Student loan payments: get advice and actual numbers here Forum

[Big Shrimpin]

No idea what my credit is, but I always pay my CCs/loans on time.

I make 2nd yr biglaw $$ doe, so I'm sure that helps.

[meg5096]

No idea what my credit is, but I always pay my CCs/loans on time.

I make 2nd yr biglaw $$ doe, so I'm sure that helps.

Thanks.

[Anonymous User]

Guys, here are my stats, would appreciate your feedback. I definitely would appreciate a second/another opinion about where I am right now.


Facts, as we know them.
I just finished my 1L year(evening program-part time). I am employed as green collar (parks job) at a small political subdivision(100 employees)(potential to move up, but not sure as a "lawyer"(they have outside counsel for legal matters)).

Just Checked today.
Loan Balance
$111,542
Interest Rate
5.5%
Interest is nearing $400 bucks a month, i get 13 dollars poorer every day

-------------
Present Income :
$33,000.00, with a possible 3k tuition reimbursement per year (t.re-burst has yet to go through, but has been "promised")
Best Case Scenario: 36K per year
-------
Need for Tuition for 2 more years of law school

Cost of Tuition: roughly $1100 per hour, i need another 57 hours.

Total $60,000.00 need.
----
Present Costs of Living

Car at 9% interest: $275.00 per month owe 4$500.00

Living expenses: $1000.00 per month total(food-rent-etc.

Contribute 5% of income to 457/401 plans.

-------------------------
MY PLAN OF ATTACK for next 2 years: Considering the limitations of take home pay of
$1900 per month(lots of taxes but get most of it back in the tax refund)


Planning to pay off 2010 model year car(owe $4500.00) with income tax refund(thank you congress for educational tax credits).

I plan to put aside $1000.oo cash aside to pay to the school.
IN 24 MONTHS, it should be about 24k paid cash towards the tuition.

Also, considering two income tax returns at about $4,500 each year is about $9,000.00.

Also, two rounds of tuition assistance from the job totals $6,000.oo

BEST CASE SECENARIO: $40,000.00 total paid out of earnings
-----------
So if all goes well, I'll pay 40k of cash money towards tuition, yet will need about 20 k in loans to meet the tuition costs if i want to finish within two years.

Another factor the max out the loan limit at $138, 500 (i will refuse to go beyond this number, no grad plus loans rule is self imposed)

Future:
I plan to work in the rural area, take over retiring mentor's practice, maybe do some real estate/real property moves.

Estimated future income 50k+ either working solo or continuing with the gubment...


Other consideration: Again i work for the government,
As an option, thinking about getting into IBR program next year and paying that, with the intention of taking advantage of PSERVICE forgiveness.

I worked there for one year before i started school, and was paying undergrad loans. Meaning if i start again in January, ill have "only" 9 more years to have the first round of loans forgiven, and only 7 after law school is done. (i checked with the feds, and they let me know i can include months-retroactively towards the Public Service forgiveness.

Yet, don't know how the cost benefit analysis of having a stable salary at the political subdivision vs being able to take risks and starting something from the ground up.

Guys, i really find this challenging. I didn't see my life being s bound by the chains of obligations like these when i was dreaming in undergrad.


It is what it is, and i want to pay this off, but DAT 6.0% interest!

Your honest and perhaps critical feedback would be appreciated.

thanks!

TL:DR

PART TIME STUDENT
OWES 111K
STILL NEEDS 60 K FOR TUITION
I'AM POOR AND ONLY MAKE ENOUGH TO FEED MYSELF AND SHOP AT THE GOODWILL FOR CLOTHING

[Old Gregg]

what the fuck

[Anonymous User]

what the fuck

sorry for the unedited and unorganized rambling. I didn't have time to trim and edit, i was trying to finish up some work on an assignment.

u seem knowledgeable @zweibester, what would you do?

[mr. wednesday]

What is the question, exactly? Should you work full time at a non-legal government job while in law school? Sure, if you want to. It would help minimize your debt.

You won't get PSLF credit for that time for your law school loans, though, because you can only potentially do that with PLUS loans, not stafford. PLUS loans become "due" the moment they are disbursed, but you get a deferment on making payments; stafford loans don't enter repayment until 6 months after graduation. Only loans that have entered repayment qualify for PSLF.

[Anonymous User]

What is the question, exactly? Should you work full time at a non-legal government job while in law school? Sure, if you want to. It would help minimize your debt.

You won't get PSLF credit for that time for your law school loans, though, because you can only potentially do that with PLUS loans, not stafford. PLUS loans become "due" the moment they are disbursed, but you get a deferment on making payments; stafford loans don't enter repayment until 6 months after graduation. Only loans that have entered repayment qualify for PSLF.

i guess my question is, what would y'all do?

are there any financial products out there that would be a smooth move?

[Anonymous User]

Debt: $100K. Interest rates between 6.8% and 7.9%.

Payments: $975 minimum payments on the standard 10 year plan.

Income: $210K

Notable: Have been in NYC big law for about 4 years (2009 grad). I retired my student loans earlier this year. Even though my debt load was considerably lower than some of the other amounts that have been posted in this thread, paying it off was still shockingly burdensome.

Not married, renter, no kids. If you live in NYC, I've found that the best thing you can do to accelerate your loan payoff is to suck it up for a couple of years and rent something affordable. Whether that translates into finding a tiny place, having roommates, or living in the outer boroughs/NJ, it's worth it if your primary goal is to get the debt off your back.

[Big Shrimpin]

Just redid the app.

10 year fixed at 5.7% and variable at 3.4%.

I'm close to pulling the trigger.

Dude what the fuck are you waiting for

Are you including the auto pay discount?

Ugh, there's so much information to upload.

[Anonymous User]

Hey guys, been a while (pre-bar?) since I've been around these parts. Really nice thread here, both for future student consideration and for current advice. TLS scared the crap out of me as a 0L, got me through 1L, helped me transfer from TTT to T10, got me a job at V50, and helped me pass the bar. So now, it figures to help with the next phase as a brand new BigLaw first year associate in NYC with a moderate amount of loans.

Current balances - after first payment:
-Stafford $61,000 @ 6.8%, min payments are $715 monthly (10 year plan)
-PLUS $57,413 @ 7.9%, min payments are $709 monthly

I've borrowed from family and depleted my savings to pay these down over the last few months. Totals were approaching $140k with interest piling up fast. Going into my first payment there is no accumulated interest, and I'm overpaying a bit. However, I could overpay a lot more. Here's my finance breakdown:

$4000 monthly income after taxes, modest savings and 401k (very modest, about 5% pretax), and MFH rent ($3k). This figure does not account for entertainment, food, drinking, "etc."

So I can comfortably throw around another $2000 a month at savings or loans, but I'm not sure what to do with it. Should I: (a) pay down the PLUS loan with the highest interest rate with every available extra dollar I have and only pay the min on the Stafford? or (b) build up my rainy day savings? It used to be $10k then $5k and now is about $250 after paying down SL interest. or (c) add more to 401k and other investments? Or of course some combo of the above?

My plans include to refinance the 7.9% plus with SoFi once I get certified. I did not submit an app yet so don't know what rate I will be offered but I have decent credit and even it's in the middle range of SoFi it should be 2-3% interest savings. Reading this thread and others helped me understand some of the risks involved, which is why I think it's probably best to refi the 7.9% loan and not the whole basket.

However, I'm also concerned that if I get shitcanned or just can't take BigLaw much more than about a year, I'll be in a tough spot. I've heard somewhere that a rainy day savings account should have enough money for 3-6 months rent, but that means $9k-18k for me. So, $5k savings + refi seems like the riskiest possible option, but one that leads to paying everything down the soonest. Even if I go as heavy as possible on the loans, it's probably a 3-4-5 year minimum to pay it down.

tl;dr - basically how do I prioritize 2 loans, savings, and investments?

[Renzo]

Debt: all in, with undergrad, law school, & years of capitalized interest= $300k (give or take)
avg interest rate: 6.1%
Income: $175k (Married with kids, in NYC.)
Monthly payment: $930
Date and amount of loans to be forgiven: Aug. 2032, $385k.

Thanks Obama! And, this assumes I stay in biglaw for the rest of my life. Otherwise, I'll pay a much smaller amount of the debt.

[fish52]

Debt: all in, with undergrad, law school, & years of capitalized interest= $300k (give or take)
avg interest rate: 6.1%
Income: $175k (Married with kids, in NYC.)
Monthly payment: $930
Date and amount of loans to be forgiven: Aug. 2032, $385k.

Thanks Obama! And, this assumes I stay in biglaw for the rest of my life. Otherwise, I'll pay a much smaller amount of the debt.

I assume this means you're banking on PAYE. I have a couple questions, which I ask with sincerity, as they reflect my concerns in deciding whether to rely on PAYE in BigLaw.

Are you not worried about having this monkey on your back for 20 years? Or Congress screwing you by axing the program (although it's unlikely you wouldn't be grandfathered in, my understanding is that there's nothing in the program to guarantee it)? Also, are you not worried about the tax bomb (which will likely be 45%+ of $385k)? And if you pay ~$1k/month for 20 years, you end up paying something close to $300k, anyway, so what's the long-term benefit? (Although, if you end up making less money those payments would be lower, and with inflation that $300k will be worth substantially less in 20 years.)

TIA.

[joblawl]

$4000 monthly income after taxes, modest savings and 401k (very modest, about 5% pretax), and MFH rent ($3k). This figure does not account for entertainment, food, drinking, "etc."

So I can comfortably throw around another $2000 a month at savings or loans, but I'm not sure what to do with it. Should I: (a) pay down the PLUS loan with the highest interest rate with every available extra dollar I have and only pay the min on the Stafford? or (b) build up my rainy day savings? It used to be $10k then $5k and now is about $250 after paying down SL interest. or (c) add more to 401k and other investments? Or of course some combo of the above?

My plans include to refinance the 7.9% plus with SoFi once I get certified. I did not submit an app yet so don't know what rate I will be offered but I have decent credit and even it's in the middle range of SoFi it should be 2-3% interest savings. Reading this thread and others helped me understand some of the risks involved, which is why I think it's probably best to refi the 7.9% loan and not the whole basket.

However, I'm also concerned that if I get shitcanned or just can't take BigLaw much more than about a year, I'll be in a tough spot. I've heard somewhere that a rainy day savings account should have enough money for 3-6 months rent, but that means $9k-18k for me. So, $5k savings + refi seems like the riskiest possible option, but one that leads to paying everything down the soonest. Even if I go as heavy as possible on the loans, it's probably a 3-4-5 year minimum to pay it down.

tl;dr - basically how do I prioritize 2 loans, savings, and investments?

Yeah man, I have been struggling with this too... Although I have been working for about 5 months, I have no idea how my job is really "going."

So here is what I have been doing - I have maxed out my contribution to my 401(k). It's tax free, if things work out with my job, future me will glad I did this. If everything goes to shit, I can withdraw the money. I would have a 10% penalty, but it would only be taxed based on my income of the year of withdrawal - which might not be a whole lot if I got fired....

I have been paying the minimum amount on my loans under the 10 year plan and putting the rest in savings. Once I have enough of an emergency fund built up (which will take about a year), I will stop putting money in the emergency fund and shift that portion of my income to my loans. To build the emergency fund, I have set up an interest bearing saving account online and it takes automatic withdrawals on payday.

I would like to put more towards my loans, but I'm not feeling secure enough in my job to risk not having an emergency fund.

As I said, this is something I have been struggling with. I don't know if this is the best way - but it's what I'm doing. hth

[Renzo]

Debt: all in, with undergrad, law school, & years of capitalized interest= $300k (give or take)
avg interest rate: 6.1%
Income: $175k (Married with kids, in NYC.)
Monthly payment: $930
Date and amount of loans to be forgiven: Aug. 2032, $385k.

Thanks Obama! And, this assumes I stay in biglaw for the rest of my life. Otherwise, I'll pay a much smaller amount of the debt.

I assume this means you're banking on PAYE. I have a couple questions, which I ask with sincerity, as they reflect my concerns in deciding whether to rely on PAYE in BigLaw.

Are you not worried about having this monkey on your back for 20 years? Or Congress screwing you by axing the program (although it's unlikely you wouldn't be grandfathered in, my understanding is that there's nothing in the program to guarantee it)? Also, are you not worried about the tax bomb (which will likely be 45%+ of $385k)? And if you pay ~$1k/month for 20 years, you end up paying something close to $300k, anyway, so what's the long-term benefit? (Although, if you end up making less money those payments would be lower, and with inflation that $300k will be worth substantially less in 20 years.)

TIA.

I am on PAYE, and was on IBR before.

I do not at all worry about carrying it around for 20 years, because I just think of it like an extra tax of %10 of my discretionary income.

If I make a career out of biglaw, and end up as an equity partner, it will backfire, and I'll regret not having paid it off. But the chances of this outcome are slim, and if it happens I'll be in a plenty comfortable position financially to take the hit. On the other hand, I would have very little hope of ever paying off the loans if I left biglaw for a substantially lower paying job, even if I was using all my extra cash to aggressively prepay them now, so I prefer to know that I can just count on slightly less than 10% of whatever I make in any job is all I will ever have to pay. I would rather be putting my extra cash in savings so that I could leave biglaw and walk away with enough cash to make the transition to a lower paying job easier (or offset the future tax penalty, or buy a house, or anything else).

I also don't worry about the tax bomb, I'll know its coming and save for it. Paying $18k in taxes in 20 years is better than $150k in interest over the next ten years.

[sidhesadie]

Debt: all in, with undergrad, law school, & years of capitalized interest= $300k (give or take)
avg interest rate: 6.1%
Income: $175k (Married with kids, in NYC.)
Monthly payment: $930
Date and amount of loans to be forgiven: Aug. 2032, $385k.

Thanks Obama! And, this assumes I stay in biglaw for the rest of my life. Otherwise, I'll pay a much smaller amount of the debt.

I assume this means you're banking on PAYE. I have a couple questions, which I ask with sincerity, as they reflect my concerns in deciding whether to rely on PAYE in BigLaw.

Are you not worried about having this monkey on your back for 20 years? Or Congress screwing you by axing the program (although it's unlikely you wouldn't be grandfathered in, my understanding is that there's nothing in the program to guarantee it)? Also, are you not worried about the tax bomb (which will likely be 45%+ of $385k)? And if you pay ~$1k/month for 20 years, you end up paying something close to $300k, anyway, so what's the long-term benefit? (Although, if you end up making less money those payments would be lower, and with inflation that $300k will be worth substantially less in 20 years.)

TIA.

I am on PAYE, and was on IBR before.

I do not at all worry about carrying it around for 20 years, because I just think of it like an extra tax of %10 of my discretionary income.

If I make a career out of biglaw, and end up as an equity partner, it will backfire, and I'll regret not having paid it off. But the chances of this outcome are slim, and if it happens I'll be in a plenty comfortable position financially to take the hit. On the other hand, I would have very little hope of ever paying off the loans if I left biglaw for a substantially lower paying job, even if I was using all my extra cash to aggressively prepay them now, so I prefer to know that I can just count on slightly less than 10% of whatever I make in any job is all I will ever have to pay. I would rather be putting my extra cash in savings so that I could leave biglaw and walk away with enough cash to make the transition to a lower paying job easier (or offset the future tax penalty, or buy a house, or anything else).

I also don't worry about the tax bomb, I'll know its coming and save for it. Paying $18k in taxes in 20 years is better than $150k in interest over the next ten years.

Where do you get 18k in taxes? If you're forgiven 385k, doesn't the whole 385k count as taxable income and get taxed at the income tax rate, which added to whatever you're making will certainly put you in the top fed tax bracket, which I'm pretty sure is 39.something% right now and unlikely to go down. So that's about 150k in taxes due,all at once. not 18k. But I admit I am not 100% sure how that all works so am I missing something?

[Anonymous User]

I'm married. My wife has ~60k in loans. I'll carry 200k+ when I finish school.

W/r/t paying off her loans before finishing mine (I've got better credit and will be able to refinance mine lower), can someone talk me through the implications of death and/or divorce? Not planning on either of these things in the short term, but either is always possible.

NY residents.

Should I leave them balanced?

[sidhesadie]

I'm married. My wife has ~60k in loans. I'll carry 200k+ when I finish school.

W/r/t paying off her loans before finishing mine (I've got better credit and will be able to refinance mine lower), can someone talk me through the implications of death and/or divorce? Not planning on either of these things in the short term, but either is always possible.

NY residents.

Should I leave them balanced?

As far as death, I mean, unless you co signed, the debt comes out of that person's estate when they die, I think. So probably partly depends on if you're in a community property state, how much assets would be in each of your 'estate' and so on. Will or living trust? Etc. You probably need to talk to an estate planning attny.

As for divorce, I think it's pretty unlikely that you'd get anything "back" if you guys paid hers off first, assuming your money is commingled. Might be some amount of addressing it in the property distribution, but then that will also depend on if she "supported" you in law school? Lots of "ifs" in divorce/family law. Also your respective income potentials at time of disso and whether you have kids at that time would factor in too. Plus what jurisdiction you're in at time of disso. Plus what the judge ate for breakfast. I think it's next to impossible to predict how that would come down in a disso.

[Tiago Splitter]

I also don't worry about the tax bomb, I'll know its coming and save for it. Paying $18k in taxes in 20 years is better than $150k in interest over the next ten years.

Where do you get 18k in taxes? If you're forgiven 385k, doesn't the whole 385k count as taxable income and get taxed at the income tax rate, which added to whatever you're making will certainly put you in the top fed tax bracket, which I'm pretty sure is 39.something% right now and unlikely to go down. So that's about 150k in taxes due,all at once. not 18k. But I admit I am not 100% sure how that all works so am I missing something?

Pretty sure it was a typo and he meant 180k in taxes. The point still stands.

As far as death, I mean, unless you co signed, the debt comes out of that person's estate when they die, I think.

Actually if they are federal student loans they are discharged upon death.

[thelawyler]

Debt: all in, with undergrad, law school, & years of capitalized interest= $300k (give or take)
avg interest rate: 6.1%
Income: $175k (Married with kids, in NYC.)
Monthly payment: $930
Date and amount of loans to be forgiven: Aug. 2032, $385k.

Thanks Obama! And, this assumes I stay in biglaw for the rest of my life. Otherwise, I'll pay a much smaller amount of the debt.

I assume this means you're banking on PAYE. I have a couple questions, which I ask with sincerity, as they reflect my concerns in deciding whether to rely on PAYE in BigLaw.

Are you not worried about having this monkey on your back for 20 years? Or Congress screwing you by axing the program (although it's unlikely you wouldn't be grandfathered in, my understanding is that there's nothing in the program to guarantee it)? Also, are you not worried about the tax bomb (which will likely be 45%+ of $385k)? And if you pay ~$1k/month for 20 years, you end up paying something close to $300k, anyway, so what's the long-term benefit? (Although, if you end up making less money those payments would be lower, and with inflation that $300k will be worth substantially less in 20 years.)

TIA.

I am on PAYE, and was on IBR before.

I do not at all worry about carrying it around for 20 years, because I just think of it like an extra tax of %10 of my discretionary income.

If I make a career out of biglaw, and end up as an equity partner, it will backfire, and I'll regret not having paid it off. But the chances of this outcome are slim, and if it happens I'll be in a plenty comfortable position financially to take the hit. On the other hand, I would have very little hope of ever paying off the loans if I left biglaw for a substantially lower paying job, even if I was using all my extra cash to aggressively prepay them now, so I prefer to know that I can just count on slightly less than 10% of whatever I make in any job is all I will ever have to pay. I would rather be putting my extra cash in savings so that I could leave biglaw and walk away with enough cash to make the transition to a lower paying job easier (or offset the future tax penalty, or buy a house, or anything else).

I also don't worry about the tax bomb, I'll know its coming and save for it. Paying $18k in taxes in 20 years is better than $150k in interest over the next ten years.

Where do you get 18k in taxes? If you're forgiven 385k, doesn't the whole 385k count as taxable income and get taxed at the income tax rate, which added to whatever you're making will certainly put you in the top fed tax bracket, which I'm pretty sure is 39.something% right now and unlikely to go down. So that's about 150k in taxes due,all at once. not 18k. But I admit I am not 100% sure how that all works so am I missing something?

Also that 385k balance at the end is only assuming he's making big law like salary for that full 20 years. If the salary decreases, then the principal will go up. When the principal goes up, the tax bomb gets bigger and bigger.

You better be damn sure that you're not going to be hit hard by that... I think I did a similar calculation for myself with 300k debt and I found that my tax bomb would be closer to a million or so assuming I went in-house counsel after 5 years. I personally think the PAYE is worth it if the tax forgiveness is there, but not if it isn't. I might need to recrunch the numbers tho.

EDIT: Okay I did rough calculations again and assuming I work biglaw for 5 years and move into an in-house job that pays 150k/year with slight raises over the next 15 years, I'll have about 1.2m remaining on the debt. And 40% tax on that forgiveness is around half a million. Of course, tax bomb would be higher if my job after big law paid less than that. Seems risky. I'd have to depend on my savings accruing a lot of positive interest (probably higher than the 7.5% or whatever) in order to make up for it.

[Old Gregg]

So weird that people here are assuming they'll just go in-house. From what I've seen, it's much, much easier to go to another law firm than in-house. Might change as you head into years 7 and 8, but I can only imagine that your movement prospects at those years are shit altogether.

[Tiago Splitter]

You better be damn sure that you're not going to be hit hard by that... I think I did a similar calculation for myself with 300k debt and I found that my tax bomb would be closer to a million or so assuming I went in-house counsel after 5 years. I personally think the PAYE is worth it if the tax forgiveness is there, but not if it isn't. I might need to recrunch the numbers tho.

EDIT: Okay I did rough calculations again and assuming I work biglaw for 5 years and move into an in-house job that pays 150k/year with slight raises over the next 15 years, I'll have about 1.2m remaining on the debt. And 40% tax on that forgiveness is around half a million. Of course, tax bomb would be higher if my job after big law paid less than that. Seems risky. I'd have to depend on my savings accruing a lot of positive interest (probably higher than the 7.5% or whatever) in order to make up for it.

Interest does not compound while on IBR/PAYE, so the principal won't get that high.

[Pokemon]

When the f*** does the interest compound? I assumed it was upon graduation (capitalization) and never again right?? This is a huge deal that is not fully clear in this forum...

[Jessep]

Interest compounds daily. Certain government subsidized loans do not accrue interest while you are in school, but most loans do.

[Tiago Splitter]

"How does IBR treat interest? Does it still accrue?
If your reduced payment under IBR does not cover the interest on your loans, the government will pay that interest on your Subsidized Stafford Loans during your first three years in IBR. After three years, and for all other loan types, the interest will accrue but not compound. That means it will be added to your principal, but interest will continue to accrue only on the original principal amount. Anything you still owe after 25 years of qualifying payments will be forgiven. For more information on this topic, see Question 35 of the Department of Education's IBR Q&A."

http://www.ibrinfo.org/faq.vp.html#_How_does_IBR_

A big downside of IBR is that if you stop being in a financial hardship (meaning your IBR payment goes below your standard 10-year payment) you get kicked out of IBR, at which time interest capitalizes. But with PAYE you never get kicked out so you don't have this problem.

[Anonymous User]

Makes sense. So why do people not on ibr care about making extra payments towards principal. I always assumed the reason was that student debt would not capitalize post-graduation so it makes sense to aim towards paying most towards principal, as opposed to interest. Guess I was wrong