Student loan payments: get advice and actual numbers here Forum

[krads153]

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.

Well, to be fair to him, he might be running a drug ring on the side, so of course he's saving 140k on 220k income....

[krads153]

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.

Still not believable, sorry. I need to see this broken down line by line.

[JenDarby]

Let's all just reconvene when those who have refinanced have paid off their loans and those on PAYE are still riding it out. Until then it's all speculative. There are arguments in either direction.

[AVBucks4239]

Let's all just reconvene when those who have refinanced have paid off their loans and those on PAYE are still riding it out. Until then it's all speculative. There are arguments in either direction.

Then I'm going to find other ways to not do work at work. https://www.youtube.com/watch?v=Y9WwaeV9IoA

[dixiecupdrinking]

I just worry that when the tea party mobs come for PAYE, the lawyers making 200k will be first against the wall. There's a lot wrong with student loan policy but this outcome is among the more politically unpalatable things.

[Tiago Splitter]

I just worry that when the tea party mobs come for PAYE, the lawyers making 200k will be first against the wall. There's a lot wrong with student loan policy but this outcome is among the more politically unpalatable things.

That just reinforces the real takeaway from this whole debate which is that if you live below your means and save aggressively you'll end up fine regardless of what happens. If you went on PAYE and saved a ton of money it won't be that difficult to pivot if the government changes the rules. If you went on PAYE and spent everything on 4k rent and expensive vacations you're fucked.

[JenDarby]

I imagine that if I had the extra 12k a year that I spend in refi payments over what I'd spend on PAYE payments I would live slightly more lavishly and probably only save maybe 8k of that. Pennies!

[krads153]

I just worry that when the tea party mobs come for PAYE, the lawyers making 200k will be first against the wall. There's a lot wrong with student loan policy but this outcome is among the more politically unpalatable things.

That just reinforces the real takeaway from this whole debate which is that if you live below your means and save aggressively you'll end up fine regardless of what happens. If you went on PAYE and saved a ton of money it won't be that difficult to pivot if the government changes the rules. If you went on PAYE and spent everything on 4k rent and expensive vacations you're fucked.

You'd be fine (unless the economy hits the shitter and stocks tank), but you'd also be much worse off than if you had just paid your loans off quickly in the first place.

So I guess the summary is - who the fuck knows.

[hangingtree]

Just read every word of this thread and two things.

1) Thank you. I have now learned that simply paying my loans down as quickly as possible is not only a poor financial decision, but - probably more importantly - is not the way I want to live my life. I think it was this post that convinced me:

everyone seems to be forgetting that you might die in 20 years. or, even more likely, life won't be worth living in 2035. what's the point of being debt free then?

There was also a post to the effect of: "I went to law school for three years, worked my ass off for four years, and being debt-free is all I have to show for it."

2) I'd like to test my knowledge and confirm with you guys that this is the right plan.

Debt: ~$155K at start of employment (mid-Sept 2016). Repayment begins November 2016.
Interest: Weighted average is ~6.4%
Income: After housing/tax, I'll net about $120K (including bonus)
Plan: Build up 6-month rainy day fund while making minimum payments on loans, then refi and pay minimum on 10 year plan and invest with the rest.

I don't fully understand PAYE/IBR, but it seems like my discretionary income will be too high (and debt too low) for them to make sense

Thanks to this thread, I realized the importance of an emergency fund. While I know 6 month is on the high end of what is needed, I'm generally risk-averse. It won't take that long to build though. Under this plan, I'm probably looking at refi around Feb 2017. I don't have a plan to go into a PSLF-eligible job, my school has a great LRAP, and I'm rather terrified about not passing the bar, so a refi in September doesn't seem like a good idea to me. Perhaps at bar passage, but not before.

I realize the time of refi could be the point where I am doing something wrong. I'm basically paying thousands of dollars ($155K at 6.2% vs $155K at ~3%) and foregoing returns on investment as a hedge against getting fired in the first five months on the job. This period is a year off, but if you all think this is really dumb and a waste of money, I'm going to start looking into refi now and do it at graduation, which I guess would save me $8K or so if I am indeed not laid off. I'm actually comfortable with that given the risks, but there could be something I'm missing.

Thank you all. I will know the ins and outs of this stuff soon and will then start paying it back myself.

Edit: I know I should be much more thoughtful on exactly what I'll be doing with my earnings pre-refi (i.e., should perhaps invest instead) and that building an emergency fund is another hedge/lost opportunity. Comments on that would be great, but since that's a year away I don't want to take up space on this thread now.

[lacrossebrother]

what's your pre-tax income?

[Anonymous User]

First year associate in major non-NYC market. I had a good scholarship, worked during 2L and 3L and luckily ended up only $45k in debt, interest rates are between 5.4% and 6.4% on all gov't loans. Salary is typical biglaw $160k. I have always planned on paying the debt off as soon as possible. But my rent is over $2k and I can buy something if I save enough over the next 12 months.

Is there any benefit to refinancing and lowering the interest rates on the loans? And would it be better to save or pay off the debt?

Refinance. Save everything you can while making minimum SL payments. Put down enough on a home to avoid PMI. Either put everything in the house or invest in retirement/brokerage accounts in your home loan is under 4%. General rule is to put your money in mutual funds if your interest rates are 4% or lower but Im a proponent of paying off a home quicker. They cant take your degree away but they can take your home if your financial situation takes a turn for the worse. You are in a fantastic position, congratulations!

Thanks. Is the correct answer to still refinance even if I hate biglaw, quit or am fired and am making less than $100k in two years?

[krads153]

First year associate in major non-NYC market. I had a good scholarship, worked during 2L and 3L and luckily ended up only $45k in debt, interest rates are between 5.4% and 6.4% on all gov't loans. Salary is typical biglaw $160k. I have always planned on paying the debt off as soon as possible. But my rent is over $2k and I can buy something if I save enough over the next 12 months.

Is there any benefit to refinancing and lowering the interest rates on the loans? And would it be better to save or pay off the debt?

Refinance. Save everything you can while making minimum SL payments. Put down enough on a home to avoid PMI. Either put everything in the house or invest in retirement/brokerage accounts in your home loan is under 4%. General rule is to put your money in mutual funds if your interest rates are 4% or lower but Im a proponent of paying off a home quicker. They cant take your degree away but they can take your home if your financial situation takes a turn for the worse. You are in a fantastic position, congratulations!

Thanks. Is the correct answer to still refinance even if I hate biglaw, quit or am fired and am making less than $100k in two years?

You can refinance part of your loans. Leave some as federal for potential deferment benefits.

I always maxed out my 401k but threw most of the rest into loans. I also refi'd mid way through repayment.

[Anonymous User]

Debt: $100,000 GradPlus + Stafford (average 6.5% interest rate)
Plan: 10 year repayment
Minimum Payment: about $1,100/month
Salary: $160,000

I'm thinking about refinancing w/ Sofi, which is offering me 10-year fixed at 5%. I would save about $8000-$9000 over ten years. Is saving that amount worth it to refinance and lose the protections (i.e., IBR) that federal loans offer? What do you guys think?

[hous]

First year associate in major non-NYC market. I had a good scholarship, worked during 2L and 3L and luckily ended up only $45k in debt, interest rates are between 5.4% and 6.4% on all gov't loans. Salary is typical biglaw $160k. I have always planned on paying the debt off as soon as possible. But my rent is over $2k and I can buy something if I save enough over the next 12 months.

Is there any benefit to refinancing and lowering the interest rates on the loans? And would it be better to save or pay off the debt?

Refinance. Save everything you can while making minimum SL payments. Put down enough on a home to avoid PMI. Either put everything in the house or invest in retirement/brokerage accounts in your home loan is under 4%. General rule is to put your money in mutual funds if your interest rates are 4% or lower but Im a proponent of paying off a home quicker. They cant take your degree away but they can take your home if your financial situation takes a turn for the worse. You are in a fantastic position, congratulations!

Thanks. Is the correct answer to still refinance even if I hate biglaw, quit or am fired and am making less than $100k in two years?

I would say so. I cant see you not paying off your loans even with a big salary decrease.

[hous]

Debt: $100,000 GradPlus + Stafford (average 6.5% interest rate)
Plan: 10 year repayment
Minimum Payment: about $1,100/month
Salary: $160,000

I'm thinking about refinancing w/ Sofi, which is offering me 10-year fixed at 5%. I would save about $8000-$9000 over ten years. Is saving that amount worth it to refinance and lose the protections (i.e., IBR) that federal loans offer? What do you guys think?

Thats a tough one. Do you like biglaw? If shit hits the fan and you are left with a $60k salary it will be very difficult paying your loans back. Perhaps you can do what another poster recommended and only refinance the higher interest loans, but this is not an easy decision. A 1.5% interest rate gain is pretty small when you consider what you are giving up.

[Johann]

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.

Well, to be fair to him, he might be running a drug ring on the side, so of course he's saving 140k on 220k income....

If you are paying 0 in loans and saving and investing it that's like 6k a month after 1.2k for rent and 1k for food in a cheap COL city and after taxes. That money makes money.
Just got to the line by line part. I mean I've been basically putting that 6k into spy every month. Started taking a break with the money in the summer because I was going on vacation etc and luckily just kept it in savings. Stuck 25k into the market when it tanked. I've also held about 10-15k in Bitcoin throughout the year at different times. It's up 50% in one year. It's been up 150% at times. So I've sold for some healthy gains but nothing that big (like 5k gain). Saving money allows you to make investments. I can bow buy an investment property with cash money (to get a good deal and undercut price) before refinancing with a bank and taking the money out and leverage that money again. So I'm looking into a rental property to rent out. Or I could buy a place and cut down on rent going into nothing and build equity. I don't even track my finances that closely to give you exact line by line but I max my 401k and maxed Ira in stub year. So the pretax income is not really liquid but still included in my money which is obviously not a true reflection because it's untaxed. I pay 0 in loans though and will start paying something minimal 14 months into biglaw.

[Johann]

Debt: $100,000 GradPlus + Stafford (average 6.5% interest rate)
Plan: 10 year repayment
Minimum Payment: about $1,100/month
Salary: $160,000

I'm thinking about refinancing w/ Sofi, which is offering me 10-year fixed at 5%. I would save about $8000-$9000 over ten years. Is saving that amount worth it to refinance and lose the protections (i.e., IBR) that federal loans offer? What do you guys think?

Thats a tough one. Do you like biglaw? If shit hits the fan and you are left with a $60k salary it will be very difficult paying your loans back. Perhaps you can do what another poster recommended and only refinance the higher interest loans, but this is not an easy decision. A 1.5% interest rate gain is pretty small when you consider what you are giving up.

PAYE for a year to make sure you like biglaw and save the money. Then refi. You people are so damn eager to refi. Never seen so many people eager to save a guaranteed 1k. You know chase is offering 200 bucks if you open a checking account with 15k if you're looking to save pennies.

[Anonymous User]

I just received notice from the Utah Higher Education Assistance Authority (student loans for college) that I qualified for the timely payment borrower benefit. To qualify, you must make 48 consecutive payments on time. Once you qualify, your interest rate is reduced 2 percentage points.
I have 4 Stafford Loans from college that I have been making payments on.
2 Stafford loans had an interest rate of 6% which are now reduced to 4%.
2 Stafford loans had an interest rate of 2.32% which are now reduced to 0.32%

The total balance of these loans is currently around $12,000. With the reduction in the interest rate, I will see some savings, but is this 2% interest decrease large enough to find noticeable savings on my monthly minimum payment, or will this just help me pay them down faster at the current monthly payment?

Any insight would be helpful, especially from the people on this forum who have provided such great knowledge on student loan repayments.
Thank you! Interest rate savings! Is there any way to get this type of benefit on credit cards???

[LA Spring]

Which candidate, if any, has the best plan to alleviate the student debt burden? I heard that a candidate mentioned reducing the interest rate to 3%. If so, who?

IMO: If they do that then the next step would be to make it retroactive. My guess is that someone paying for the last few years would see their debt automatically reduced by several thousand $.

[Anonymous User]

Just got through the refi process (SoFi)

Debt: 211,000 (about 20k from UG, rest from LS)
Rate: 4.5% at 7 years (lowest rate offered)
Payments: $2,900 (rounded)/month
Salary: $160k

Ouch...the debt never felt so real

[Anonymous User]

Monthly payment = $2,900 !!

That is a huge monthly payment; however, your salary is quite a bit higher than mine. I recently built a home and my mortgage on a $300k house is only $1,600 a month!

[gk101]

Just got through the refi process (SoFi)

Debt: 211,000 (about 20k from UG, rest from LS)
Rate: 4.5% at 7 years (lowest rate offered)
Payments: $2,900 (rounded)/month
Salary: $160k

Ouch...the debt never felt so real

jesus that is a bold move indeed. good luck man

[Anonymous User]

Just got through the refi process (SoFi)

Debt: 211,000 (about 20k from UG, rest from LS)
Rate: 4.5% at 7 years (lowest rate offered)
Payments: $2,900 (rounded)/month
Salary: $160k

Ouch...the debt never felt so real

jesus that is a bold move indeed. good luck man

How is this that much worse than the 10 year? 10 years at 5% (lowest for 10 year I believe) would only be about $600/month less. I guess I just don't see a tangible difference?

[gk101]

Just got through the refi process (SoFi)

Debt: 211,000 (about 20k from UG, rest from LS)
Rate: 4.5% at 7 years (lowest rate offered)
Payments: $2,900 (rounded)/month
Salary: $160k

Ouch...the debt never felt so real

jesus that is a bold move indeed. good luck man

How is this that much worse than the 10 year? 10 years at 5% (lowest for 10 year I believe) would only be about $600/month less. I guess I just don't see a tangible difference?

its not the 7 vs 10 thing that gives me anxiety. you are (presumably) a first year biglaw associate with no clue about your future in the firm and you just cut off IBR/PAYE options to save a few thousand dollars of interest. risk/reward here doesn't seem justified here. anyways, it's done now so good luck and hope it all works out for you

[JenDarby]

I don't disagree that with that debt load/payment amount it was a risky move, but let's be fair that he's going to save a fuckton more than a "few thousand dollars" if everything works out as planned.