Student loan payments: get advice and actual numbers here Forum

[AVBucks4239]

Her Jetta is an SEL trim level. The SEL should raise the estimate. We got it for about 15k about 9 months ago. We aren't too terriblely underwater on the Jetta; perhaps based on the trade in value. Either way though my wife works part time and pays her note herself. So unless she falls behind on the payments I cannot justify taking it away from her.

Edit: also my liquid cash on hand is $4000. I also have $1000 in long term stocks that are doing well.

I'm not suggesting taking the car from her. I'm suggesting both of you sit down like adults and realize you've made several bad decisions and that you come up with a few things to remedy those bad decisions. And the first and most immediate thing you can do is to cut your fixed costs.

And when you cut fixed costs, the best thing you can do is focus on the big things: rent/mortgage, car payments, student loan payments, cable, etc. Where do you plan on renting if you rent your house out? Can you cut cable? Can you reduce car payments?

Then can you change cell phone plans? Drop your internet speed a little? Buy smarter at the grocery store? Whatever. But this is all small peanuts compared to the big things above.

I mean, your debt is outrageous and you need to recognize that. Sitting here and defending a $15k car purchase that was bought when you have student loans was (for the fifth time) absolutely fucking absurd. You continue to make excuses for keeping it, which again, is absolutely fucking absurd.

And LOL at $1,000 in stocks doing well. You have a loan accruing at 18% interest. Get a grip. Sit your wife down so she gets a grip too.

[Anonymous User]

Law School Debt: $0---the one upside to taking the scholarship at the shitty school.

Mortgage Debt: Maybe 145k left on my mortgage on a house in a city I no longer live in. I could sell for about 300k. Right now I rent it out for like 1700/month. My monthly payment is like 1300/month considering HOA fees and all expenses and bullshit that comes up with the renters. I'm thinking hard about dumping it and just moving the equity elsewhere. One big problem with the renters could wipe out all my gains.

Combined household income: $200k. We have 1 kid. I'm working for the government now, but I'll probably go back to biglaw. I got too used to the pay, and as embarrassing as it is to admit it, it's tough to save money on $200k. I think we'll have a combined household income of $400k once I go back.

Notes: biggest expenses are kid's daycare (like 1,800/mo, which is competitive here) and rent (like 3,000/mo, which is high here and a vestige of my good old days in biglaw. I'll probably downgrade if I'm still in government when my lease is up, or I'll buy a new place if I'm back in biglaw).

[ballouttacontrol]

Jesus u guys need to chill on the car loan dude. Jfc he doesn't have that much debt and probably less than an average american once you factor in the fact that his student loan debt will be paid off by the gov't. The credit card debt is his only serious debt so he should work on that ASAP, and use those silly stocks to pay it down but other than that damn he has a good job, PSLF loan forgiveness, and owns a home with super low monthly payments. Once his wife starts throwing down sum $ he's fine. I'm guessing the Kay loan was for a wedding/engagement ring so he's probs not gonna be doing that again, and if he bought a house for $60k or some shit it was probably a fixer upper hopefully has that under control now

[84651846190]

pretty sure one or more of the posters ITT is Suze Orman

[Anonymous User]

Jesus u guys need to chill on the car loan dude. Jfc he doesn't have that much debt and probably less than an average american once you factor in the fact that his student loan debt will be paid off by the gov't. The credit card debt is his only serious debt so he should work on that ASAP, and use those silly stocks to pay it down but other than that damn he has a good job, PSLF loan forgiveness, and owns a home with super low monthly payments. Once his wife starts throwing down sum $ he's fine. I'm guessing the Kay loan was for a wedding/engagement ring so he's probs not gonna be doing that again, and if he bought a house for $60k or some shit it was probably a fixer upper hopefully has that under control now

Thanks man for the support. The Kay loan was for a wedding band for my beloved wife. So that is not a reoccurring expense! The house is actually really nice. It is in like a Fl Jacksonville type market where pretty decent properties are competitively priced. The home remodel loan replaced all of the tile in the bathrooms and kitchen. It is nice, and should rent easy!

[AVBucks4239]

Jesus u guys need to chill on the car loan dude. Jfc he doesn't have that much debt and probably less than an average american once you factor in the fact that his student loan debt will be paid off by the gov't. The credit card debt is his only serious debt so he should work on that ASAP, and use those silly stocks to pay it down but other than that damn he has a good job, PSLF loan forgiveness, and owns a home with super low monthly payments. Once his wife starts throwing down sum $ he's fine. I'm guessing the Kay loan was for a wedding/engagement ring so he's probs not gonna be doing that again, and if he bought a house for $60k or some shit it was probably a fixer upper hopefully has that under control now

Thanks man for the support. The Kay loan was for a wedding band for my beloved wife. So that is not a reoccurring expense! The house is actually really nice. It is in like a Fl Jacksonville type market where pretty decent properties are competitively priced. The home remodel loan replaced all of the tile in the bathrooms and kitchen. It is nice, and should rent easy!

Sorry if I was being a dick earlier. Guy reminded me of my older brother who started out like this OP, never learned his lesson, has filed bankruptcy, and has just this past summer texted me because he needed $3 for gas so he could get to work (his debt and fixed costs are insane).

So anyway, to this OP: you're light years ahead of my brother by just recognizing you need a little advice. I'll end by just recommending those three books again.

[Roger Podactor]

Her Jetta is an SEL trim level. The SEL should raise the estimate. We got it for about 15k about 9 months ago. We aren't too terriblely underwater on the Jetta; perhaps based on the trade in value. Either way though my wife works part time and pays her note herself. So unless she falls behind on the payments I cannot justify taking it away from her.

Edit: also my liquid cash on hand is $4000. I also have $1000 in long term stocks that are doing well.

I'm not suggesting taking the car from her. I'm suggesting both of you sit down like adults and realize you've made several bad decisions and that you come up with a few things to remedy those bad decisions. And the first and most immediate thing you can do is to cut your fixed costs.

And when you cut fixed costs, the best thing you can do is focus on the big things: rent/mortgage, car payments, student loan payments, cable, etc. Where do you plan on renting if you rent your house out? Can you cut cable? Can you reduce car payments?

Then can you change cell phone plans? Drop your internet speed a little? Buy smarter at the grocery store? Whatever. But this is all small peanuts compared to the big things above.

I mean, your debt is outrageous and you need to recognize that. Sitting here and defending a $15k car purchase that was bought when you have student loans was (for the fifth time) absolutely fucking absurd. You continue to make excuses for keeping it, which again, is absolutely fucking absurd.

And LOL at $1,000 in stocks doing well. You have a loan accruing at 18% interest. Get a grip. Sit your wife down so she gets a grip too.

I got to say I don't exactly agree with everything said here. A lot of you all are coming off as haters honestly. First and foremost, you can't count OP's student loans; because of PSLF it is really equivalent to giving 10% of your income for 10 years. Those loans aren't really a factor. In 10 years, they're gone. And only from a series of neglible payments.

Moreover, you that are harping on OP's credit card debt and car loans may not be considering OP's starting salary. Jag pays a lot, second really only to big law. Jag is really pretty much on the same financial level as big law, with way less stress and work hours. OP makes 100k plus a year, just starting out! His credit card debt and all other unsecured debt are below 50k. Meaning he could EASILY pay off that unsecured debt and even the secured debt in his FIRST year of work. I agree that this debt is something to be concerned with, but when you're making as much money as OP it really doesn't matter.

[bk1]

I got to say I don't exactly agree with everything said here. A lot of you all are coming off as haters honestly. First and foremost, you can't count OP's student loans; because of PSLF it is really equivalent to giving 10% of your income for 10 years. Those loans aren't really a factor. In 10 years, they're gone. And only from a series of neglible payments.

Moreover, you that are harping on OP's credit card debt and car loans may not be considering OP's starting salary. Jag pays a lot, second really only to big law. Jag is really pretty much on the same financial level as big law, with way less stress and work hours. OP makes 100k plus a year, just starting out! His credit card debt and all other unsecured debt are below 50k. Meaning he could EASILY pay off that unsecured debt and even the secured debt in his FIRST year of work. I agree that this debt is something to be concerned with, but when you're making as much money as OP it really doesn't matter.

Neither avbucks nor I counted student loans or the mortgage. OP's salary is less important than the financial mistakes that led to the 30k in unsecured debt at usury rates in the first place. Of course he can pay it off in that time, but the biggest issue is living beyond his means which very well can continue even after a salary increase.

Nobody is "hating," merely trying to be helpful.

[AVBucks4239]

I got to say I don't exactly agree with everything said here. A lot of you all are coming off as haters honestly. First and foremost, you can't count OP's student loans; because of PSLF it is really equivalent to giving 10% of your income for 10 years. Those loans aren't really a factor. In 10 years, they're gone. And only from a series of neglible payments.

Moreover, you that are harping on OP's credit card debt and car loans may not be considering OP's starting salary. Jag pays a lot, second really only to big law. Jag is really pretty much on the same financial level as big law, with way less stress and work hours. OP makes 100k plus a year, just starting out! His credit card debt and all other unsecured debt are below 50k. Meaning he could EASILY pay off that unsecured debt and even the secured debt in his FIRST year of work. I agree that this debt is something to be concerned with, but when you're making as much money as OP it really doesn't matter.

Bolded is where I disagree. This OP has been on student loans for three years and has financed two vehicles, financed a $2,500 wedding band (you have to be in pretty bad financial shape to need to finance something that's $2,500), and racked up $30k in credit card debt. What's he going to do when he has an actual income?

I'm just trying to emphasize and attack the decisionmaking part of the whole thing that led to his predicament. There's a rationalization process that is behavioral and becomes ingrained if they don't get a wake-up call.

The OP here, I can assure you, is nowhere near the shitcannery of my brother (who I think was/is so bad with money that he traumatized me into constantly reading personal finance books). And I'm not Suzie Orman or Dave Ramsey who are pathologically and irrationally against any and all debt (I'm totally okay with his student loans and mortgage).

But what is similar between my brother and this OP is just bad decisionmaking supported by bad rationalization to support these bad decisions. His car is the easiest example for me because it's the same thing my brother always said with his cars. "Oh, it's underwater, I can't trade it in," "I can't take that car from her" (brother's GF was working PT and making like $10k/year with a $245 car payment which she was technically paying, but my brother was subsidizing a lot of other things, as I imagine might be the case here), "Oh, we didn't know we should only spend 10-20% on transportation." It's all a bunch of excuses to rationalize a bad decision.

So I'm just hoping to get a light bulb to go off that this is a behavioral thing, not a numbers thing. If OP did all this while in school, WTF is he going to do when he has $100k income?

But to go back to the original question, which is to give him advice:

(1) Enroll in PAYE and scroll through this thread to figure out how to make that work most for you;
(2) Contribute to 401k/403b up to match;
(3) Lower fixed costs as much as you're comfortable with;
(4) Stop financing shit until you're out of debt;
(5) Use income and money saved from lower fixed costs to pay down debt;
(6) Pay highest interest rate loans first;
(7) Again, no financing shit until unsecured debt is paid off;
(8) Start reading about personal finance.

[Anonymous User]

2014 grad here.
Total student debt 265k at an average of more than 7% interest (was 272k at graduation and a large % of my debt is at 7.9%). No other debt besides student loans.
NYC big law and single. In 2015, I paid 2k a month for student loans + 1/3 of my bonus, and plan on doing the same this year.
5% of my income goes in unmatched 401k, and I also take $1,000 a month and invest it to savings account or SPY ETF.

I thought about re-financing, but am scared of economy going down and getting canned. Am I doing things really wrong?

I personally wouldn't do unmatched 401k until your debt is lower unless you are on an income-based plan (in which case 401k contributions reduce the amount you have to pay). You're not really doing anything "wrong" per se, it just depends on which of the 3 options are most preferable to you: (1) income-based, (2) refinance, (3) aggressively pay down fed loans. That said, I think your method is the worst option of the 3 because most calculations seem to have income-based plans coming out ahead of aggressive repayment on fed loans. If you're really worried about being canned to the point that you don't want to refi, I would lean towards doing income-based (lax has some decent writeups in either this thread or another thread).

You should also be building an emergency fund (presumably that's what he 1k/month is going to). I would not put your e-fund in ETFs (instead use something safe/liquid like high-interest savings or CDs).

Thanks for the insight. I am actually on IBR however I pay more than the minimum so that I can make a dent on the debt. I thought of just paying the IBR minimum and saving on the side for the tax bomb, but I found it psychologically difficult to pay money without really affecting the principal (which would basically be the case if I only payed IBR minimum).
Also, I thought that even if someone plans on just aggressively paying the debt, they should still IBR since it allows you to allocate more of your funds to your higher interest loans.
I have already built a 4 month e-fund with GE capital bank, and in the future plan on basically keeping a 50/50 ratio between ETFs and GE Capital bank.

[A. Nony Mouse]

Moreover, you that are harping on OP's credit card debt and car loans may not be considering OP's starting salary. Jag pays a lot, second really only to big law. Jag is really pretty much on the same financial level as big law, with way less stress and work hours. OP makes 100k plus a year, just starting out! His credit card debt and all other unsecured debt are below 50k. Meaning he could EASILY pay off that unsecured debt and even the secured debt in his FIRST year of work. I agree that this debt is something to be concerned with, but when you're making as much money as OP it really doesn't matter.

I'm confused. Didn't this anon say his salary will be $63,446.40? Not poverty level, but not second only to biglaw.

[bk1]

Thanks for the insight. I am actually on IBR however I pay more than the minimum so that I can make a dent on the debt. I thought of just paying the IBR minimum and saving on the side for the tax bomb, but I found it psychologically difficult to pay money without really affecting the principal (which would basically be the case if I only payed IBR minimum).

You're welcome. Are you going to actually pay it off before the 20/25 year forgiveness period? What's your risk tolerance?

By doing the IBR minimum, you would essentially only pay a partial amount on each dollar of debt (i.e., approximately what the taxes on it will be, though with some higher interest because of the higher principal). As I noted earlier, I tend to think that not refinancing and not going all in on income-based is probably the worst deal. You don't get to take advantage of a lower interest (i.e., refinancing), and you don't get to pay a partial amount on each dollar (i.e., taxes on IBR debt forgiveness). But the psychological impact is important (which is why, for example, debt snowball tends to be more successful than debt avalanche even though avalanche costs less money in the long run). Refinancing is risky (because you can't just fall back on an income-based plan) and having a quarter million dollars or more hanging over your head for 20-25 years is not something that everyone would feel comfortable with. You should do what works best with your personal preferences and risk tolerance, while being mindful of the costs. You may pay more money than others, but if the other methods would cause significant stress, that extra money may be worth it to you.

Also, I thought that even if someone plans on just aggressively paying the debt, they should still IBR since it allows you to allocate more of your funds to your higher interest loans.

Yes, if you can be on an income based plan, you should pretty much always be on it. I merely meant paying aggressively on top of income-based payments.

I have already built a 4 month e-fund with GE capital bank, and in the future plan on basically keeping a 50/50 ratio between ETFs and GE Capital bank.

That's good and ignore what I said earlier. Only said that because it was unclear based on your "savings account or SPY ETFs" note.

[bk1]

I'm confused. Didn't this anon say his salary will be $63,446.40? Not poverty level, but not second only to biglaw.

He had other perks on top of base salary that brought it close to 100k:

Total un-taxed housing allowance $27,720 yearly. $2,310 monthly, 03E With Dependents. This is based on a northeastern base location. Which is where I will likely be.

Total BAS allowance (for sustenance), un-taxed: $253.63 a month. $3,043.56 for the year.

I'm not necessarily convinced that it's second to biglaw (or that it's "way less stress" depending on the type of work done), but it is quite a bit.

[A. Nony Mouse]

Oh, I missed that part, thanks.

[bk1]

No worries.

[Anonymous User]

I'm confused. Didn't this anon say his salary will be $63,446.40? Not poverty level, but not second only to biglaw.

He had other perks on top of base salary that brought it close to 100k:

Total un-taxed housing allowance $27,720 yearly. $2,310 monthly, 03E With Dependents. This is based on a northeastern base location. Which is where I will likely be.

Total BAS allowance (for sustenance), un-taxed: $253.63 a month. $3,043.56 for the year.

I'm not necessarily convinced that it's second to biglaw (or that it's "way less stress" depending on the type of work done), but it is quite a bit.

Jag OP here. Thank you for all of the input guys!

In regard to income, I also have a rental property that should generate about $1200 a month. All in, I think my salary will be a little over $106,000.

A point you all made that particularly resonates with me is lifestyle inflation. I really don't think my debt right now is too concerning given my starting salary. So long as I don't ramp up my spending because I am bringing in more money! I will be sure to keep an eye on this!

Thanks again!

[whysoseriousbiglaw]

Law School Debt: $0---the one upside to taking the scholarship at the shitty school.

Mortgage Debt: Maybe 145k left on my mortgage on a house in a city I no longer live in. I could sell for about 300k. Right now I rent it out for like 1700/month. My monthly payment is like 1300/month considering HOA fees and all expenses and bullshit that comes up with the renters. I'm thinking hard about dumping it and just moving the equity elsewhere. One big problem with the renters could wipe out all my gains.

Combined household income: $200k. We have 1 kid. I'm working for the government now, but I'll probably go back to biglaw. I got too used to the pay, and as embarrassing as it is to admit it, it's tough to save money on $200k. I think we'll have a combined household income of $400k once I go back.

Notes: biggest expenses are kid's daycare (like 1,800/mo, which is competitive here) and rent (like 3,000/mo, which is high here and a vestige of my good old days in biglaw. I'll probably downgrade if I'm still in government when my lease is up, or I'll buy a new place if I'm back in biglaw).

Do you live in a big city with a kid? If so, then yeah 200k is not enough to save on. Why not relocate and transfer offices in your job?

[Anonymous User]

Debt: 238K (interest accrued I was unemployed for a while after law school)

Income: ~ $80K/year (single)

Payment: $350.00/month

Payment Plan: PAYE (Pay As You Earn)

[bk1]

Do you live in a big city with a kid? If so, then yeah 200k is not enough to save on. Why not relocate and transfer offices in your job?

This is ridiculous. It is definitely possible to save while earning 200k for a family of 3, even in an expensive metro area.

[LA Spring]

I thought of just paying the IBR minimum and saving on the side for the tax bomb.

Tax Bomb?? Come again...

[Danger Zone]

I thought of just paying the IBR minimum and saving on the side for the tax bomb.

Tax Bomb?? Come again...

Well, as it stands, any loans forgiven under IBR qualify as debt forgiveness and thus are included in your income when you file your tax return that year. So you get to pay taxes on your forgiven student loan debt.

[Johann]

I thought of just paying the IBR minimum and saving on the side for the tax bomb.

Tax Bomb?? Come again...

Well, as it stands, any loans forgiven under IBR qualify as debt forgiveness and thus are included in your income when you file your tax return that year. So you get to pay taxes on your forgiven student loan debt.

only to the extent you are solvent (have assets) though.

[Anonymous User]

I thought of just paying the IBR minimum and saving on the side for the tax bomb.

Tax Bomb?? Come again...

Well, as it stands, any loans forgiven under IBR qualify as debt forgiveness and thus are included in your income when you file your tax return that year. So you get to pay taxes on your forgiven student loan debt.

Does this also apply if your loans are forgiven under PSLF?


EDIT: Never mind, I found the answer. See the link:

https://lawyerist.com/83690/defusing-st ... -tax-bomb/

[Danger Zone]

I thought of just paying the IBR minimum and saving on the side for the tax bomb.

Tax Bomb?? Come again...

Well, as it stands, any loans forgiven under IBR qualify as debt forgiveness and thus are included in your income when you file your tax return that year. So you get to pay taxes on your forgiven student loan debt.

only to the extent you are solvent (have assets) though.

Yes, my advice is solely for those of us who expect to be solvent in 20 years.

No tax bomb on PSLF.

[bk1]

Yes, my advice is solely for those of us who expect to be solvent in 20 years.

Most likely people trying to maximize the value of IBR/PAYE will be incredibly solvent because they will have maxed out 401k contributions each year.