Student loan payments: get advice and actual numbers here Forum

[Anonymous User]

Second year in biglaw. Already refinanced to 4.25% for 7 years during my first year. I have about 180k left and debating refinancing again with First Republic. The 5 year 1.95% is tempting to just get it done (I have six years left on mine). But also considering the 10 year 2.95% or 15 year 3.75%. My mortgage is 3.75%, so I feel like that is a pretty killer deal. But, you cannot deduct student loan interest like you can mortgage interest when you make a biglaw salary.

Any thoughts on which way to go? I think I am leaning the 5 year to get it done since its hard to say how long I will be in biglaw. But switching to the 10, and saving $1,000 a month could also be very helpful for the same reason.

[Good Guy Gaud]

Smart people:

If I'm going to take the long road to paying off my loans, should I refinance to get a lower interest rate? Does refinancing mean I'll be unable to pay it off early if I change my mind (prepayment penalties or something?). I really don't have any financial concerns except maybe children down the line so it's hard to find an incentive to pay it off early.

If you are comfortable with losing government protections (assuming you have fed loans), then yes a refi is worth it for the lower rate.

My impression is that most (if not all) student refi offers do not have prepayment penalties, but you can look at the terms of their offers to make sure.

What government protections do I risk losing? The chance that they'll be forgiven? Serious question

Yes. Also, your balance will be forgiven at the end of the term (but you'll still pay the income tax). Private loans could go on forever, I suppose, or if you don't pay by the end of the term then I guess they could levy it against you.

Prepayment penalties on student loans are illegal. Basically your tradeoff is the lower interest rate vs. the downside protection government loans offer, as described above (PAYE, IBR, forebearance, deferral). If you haven't started looking at refi options, I would recommend Earnest or First Republic Bank, depending on where you live. I've refi'd thrice, and those have been the best. SoFi, meh. DRB, terrible peripheral product, plus no longer the cheapest game in town.

I appreciate the info. Thanks!

[bk1]

Per these threads on reddit (https://www.reddit.com/r/StudentLoans/c ... t_subsidy/ ; https://www.reddit.com/r/StudentLoans/c ... _question/), it looks like the subsidy is based on the amount due, not the amount paid. So if his payment is set at a lower number than the accruing interest, he can still take advantage of the subsidy while making $2,500/mo payments.

(And if you were saying the same thing I just said, sorry for repeating. The wording was just a little vague.)

That's a good point, my post definitely wasn't clear. Unless anon is not using his/her salary as AGI (e.g., using the prior year's tax returns that show a much lower income) then the REPAYE monthly payment probably doesn't result in a large interest subsidy (maybe shaving off a point to a point and a half, definitely not halving the full interest rate).

[bk1]

Second year in biglaw. Already refinanced to 4.25% for 7 years during my first year. I have about 180k left and debating refinancing again with First Republic. The 5 year 1.95% is tempting to just get it done (I have six years left on mine). But also considering the 10 year 2.95% or 15 year 3.75%. My mortgage is 3.75%, so I feel like that is a pretty killer deal. But, you cannot deduct student loan interest like you can mortgage interest when you make a biglaw salary.

Any thoughts on which way to go? I think I am leaning the 5 year to get it done since its hard to say how long I will be in biglaw. But switching to the 10, and saving $1,000 a month could also be very helpful for the same reason.

The 5 year will cost you 9k in interest over 5 years. If you took the 10 year and paid it in 5 years, it would cost you 13.8k in interest. If you took the 15 year and paid it in 5 years, it would cost you 17.6k in interest. The 10 year will cost you 28k in interest over 10 years. If you took the 15 year and paid it in 10 years, it would cost you 36k in interest.

Essentially, the flexibility of the 10 year or 15 year (i.e., that they give you the ability to pay it off on a longer term, but you can still pay it more quickly to save money if you like) will cost you around 1000/year. For you, I think the greatest financial benefit is taking the 15 year and either investing the extra money or putting it into the mortgage to get the deduction. That said, once you pay off the student loan, that obligation is gone. If you are concerned about your income not being able to support both a student loan payment and all your other financial obligations, then there may be benefit to getting rid of it rather than maximizing your overall financial returns.

[swampthang]

Second year in biglaw. Already refinanced to 4.25% for 7 years during my first year. I have about 180k left and debating refinancing again with First Republic. The 5 year 1.95% is tempting to just get it done (I have six years left on mine). But also considering the 10 year 2.95% or 15 year 3.75%. My mortgage is 3.75%, so I feel like that is a pretty killer deal. But, you cannot deduct student loan interest like you can mortgage interest when you make a biglaw salary.

Any thoughts on which way to go? I think I am leaning the 5 year to get it done since its hard to say how long I will be in biglaw. But switching to the 10, and saving $1,000 a month could also be very helpful for the same reason.

Really depends on your personal finances and how comfortable you are with the potentially bigger payments that come with shorter repayment. Let's look at some comparative numbers.

Current: 180k, 4.25%, 6 years. Monthly pmt. = $2,837 (I assume that's about what you pay a month now?). Lifetime interest = $24,241.
1RB 5-year: 180k, 1.95%, 5 year. Monthly pmt. = $3,151. Lifetime interest = $9,064.
^So the monthly payments don't get much worse with the 1RB 5-year, as the shorter term is offset by the much lower interest rate, resulting in an extra $314/mo. in payments. If you're already tight financially, you may prefer the option but not the obligation to prepay that the 7-year term gets you. You're still getting a significant interest discount at 2.65%, and you're lowering your payments to $2,350/mo. while still only paying $17,408 interest over the life of the loan. If you do end up going with First Republic, PM me and I can set you up with a $200 referral!

[Anonymous User]

Second year in biglaw. Already refinanced to 4.25% for 7 years during my first year. I have about 180k left and debating refinancing again with First Republic. The 5 year 1.95% is tempting to just get it done (I have six years left on mine). But also considering the 10 year 2.95% or 15 year 3.75%. My mortgage is 3.75%, so I feel like that is a pretty killer deal. But, you cannot deduct student loan interest like you can mortgage interest when you make a biglaw salary.

Any thoughts on which way to go? I think I am leaning the 5 year to get it done since its hard to say how long I will be in biglaw. But switching to the 10, and saving $1,000 a month could also be very helpful for the same reason.

Really depends on your personal finances and how comfortable you are with the potentially bigger payments that come with shorter repayment. Let's look at some comparative numbers.

Current: 180k, 4.25%, 6 years. Monthly pmt. = $2,837 (I assume that's about what you pay a month now?). Lifetime interest = $24,241.
1RB 5-year: 180k, 1.95%, 5 year. Monthly pmt. = $3,151. Lifetime interest = $9,064.
^So the monthly payments don't get much worse with the 1RB 5-year, as the shorter term is offset by the much lower interest rate, resulting in an extra $314/mo. in payments. If you're already tight financially, you may prefer the option but not the obligation to prepay that the 7-year term gets you. You're still getting a significant interest discount at 2.65%, and you're lowering your payments to $2,350/mo. while still only paying $17,408 interest over the life of the loan. If you do end up going with First Republic, PM me and I can set you up with a $200 referral!

Has anyone tried to refi with First Republic before they had an associate position for 24 months? I guess, does the "in the industry" part matter, can you count SA positions or if you worked before law school?

[bk1]

Has anyone tried to refi with First Republic before they had an associate position for 24 months? I guess, does the "in the industry" part matter, can you count SA positions or if you worked before law school?

You can refi before 2 years, but it'll depend on your other factors (e.g., liquidity, debt-to-income ration, cosigner, etc).

[Anonymous User]

Has anyone tried to refi with First Republic before they had an associate position for 24 months? I guess, does the "in the industry" part matter, can you count SA positions or if you worked before law school?

You can refi before 2 years, but it'll depend on your other factors (e.g., liquidity, debt-to-income ration, cosigner, etc).

I am an idiot, I do not live in one of the states where I would qualify. I am very annoyed it is so limited. I have a drivers licence from one of them still, but I don't live or work there

[swampthang]

Second year in biglaw. Already refinanced to 4.25% for 7 years during my first year. I have about 180k left and debating refinancing again with First Republic. The 5 year 1.95% is tempting to just get it done (I have six years left on mine). But also considering the 10 year 2.95% or 15 year 3.75%. My mortgage is 3.75%, so I feel like that is a pretty killer deal. But, you cannot deduct student loan interest like you can mortgage interest when you make a biglaw salary.

Any thoughts on which way to go? I think I am leaning the 5 year to get it done since its hard to say how long I will be in biglaw. But switching to the 10, and saving $1,000 a month could also be very helpful for the same reason.

Really depends on your personal finances and how comfortable you are with the potentially bigger payments that come with shorter repayment. Let's look at some comparative numbers.

Current: 180k, 4.25%, 6 years. Monthly pmt. = $2,837 (I assume that's about what you pay a month now?). Lifetime interest = $24,241.
1RB 5-year: 180k, 1.95%, 5 year. Monthly pmt. = $3,151. Lifetime interest = $9,064.
^So the monthly payments don't get much worse with the 1RB 5-year, as the shorter term is offset by the much lower interest rate, resulting in an extra $314/mo. in payments. If you're already tight financially, you may prefer the option but not the obligation to prepay that the 7-year term gets you. You're still getting a significant interest discount at 2.65%, and you're lowering your payments to $2,350/mo. while still only paying $17,408 interest over the life of the loan. If you do end up going with First Republic, PM me and I can set you up with a $200 referral!

Has anyone tried to refi with First Republic before they had an associate position for 24 months? I guess, does the "in the industry" part matter, can you count SA positions or if you worked before law school?

1RB told me I could count my firm SA, and I assume probably 1L summer and any internships, externships, maybe even clinics or unrelated prior WE. bk1 is right that it's just part of the considerations-- I know they make it seem like it's a hard requirement, but the banker I went through said just that: if it's sub-2 years, it's not automatically disqualifying. When I walked him through junior associate salaries and the like, his response was basically, "yeah, you'll have no trouble qualifying."

[Mr. Peanutbutter]

Question:

I was approved for PAYE earlier this year, but the PDF they sent me included "loan information" but only lists my grad plus loans and not any of the other loans (both un-sub stafford from law school and undergrad loans). Also, it says "If you do not recertify or if you no longer have a partial financial hardship, your payment amount will be $X" with X being less than half of my standard repayment amount listed for all my loans. I don't have a payment yet so I'm not sure how this is going to shake out, but should I bother calling them and making sure that I'm not on some weird half-your-loans-are-in-PAYE scenario? Is that even possible?!

Anyone else have anything similar happen?

[bk1]

Are all your loans with the same loan servicer? Note that your loans can change hands.

I don't know for sure, but the "your payment will be $X" could be a repayment plan other than standard (e.g., graduated)

[Mr. Peanutbutter]

Are all your loans with the same loan servicer? Note that your loans can change hands.

I don't know for sure, but the "your payment will be $X" could be a repayment plan other than standard (e.g., graduated)

Yeah, they're all with Fedloans and are listed in my regular account view. It's frustrating that I can't see what my bill will be when defferment ends.

[bk1]

Are all your loans with the same loan servicer? Note that your loans can change hands.

I don't know for sure, but the "your payment will be $X" could be a repayment plan other than standard (e.g., graduated)

Yeah, they're all with Fedloans and are listed in my regular account view. It's frustrating that I can't see what my bill will be when defferment ends.

I'd call them and clear it up.

[boredtodeath]

Hi all -

I've posted in this thread before, but with repayment looming in about a month and a half I wanted to come back for some advice.

Debt: 295k
Salary: NYC biglaw 180k
Rent: 1,830/month

My main question revolves around whether I should apply for PAYE, REPAYE, IBR or ICR, or, if I qualify, if I should refi with First Republic at their 2.95% 10-year fixed rate.

On the standard 10 year govt repayment plan, my monthly payments are $3,395. I can afford that as of now, but obviously the big question is how long I am going to last in biglaw, and planning for 4-5 years down the road when my salary might drop. A refi with First Republic at 2.95% would drop the monthly payments to $2,842, but if I transition out of biglaw in 4 years and take a lower salary, that $2,842/month is going to be unaffordable.

So if I opt for one of the income-based repayment plans, which do I choose? I'm having trouble discerning the difference between REPAYE and PAYE. I know that the govt will subsidize 50% of the unpaid interest that accrues if you go REPAYE, but that assumes you are making minimum payments for the life of the repayment. Do I really want to commit to paying the minimum for 25 years and then dealing with the tax bomb at the end? It also seems like under PAYE you are restricted from making payments above what the 10-year plan would have you pay. I like the idea of the lower payment safety net, but ideally I would like to be able to pay more than the 10-year plan mandates if I should have the extra money.

It's tough because I'd obviously like to get the lower rate of a refi now, while I am making the most money and can contribute extra to my debt. But on the flip side, I lose the protections of PAYE, etc and might be fucked in a few years if (when) I leave biglaw.

[Mr. Peanutbutter]

Hi all -

I've posted in this thread before, but with repayment looming in about a month and a half I wanted to come back for some advice.

Debt: 295k
Salary: NYC biglaw 180k
Rent: 1,830/month

My main question revolves around whether I should apply for PAYE, REPAYE, IBR or ICR, or, if I qualify, if I should refi with First Republic at their 2.95% 10-year fixed rate.

On the standard 10 year govt repayment plan, my monthly payments are $3,395. I can afford that as of now, but obviously the big question is how long I am going to last in biglaw, and planning for 4-5 years down the road when my salary might drop. A refi with First Republic at 2.95% would drop the monthly payments to $2,842, but if I transition out of biglaw in 4 years and take a lower salary, that $2,842/month is going to be unaffordable.

So if I opt for one of the income-based repayment plans, which do I choose? I'm having trouble discerning the difference between REPAYE and PAYE. I know that the govt will subsidize 50% of the unpaid interest that accrues if you go REPAYE, but that assumes you are making minimum payments for the life of the repayment. Do I really want to commit to paying the minimum for 25 years and then dealing with the tax bomb at the end? It also seems like under PAYE you are restricted from making payments above what the 10-year plan would have you pay. I like the idea of the lower payment safety net, but ideally I would like to be able to pay more than the 10-year plan mandates if I should have the extra money.

It's tough because I'd obviously like to get the lower rate of a refi now, while I am making the most money and can contribute extra to my debt. But on the flip side, I lose the protections of PAYE, etc and might be fucked in a few years if (when) I leave biglaw.

I'm pretty sure the bolded isn't true. It's that if the PAYE calculations give you a payment higher than standard, then they just bill you the standard plan, not that you can't pay higher than that amount. I could be wrong though.

[boredtodeath]

Hi all -

I've posted in this thread before, but with repayment looming in about a month and a half I wanted to come back for some advice.

Debt: 295k
Salary: NYC biglaw 180k
Rent: 1,830/month

My main question revolves around whether I should apply for PAYE, REPAYE, IBR or ICR, or, if I qualify, if I should refi with First Republic at their 2.95% 10-year fixed rate.

On the standard 10 year govt repayment plan, my monthly payments are $3,395. I can afford that as of now, but obviously the big question is how long I am going to last in biglaw, and planning for 4-5 years down the road when my salary might drop. A refi with First Republic at 2.95% would drop the monthly payments to $2,842, but if I transition out of biglaw in 4 years and take a lower salary, that $2,842/month is going to be unaffordable.

So if I opt for one of the income-based repayment plans, which do I choose? I'm having trouble discerning the difference between REPAYE and PAYE. I know that the govt will subsidize 50% of the unpaid interest that accrues if you go REPAYE, but that assumes you are making minimum payments for the life of the repayment. Do I really want to commit to paying the minimum for 25 years and then dealing with the tax bomb at the end? It also seems like under PAYE you are restricted from making payments above what the 10-year plan would have you pay. I like the idea of the lower payment safety net, but ideally I would like to be able to pay more than the 10-year plan mandates if I should have the extra money.

It's tough because I'd obviously like to get the lower rate of a refi now, while I am making the most money and can contribute extra to my debt. But on the flip side, I lose the protections of PAYE, etc and might be fucked in a few years if (when) I leave biglaw.

I'm pretty sure the bolded isn't true. It's that if the PAYE calculations give you a payment higher than standard, then they just bill you the standard plan, not that you can't pay higher than that amount. I could be wrong though.

You're correct, I misread it. Forget that part.

[Mr. Peanutbutter]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

[boredtodeath]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

No, that is my plan outside of a refi. My question is which income-based plan is best, as I can't really figure out the differences between them.

I've gone on the studentloans.gov repayment estimator but it's sort of unhelpful because it assumes your AGI will increase by 5% every year over the course of the repayment. So under PAYE, for example, it has me being forgiven $0, which I know can't be right.

Then there is still the option of the refi. Is 2.95% too good a rate to turn down (assuming I qualify) even with the risk that my income decreases in the future?

[Nebby]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

You have to make a lot of money for this to actually happen. For instance, 250k of debt with a 250k salary still comes with a paye of $1900/month, whereas the standard payment would be 3k

[Mr. Peanutbutter]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

You have to make a lot of money for this to actually happen. For instance, 250k of debt with a 250k salary still comes with a paye of $1900/month, whereas the standard payment would be 3k

... you know how much big law pays right?

[Mr. Peanutbutter]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

No, that is my plan outside of a refi. My question is which income-based plan is best, as I can't really figure out the differences between them.

I've gone on the studentloans.gov repayment estimator but it's sort of unhelpful because it assumes your AGI will increase by 5% every year over the course of the repayment. So under PAYE, for example, it has me being forgiven $0, which I know can't be right.

Then there is still the option of the refi. Is 2.95% too good a rate to turn down (assuming I qualify) even with the risk that my income decreases in the future?

If you're gonna be on PAYE with a big law salary, the benefit isn't what could hypothetically be forgiven in 20 years (don't listen to johann). The benefit is that the lower payments give you time to get your financial house of cards in order and it's insurance for if you don't think your salary will stay at that level for as long as you need to pay off your loans.

As far as refinancing, that's a risk that's going to be really personal. For me, the risks of interest rates increasing more than another percentage point over the next year scares me less than the risk of not liking my job or being bad at it. At least for now, getting on PAYE gives me the peace of mind that if I don't like my lifestyle, I can conceivably do something else and not be totally financially devastated.

As far as which plan is best, if you qualify for PAYE that's better than REPAYE I'm pretty sure, although I haven't really looked at the details in a while.

[JenDarby]

There's so much burnout and unpredictability in biglaw that I would probably hold off on refinancing since you aren't going to over pay THAT much more in interest by waiting a year or two.

2 years post grad I am confident that one way or another I was going to pay all my loans off before I had any forgiveness from PAYE. That being said, I do kind of wish I would have waited a year or so to refinance as I'm looking to buy a house and that extra cash flow would have been great.

[Nebby]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

You have to make a lot of money for this to actually happen. For instance, 250k of debt with a 250k salary still comes with a paye of $1900/month, whereas the standard payment would be 3k

... you know how much big law pays right?

Yes

[Mr. Peanutbutter]

Then is there any big draw back, other than the paperwork, to getting on PAYE and then paying the standard amounts or higher once you get 6 months savings and more financially stable?

You have to make a lot of money for this to actually happen. For instance, 250k of debt with a 250k salary still comes with a paye of $1900/month, whereas the standard payment would be 3k

... you know how much big law pays right?

Yes

Alright, allow me to lay this out long form so some other people in similar positions might benefit:

My current debt load including interest is $233k (jfc). PAYE payments are calculated June - June based on your last year's tax return. Last year, my AGI was around $40k. That puts my payments until June 2017 at about $185/month, and since my income won't go up much for this tax year, the payments will likely be similar until June 2018. My standard payment is $2,400/month

If you can't save an emergency fund / pay off credit card debt before you start earning $250k with that kind of budget, you either have a meth problem or enjoy throwing burning bags of cash off the balcony of your $5k/month apartment.

(The calculator is available here. You're able to log in to your fed loans account so you don't have to input all the loan information manually)

[bk1]

If you're gonna be on PAYE with a big law salary, the benefit isn't what could hypothetically be forgiven in 20 years (don't listen to johann). The benefit is that the lower payments give you time to get your financial house of cards in order and it's insurance for if you don't think your salary will stay at that level for as long as you need to pay off your loans.

As far as refinancing, that's a risk that's going to be really personal. For me, the risks of interest rates increasing more than another percentage point over the next year scares me less than the risk of not liking my job or being bad at it. At least for now, getting on PAYE gives me the peace of mind that if I don't like my lifestyle, I can conceivably do something else and not be totally financially devastated.

As far as which plan is best, if you qualify for PAYE that's better than REPAYE I'm pretty sure, although I haven't really looked at the details in a while.

I agree it's a personal risk assessment, but I feel like being able to refi again to a longer term is a sufficient hedge. Unless you think you're going to potentially ride out to forgiveness, I lean towards refi sooner rather than later.

It's not just the risk of interest rates rising, but also paying the 6-7% interest on your current loan (rather than the refi rate) up until the time you refi. I've already saved nearly 10k in interest purely from the first year of my refi.