asking them to pay minimums while they aren't on PAYE for a few years, (so effectively asking them to pay 5-6 six figures more of their debt) before PAYE, then to get on PAYE after a few years when they qualified and pay minimums for 20 years, and then pay the tax bomb? Keep in mind without PAYE your loan repayment on like 200k debt is minimum 2k+/2.5k+ a month. We'd have to do the math to see if this works out (and keep in mind investments, etc. of the extra money that you paid towards your loans), but i'm not sure that makes any sense as opposed to paying it off super fast. Also who knows if they will change the legislation again to fuck over borrowers.