Student loan payments: get advice and actual numbers here Forum

[Johann]

wait so i haven't actually paid my loans? i'm confused

nah youre good.

[smaug]

I've been drinking and I'm still shocked by the idiocy on this page. Yes fed loans have protections. But they don't protect you for overpayments in a way that private loan servicers don't.

... i mean they kinda do though, just not specifically in any way related to the overpayment

regardless you can chose to pay down balance or make future payments with either

arguably makes more sense to put it to balance under fed loans than otherwise

[smaug]

i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.

[El Pollito]

i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.

idk ive been doing this for a while

[bk1]

Is that true though? When I had my car loan, at the beginning of every semester I would just pay 3–4 months of payments (but they all had to be separate transactions). The first payment would pay the accrued interest first, then principal. The next few payments would be like $.01 of accrued interest and then all principal, and then the interest that would accrue until I made another payment would be on the lower principal amount.

I get that this is a different thing than crediting future payments, but why wouldn't it work the same way? (IE if your student loan payment is usually $2k with $1k to I and $1k to P, then making a $20k lump payment would pay $1k I and then $19k P, with interest accruing on the lower balance in the 10 months until you make another payment)

Yea, that makes no sense to me bk. If I over pay my car loan the principal IMMEDIATELY goes down. I then ALSO owe less on my next payment. It's not like they hold the money and then apply it when the next payment is due.

Yes it is a thing that happens (also look at the tons of threads online of people complaining about it happening). If you make an overpayment to principal, I am not sure that they are necessarily required to reduce/push back your future payments, but it does look like a lot of federal student loan servicers do do that (see https://www.navient.com/loan-customers/ ... -payments/, https://www.salliemae.com/student-loans ... locations/, etc).

[JenDarby]

^ ok sob stories exist everywhere and I'm sure you could find some fed loan sob stories too. I'll caveat that it's in my experience with a handful of private loan servicers that overpayments have always pushed back future payments

[somedude]

Plan

1st year, 138 K debt (9 months in ny biglaw, 180 K)

Fixed costs excluding loans (very conservatively): 45 K / yr + 401 K max

State of loans / savings as of (rough numbers but close to right):

1/2017: 130 K loans (paying 2 K / mo) / 10 K savings (+ 18 K 401)
1/2018: 100 K (paying 3 K / mo) / 38 K savings (+ 36 K 401)
1/2019: 56 K (pay 4 K / mo) / 78 K savings (+ 54 K 401)
1/2020: 0 K (pay 4.8 K / mo) / 130 K savings (+ 72 K 401)
1/2021: 260 K savings (+ 90 K 401)

3 Rules:

don't quit before 1/2018. (Only crazies get fired; do mediocre work if required to survive to that date)

don't stay through 2021. (Only crazies stay that long; smaller firm, smaller market, in-house, whatever, $100 K min salary)

Believe in the plan because, if you do, you will likely not let go until 1/2021, and then you will be glad you did it for the rest of your life. Even if it almost eats you, you will recover.

[Anonymous User]

i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.

idk ive been doing this for a while

Wait so what's the advantage of doing REPAYE then as opposed to just doing that? I ask bc I'm in a similar boat (and have paid my loans down semi-aggressively so far) and wonder if getting on REPAYE for my fed loans makes sense (or at least what the advantages would be).

[smaug]

i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.

idk ive been doing this for a while

Wait so what's the advantage of doing REPAYE then as opposed to just doing that? I ask bc I'm in a similar boat (and have paid my loans down semi-aggressively so far) and wonder if getting on REPAYE for my fed loans makes sense (or at least what the advantages would be).

is your income high enough where it matters? REPAYE is part of the maximize cashflow -> invest in other things -> wait for the balance to be forgiven (..and taxed) route

if you're paying aggressively i don't see where it would be any benefit to you

[maxpower430]

i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.

idk ive been doing this for a while

Wait so what's the advantage of doing REPAYE then as opposed to just doing that? I ask bc I'm in a similar boat (and have paid my loans down semi-aggressively so far) and wonder if getting on REPAYE for my fed loans makes sense (or at least what the advantages would be).

is your income high enough where it matters? REPAYE is part of the maximize cashflow -> invest in other things -> wait for the balance to be forgiven (..and taxed) route

if you're paying aggressively i don't see where it would be any benefit to you

didn't mean for that to be anon. I'm a first year making a little below market - and I'm trying to figure out whether the aggressive pay down makes sense.

I assume REPAYE makes sense rn because my 2015 income was low, so my payments would be low. And then would I get out in forbearance for a while with REPAYE making some portion of the Internet payments?

[El Pollito]

i also realize i have the least popular opinion on this cite in that i think that many to most should stay on gubmint loans but pay fairly aggressively

it's cheap insurance but you should operate assuming modal outcome

not refinancing but paying aggressively lets you hedge some risk while still getting a lot of the upside of refinancing. just don't be dumb about it.

idk ive been doing this for a while

Wait so what's the advantage of doing REPAYE then as opposed to just doing that? I ask bc I'm in a similar boat (and have paid my loans down semi-aggressively so far) and wonder if getting on REPAYE for my fed loans makes sense (or at least what the advantages would be).

is your income high enough where it matters? REPAYE is part of the maximize cashflow -> invest in other things -> wait for the balance to be forgiven (..and taxed) route

if you're paying aggressively i don't see where it would be any benefit to you

You benefit from repaye bc it has lower required payments than 10 year so you have more flexibility to target higher interest loans by overpaying on specific loans.

[JenDarby]

^ they could have been entirely full of shit, but my loan servicer said that payments were automatically applied to interest and then the highest rate loans even before I got on PAYE

[Johann]

you also benefit on REPAYE because the government subsidizes your interest. they pay half of whatever you dont pay, so the effective interest rate is the proportion of the interest you actually pay averaged out against half the actual stated interest. you also get fed loan protections.

if your 7% interest rate means you accrue 7k in interest a year, but you only pay1k under repaye, your effective interest is (3.5%*[6/7]) + (7%*1/7).

this makes it very competitive with private refinancers while also giving you a year to kick the can down the road and determine if its right to refi. your interest is not building up. you can also use the increased cash flow for everything else discussed in this thread (investments, nest egg, buying property etc).

I've been on PAYE for 3 years now and I'm going to switch to REPAYE once I get married I think to have the govt pay some of the interest (even though it comes at a longer term of 25 years). have to do the math but REPAYE has some really appealing aspects to it.

[Johann]

^ they could have been entirely full of shit, but my loan servicer said that payments were automatically applied to interest and then the highest rate loans even before I got on PAYE

yeah thats not at all how it works. a standard payment is an even proportion of all your loans. PAYE minimizes your payment and allows you to then allocate the rest of that payment.

tbf, its only an advantage over standard repayment fedloans because refinanced loans all have one low rate already.

[JenDarby]

^ they could have been entirely full of shit, but my loan servicer said that payments were automatically applied to interest and then the highest rate loans even before I got on PAYE

yeah thats not at all how it works. a standard payment is an even proportion of all your loans. PAYE minimizes your payment and allows you to then allocate the rest of that payment.

tbf, its only an advantage over standard repayment fedloans because refinanced loans all have one low rate already.

my loan servicer also said they were incapable of allocating loans in any specific way (while on PAYE) lol

refi, if nothing else, is very simple. they just direct deposit money every month and such is life! I honestly have no need for more money than I have now so I would just be throwing that money into one of my hedge fund's portfolios I guess. (never not convincing myself that refi was a good choice, which I THINK long run it was)

[Johann]

^ they could have been entirely full of shit, but my loan servicer said that payments were automatically applied to interest and then the highest rate loans even before I got on PAYE

yeah thats not at all how it works. a standard payment is an even proportion of all your loans. PAYE minimizes your payment and allows you to then allocate the rest of that payment.

tbf, its only an advantage over standard repayment fedloans because refinanced loans all have one low rate already.

my loan servicer also said they were incapable of allocating loans in any specific way (while on PAYE) lol

refi, if nothing else, is very simple. they just direct deposit money every month and such is life

i mean the govt worker might be incapable of doing it. but i can navigate which loan to pay on my fedloan screen.

but thats dumb anyways, because as ive said before, the highest ROI plays are to either pay down with a lower refi rate or not pay down and use the increased cash flow for something. by staying on high interest fedloans while paying above the minimum, youre just using the fedloan protections of being economy fucked and paying a premium for that. might be right for some very risk averse people, but the highest ROIs are committing to one or the other. the US govt is banking on people that pay the high interest rate without refi-ing subsidizing all the lemons that dont pay their interest/principal and use PAYE (like me!).

so thanks sugar mama chicken.

[JenDarby]

i mean the govt worker might be incapable of doing it. but i can navigate which loan to pay on my fedloan screen.

I'm almost certain that on the great lakes website there was no way to do this, but I wasn't on PAYE very long

[maxpower430]

you also benefit on REPAYE because the government subsidizes your interest. they pay half of whatever you dont pay, so the effective interest rate is the proportion of the interest you actually pay averaged out against half the actual stated interest. you also get fed loan protections.

if your 7% interest rate means you accrue 7k in interest a year, but you only pay1k under repaye, your effective interest is (3.5%*[6/7]) + (7%*1/7).

this makes it very competitive with private refinancers while also giving you a year to kick the can down the road and determine if its right to refi. your interest is not building up. you can also use the increased cash flow for everything else discussed in this thread (investments, nest egg, buying property etc).

I've been on PAYE for 3 years now and I'm going to switch to REPAYE once I get married I think to have the govt pay some of the interest (even though it comes at a longer term of 25 years). have to do the math but REPAYE has some really appealing aspects to it.

interesting. is there really a downside of being on REPAYE then? Outside of a potential income tax bomb down the road?

[Tiago Splitter]

you also benefit on REPAYE because the government subsidizes your interest. they pay half of whatever you dont pay, so the effective interest rate is the proportion of the interest you actually pay averaged out against half the actual stated interest. you also get fed loan protections.

if your 7% interest rate means you accrue 7k in interest a year, but you only pay1k under repaye, your effective interest is (3.5%*[6/7]) + (7%*1/7).

this makes it very competitive with private refinancers while also giving you a year to kick the can down the road and determine if its right to refi. your interest is not building up. you can also use the increased cash flow for everything else discussed in this thread (investments, nest egg, buying property etc).

I've been on PAYE for 3 years now and I'm going to switch to REPAYE once I get married I think to have the govt pay some of the interest (even though it comes at a longer term of 25 years). have to do the math but REPAYE has some really appealing aspects to it.

interesting. is there really a downside of being on REPAYE then? Outside of a potential income tax bomb down the road?

Big downside of REPAYE vs. PAYE is that your spouse's income counts under REPAYE regardless of filing status.

[smaug]

i mean the govt worker might be incapable of doing it. but i can navigate which loan to pay on my fedloan screen.

I'm almost certain that on the great lakes website there was no way to do this, but I wasn't on PAYE very long

there this.

[Johann]

you also benefit on REPAYE because the government subsidizes your interest. they pay half of whatever you dont pay, so the effective interest rate is the proportion of the interest you actually pay averaged out against half the actual stated interest. you also get fed loan protections.

if your 7% interest rate means you accrue 7k in interest a year, but you only pay1k under repaye, your effective interest is (3.5%*[6/7]) + (7%*1/7).

this makes it very competitive with private refinancers while also giving you a year to kick the can down the road and determine if its right to refi. your interest is not building up. you can also use the increased cash flow for everything else discussed in this thread (investments, nest egg, buying property etc).

I've been on PAYE for 3 years now and I'm going to switch to REPAYE once I get married I think to have the govt pay some of the interest (even though it comes at a longer term of 25 years). have to do the math but REPAYE has some really appealing aspects to it.

interesting. is there really a downside of being on REPAYE then? Outside of a potential income tax bomb down the road?

longer repayment period compared to PAYE. because of the near 0 payments initially, almost everyone with a loan balance of 100k+ (imo) should be on PAYE or REPAYE when they start their career. after the first year is when people should look at salary and loan balances and career plans.

a biglawyer with lowish debt (100k) should choose repaye though probably because they arent going to ride REPAYE to term so the 25/20 year difference doesnt mean anything.

eta: and also what tiago said above re spouse income.

[JenDarby]

i mean the govt worker might be incapable of doing it. but i can navigate which loan to pay on my fedloan screen.

I'm almost certain that on the great lakes website there was no way to do this, but I wasn't on PAYE very long

there this.

THANKFULLY I JUST PAY MY SOUL TO LOANS NOW ANYWAYS

[maxpower430]

you also benefit on REPAYE because the government subsidizes your interest. they pay half of whatever you dont pay, so the effective interest rate is the proportion of the interest you actually pay averaged out against half the actual stated interest. you also get fed loan protections.

if your 7% interest rate means you accrue 7k in interest a year, but you only pay1k under repaye, your effective interest is (3.5%*[6/7]) + (7%*1/7).

this makes it very competitive with private refinancers while also giving you a year to kick the can down the road and determine if its right to refi. your interest is not building up. you can also use the increased cash flow for everything else discussed in this thread (investments, nest egg, buying property etc).

I've been on PAYE for 3 years now and I'm going to switch to REPAYE once I get married I think to have the govt pay some of the interest (even though it comes at a longer term of 25 years). have to do the math but REPAYE has some really appealing aspects to it.

interesting. is there really a downside of being on REPAYE then? Outside of a potential income tax bomb down the road?

longer repayment period compared to PAYE. because of the near 0 payments initially, almost everyone with a loan balance of 100k+ (imo) should be on PAYE or REPAYE when they start their career. after the first year is when people should look at salary and loan balances and career plans.

a biglawyer with lowish debt (100k) should choose repaye though probably because they arent going to ride REPAYE to term so the 25/20 year difference doesnt mean anything.

eta: and also what tiago said above re spouse income.

Hmm ok. Well, my situation is: married (SO makes about 1/3 what I do), $100k fed loans and 30k refi (10 year variable at 2.69% rn). I assume I should hop on now and start saving/investing my savings, and reasses once I have to recertify my income. Thoughts?

[Johann]

Hmm ok. Well, my situation is: married (SO makes about 1/3 what I do), $100k fed loans and 30k refi (10 year variable at 2.69% rn). I assume I should hop on now and start saving/investing my savings, and reasses once I have to recertify my income. Thoughts?

yeah with the way you have 30k refied already, I'd probably just refi them all. doing REPAYE for a year isnt really going to help you that much because your payments will probably be close to covering all the interest with you and your SO's income together.

[Pokemon]

i mean the govt worker might be incapable of doing it. but i can navigate which loan to pay on my fedloan screen.

I'm almost certain that on the great lakes website there was no way to do this, but I wasn't on PAYE very long

I am on Great Lakes and you can partially do this. I have two accounts and one has a higher interest than the other. The accounts are divided by type of federal loans. I do not have it open now to provide more details.