Student loan payments: get advice and actual numbers here Forum

[Anonymous User]

Debt: $83,000 
Salary: $62,300
Mo. Payment: $460/IBR
Interest: averages to 5.87% 

Class of 2019. I was fortunate to end up at a federal agency, in an office in a city with relatively cheap COL (apt is $1000). I am really liking the work so far, and am in a practice area where a lot of attorneys at my agency are able to lateral into private practice. My hesitancy with PSLF is that while I really like my job so far, it's too early to tell whether I'd stay in PI for 10 years. In addition, I know there's not a lot of data available to begin with on law students successfully paying for 10 years and getting the remainder forgiven. 

Part of me is considering just trying to pay it down now and not try to rely on PSLF. I'd hate to make my payments each month but really not put a dent into the debt, and then find myself no longer in PI or some other horror story where I don't qualify for PSLF and have a debt load that didn't actually budge. I am obviously not rolling in money, but is this worth considering? I will be meeting with a financial planner, but wanted to see if anyone has been in the same boat. Thanks!

[Anonymous User]

Regarding PSLF and the IBR options ... do you include total salary or just base salary to get your monthly repayment amount?

[nixy]

Regarding PSLF and the IBR options ... do you include total salary or just base salary to get your monthly repayment amount?

It's calculated off your tax return, based on your adjusted gross income. If your income has changed since your last tax return, you can use a pay stub to show your income (which I presume is going to be base and not total), but at some point when you have to recertify your income (which you do annually) you will probably be using a tax return showing your AGI, which should capture your bonus. To be honest, I'm not sure that most positions eligible for PSLF involve benefits beyond base salary (bonus isn't really a thing).

[Anonymous User]

Regarding PSLF and the IBR options ... do you include total salary or just base salary to get your monthly repayment amount?

It's calculated off your tax return, based on your adjusted gross income. If your income has changed since your last tax return, you can use a pay stub to show your income (which I presume is going to be base and not total), but at some point when you have to recertify your income (which you do annually) you will probably be using a tax return showing your AGI, which should capture your bonus. To be honest, I'm not sure that most positions eligible for PSLF involve benefits beyond base salary (bonus isn't really a thing).

Thanks for the reply...

If I'll be calling and asking for an IBR, do I just tell them what the base salary is? Even though the AGI won't show that actual amount since it's fairly new gig.

[nixy]

You can call and talk to them but you’ll have to fill out forms actually to get approved for IBR and as part of the process you’ll need to include a pay stub.

[Anonymous User]

You can call and talk to them but you’ll have to fill out forms actually to get approved for IBR and as part of the process you’ll need to include a pay stub.

Got it ... thank you, nixy.

[QContinuum]

Haha sorry to disappoint,$2,200 is my share of the rent with my significant other. If you looking for good alternatives to NYC rent prices you may want to consider Jersey City/Hoboken (you also avoid the city tax this way) if you’re working on the west side or Long Island City if your working on the East side. Both are young, fun areas in my opinion.

Thanks for the clarification!

[Anonymous User]

Debt: $230,000 (210k in fed loans, 20k owed to family with 0% interest. I do have to pay this back but my family is very forgiving/easy to work with repayment schedule).
Salary: 190,000 + bonus
Mo. Payment: $3,000 to fed loans, $400 to family
Interest: 5-7% on fedloans, 0% on the 20k to family

Just graduated and started in biglaw. $3,400/month to loans is a bit of a struggle for me, if only because I am also trying to somewhat aggressively save for a down payment and am largely supporting my partner, who has 1.5 years left in grad school before she starts her career. I pay for our groceries and utilities, as well as us going out to eat/bars when we do.

My share of the rent is $2350 (2 bedroom house in high COL area; partner only pays $500/month). I'm also maxing out my 401k and putting away $2,000/month in savings.

Is there anything else I'm missing/should be doing? Refinancing? Seems like I definitely should do this but I would like to exit big law as soon as is financially feasible, and I'm worried about a potential pay cut that would come with going in house or midlaw (not interested in government), and not being able to service the monthly payment.

[The Lsat Airbender]

Seems like I definitely should do this but I would like to exit big law as soon as is financially feasible, and I'm worried about a potential pay cut that would come with going in house or midlaw (not interested in government), and not being able to service the monthly payment.

Hate to break it to you but if you're going to have that much debt and buy a house in a coastal metro and support your partner for the next 18 months then you're kind of chained for Biglaw longer than most people. Your best option by far is to refinance.

Once your partner has an income of her own things should get a lot easier and you can start throwing haymakers at that debt pile but it's silly to let like $30k of interest pile up in the meantime.

[sparty99]

Debt: $230,000 (210k in fed loans, 20k owed to family with 0% interest. I do have to pay this back but my family is very forgiving/easy to work with repayment schedule).
Salary: 190,000 + bonus
Mo. Payment: $3,000 to fed loans, $400 to family
Interest: 5-7% on fedloans, 0% on the 20k to family

Just graduated and started in biglaw. $3,400/month to loans is a bit of a struggle for me, if only because I am also trying to somewhat aggressively save for a down payment and am largely supporting my partner, who has 1.5 years left in grad school before she starts her career. I pay for our groceries and utilities, as well as us going out to eat/bars when we do.

My share of the rent is $2350 (2 bedroom house in high COL area; partner only pays $500/month). I'm also maxing out my 401k and putting away $2,000/month in savings.

Is there anything else I'm missing/should be doing? Refinancing? Seems like I definitely should do this but I would like to exit big law as soon as is financially feasible, and I'm worried about a potential pay cut that would come with going in house or midlaw (not interested in government), and not being able to service the monthly payment.

You will be stuck in big law forever if you only manage $3,400/month in loan payments. You should be paying $5,500 to $6,500 to your loans a month easily, which would be 3.5 years. At your rate, you would be in big law for 7 years (which is a long grueling fight) and assuming you miss any layoffs. A bit of a risk. You need to stop maxing out your 401(k). I would refinance after a year in Big Law. Your rent is way too high. You need to downgrade and stop going out to eat. Get on a budget. And by Partner, I hope you mean you are married. You are not setup for success if $3,400 a month is all you can do. You will regret that you spent so much money not paying off your loans while you have this strong $190,000 income. Each month that you pass and you do not save $5,500 to $6,500 is a wasted opportunity and an additional month that you will have to spend in big law.

[Anonymous User]

Debt: $230,000 (210k in fed loans, 20k owed to family with 0% interest. I do have to pay this back but my family is very forgiving/easy to work with repayment schedule).
Salary: 190,000 + bonus
Mo. Payment: $3,000 to fed loans, $400 to family
Interest: 5-7% on fedloans, 0% on the 20k to family

Just graduated and started in biglaw. $3,400/month to loans is a bit of a struggle for me, if only because I am also trying to somewhat aggressively save for a down payment and am largely supporting my partner, who has 1.5 years left in grad school before she starts her career. I pay for our groceries and utilities, as well as us going out to eat/bars when we do.

My share of the rent is $2350 (2 bedroom house in high COL area; partner only pays $500/month). I'm also maxing out my 401k and putting away $2,000/month in savings.

Is there anything else I'm missing/should be doing? Refinancing? Seems like I definitely should do this but I would like to exit big law as soon as is financially feasible, and I'm worried about a potential pay cut that would come with going in house or midlaw (not interested in government), and not being able to service the monthly payment.

You will be stuck in big law forever if you only manage $3,400/month in loan payments. You should be paying $5,500 to $6,500 to your loans a month easily, which would be 3.5 years. At your rate, you would be in big law for 7 years (which is a long grueling fight) and assuming you miss any layoffs. A bit of a risk. You need to stop maxing out your 401(k). I would refinance after a year in Big Law. Your rent is way too high. You need to downgrade and stop going out to eat. Get on a budget. And by Partner, I hope you mean you are married. You are not setup for success if $3,400 a month is all you can do. You will regret that you spent so much money not paying off your loans while you have this strong $190,000 income. Each month that you pass and you do not save $5,500 to $6,500 is a wasted opportunity and an additional month that you will have to spend in big law.

My original post may have made it sound like I'm trying to get out of biglaw in 2-3 or even 5 years. I am not. I like my office/market a lot and in a lot of ways feel like I hit the biglaw lottery. Gonna stick it out as long as I can since it will not be financially feasible to exit quickly.

I am on a budget. We go out to eat once or twice a month, and I'm not going to stop doing that. By 'partner' I mean whatever I want to mean, since it's no one business whether I'm married or not.

That said, am going to try to find cheaper rent and put more toward loans. And to earlier poster - I am planning to move to a lower COL area to buy a house, not buy on the coast.

Anyway, seems like refinancing is the right move.

[The Lsat Airbender]

I agree that anon should be aggressively paying down their loans, but if they can refinance to a decent rate then equities (and especially a 401(k), because of the tax advantages) will usually be a better use of money than (early) debt repayment. If OP manages their money properly then they can probably afford $1700 of 401K + $2300 of rent and still put like $5000 towards loans - depends on tax burden.

Also agree that subsidizing someone you're not married to seems dubious. Like, nobody's shaming your lifestyle choices but, again, doing that while having a mountain of debt and aggressive savings goals is why you're crimping even on a Biglaw salary. If one's life choices only make sense per the assumption "I will stay in biglaw for 6 more years" then they are poor life choices.

[Anonymous User]

I'm anon. I actually am married so could have avoided this if I had just said "spouse." I appreciate the financial advice and agree with most of it (yeah, not going to stop maxing out my 401k) but I also despise the moralizing, particularly when it's couched in "no judgment, but here's why you are wrong to do this deeply personal thing that touches upon a central part of your life, and about which I have zero knowledge other than that it costs money." Probably the risk you run posting on the internet though, so I get it.

[QContinuum]

I disagree strongly with the advice to reduce 401k contributions. 401ks have huge tax and other benefits, and in any case saving for retirement is critical. It would be foolish in the extreme to reduce 401k contributions in a bid to pay down loans a bit quicker. Like, certainly don't forego any essentials or take out a new loan or do anything extreme in order to plow money into a 401k, but otherwise maxing out one's 401k should be pretty much the first order of business (along with, if applicable, using pre-tax parking/transit benefits and flexible spending accounts). I'm highly allergic to debt myself so I'm sympathetic to the impulse to pay off debt as quickly as possible, but objectively, doing so uber alles can be pretty far from the best move.

I also somewhat disagree with the notion that $2350/month in rent is "too high". BigLaw tends to be in expensive downtown areas (even TX BigLaw), and BigLaw's hours make living relatively near by an absolute must. Now, I do agree that it probably makes sense for Anon to try to look for a smaller, cheaper place - say, a one-bedroom. That would allow Anon to save up that downpayment more quickly. But I don't think the $2350/month is outlandish. Many/most of my friends/colleagues pay more. Now, you could say they're also being reckless and irresponsible, but I think we hafta accept that OP's already on the responsible side of the spectrum, rent-wise.

(Re: moving to a lower COL area, obviously Texas is the best out there as far as COL and being on the NYC salary scale. But liking one's place of residence is also important, and if Anon and/or their wife would be miserable living in Texas, I don't think it's necessarily worth it to move there just for the finances.)

As for Anon "subsidizing" their wife, the wife's a grad student, with a stipend almost certainly around ~$20-30k. Having her pay $500/month sounds objectively pretty fair. Assuming her stipend's $30k (~16% of Anon's $190k), then an equal contribution, weighted for salary, would be $450/month on her part. I don't think one should be in the business of nickel and diming one's spouse, especially when the spouse's salary is so much lower.

(And, while not relevant to Anon, who's married, I'd also push back against the notion that it'd be foolish to "subsidize" one's non-spouse partner. It's very normal and healthy to live together before getting married (or even without ever getting married), and I don't see anything wrong with (roughly) weighting contributions by salary while doing so. It's a bit surprising to me that TLS would be so retrograde as to inveigh against cohabiting with one's SO.)

As for not going out to eat, again I'm sympathetic, because I usually think splurging on fancy restaurants just isn't worth it (and I say this as someone who loves food...). Anon says they go out to eat once or twice a month, which seems like a very responsible frequency. Now, if they're rolling around like the Wolf of Wall Street and blowing $500 each time they dine out, sure, I'd encourage Anon to find cheaper places to eat out and consider lower-cost activities.

[nixy]

I'm anon. I actually am married so could have avoided this if I had just said "spouse." I appreciate the financial advice and agree with most of it (yeah, not going to stop maxing out my 401k) but I also despise the moralizing, particularly when it's couched in "no judgment, but here's why you are wrong to do this deeply personal thing that touches upon a central part of your life, and about which I have zero knowledge other than that it costs money." Probably the risk you run posting on the internet though, so I get it.

FWIW, anon, I'm completely with you on this and disagree with comments about who you should be subsidizing/how.

[The Lsat Airbender]

I sincerely did not mean to create that impression, and I'm sorry if I did. But from a financial perspective it's way more reasonable to support a (legal) spouse for a lot of reasons. Being able to jointly file income taxes is a massive factor that comes immediately to mind. In the financial-advice thread, if something costs tens of thousands of dollars, it'd be irresponsible not to mention it.

[QContinuum]

I sincerely did not mean to create that impression, and I'm sorry if I did. But from a financial perspective it's way more reasonable to support a (legal) spouse for a lot of reasons. Being able to jointly file income taxes is a massive factor that comes immediately to mind. In the financial-advice thread, if something costs tens of thousands of dollars, it'd be irresponsible not to mention it.

Plenty of folks cohabit and share expenses, and it seems manifestly unreasonable to argue that, say, partner A making $190k per year should pay the same 50% of the rent and expenses as partner B making $60k per year. Of course, this assumes partners A and B are in a stable, committed relationship, which is probably a pretty safe assumption if they're (considering) cohabiting. I don't think BigLawyers are in the habit of scouring the streets for live-in layabouts to subsidize.

The joint income tax thing, incidentally, only really helps if one partner isn't a BigLawyer. Double BigLaw couples actually are likely to face an overall marriage penalty, from the 0.9% Medicare surtax on combined income over $250k (the threshold is $200k per person for singles), as well as the net investment income tax, as well as the capital gains tax, as well as state taxes.

[Anonymous User]

Debt: $130,000
Salary: Biglaw first year $190,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I am debating whether to re-finance my loans. I am single, but I'm supporting my sibling. I'm paying $2600 rent, and maxing out my 401K (pre-tax). I don't spend much money besides the essentials and have been paying the rest to pay off the loans. My goal is to pay off the loans ASAP and following the current plan, I believe I'll be able to pay it off within 3 years. Can anyone comment on this? Thank you so much!

[sparty99]

Debt: $130,000
Salary: Biglaw first year $190,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I am debating whether to re-finance my loans. I am single, but I'm supporting my sibling. I'm paying $2600 rent, and maxing out my 401K (pre-tax). I don't spend much money besides the essentials and have been paying the rest to pay off the loans. My goal is to pay off the loans ASAP and following the current plan, I believe I'll be able to pay it off within 3 years. Can anyone comment on this? Thank you so much!

You should be saving at least 6,000 a month on your income not including your loan payments. You need to step it up. You could ideally be out of debt in 2 years. I would stop investing in your 401(k). Get on a tight budget.

[Wubbles]

Debt: $130,000
Salary: Biglaw first year $190,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I am debating whether to re-finance my loans. I am single, but I'm supporting my sibling. I'm paying $2600 rent, and maxing out my 401K (pre-tax). I don't spend much money besides the essentials and have been paying the rest to pay off the loans. My goal is to pay off the loans ASAP and following the current plan, I believe I'll be able to pay it off within 3 years. Can anyone comment on this? Thank you so much!

You should be saving at least 6,000 a month on your income not including your loan payments. You need to step it up. You could ideally be out of debt in 2 years. I would stop investing in your 401(k). Get on a tight budget.

Bolded is probably wrong. Underlined is absolutely wrong. I get it, debt is bad. But giving bad advice about debt is also bad.

[sparty99]

Debt: $130,000
Salary: Biglaw first year $190,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I am debating whether to re-finance my loans. I am single, but I'm supporting my sibling. I'm paying $2600 rent, and maxing out my 401K (pre-tax). I don't spend much money besides the essentials and have been paying the rest to pay off the loans. My goal is to pay off the loans ASAP and following the current plan, I believe I'll be able to pay it off within 3 years. Can anyone comment on this? Thank you so much!

You should be saving at least 6,000 a month on your income not including your loan payments. You need to step it up. You could ideally be out of debt in 2 years. I would stop investing in your 401(k). Get on a tight budget.

Bolded is probably wrong. Underlined is absolutely wrong. I get it, debt is bad. But giving bad advice about debt is also bad.

You don't know much as $6,000 a month can easily be saved making $190,000 not including any loan payments. And well, your decision to invest in the 401(k) merits no response.

[nixy]

The whole point of 401(k)s is to get as much into them as early as you can. This person absolutely should keep investing the 401(k). I get that your pathological hatred for debt means that you would rather get rid of the debt sooner than invest more in your future retirement, but that's not a universal truth and you shouldn't advise people as if it is.

[The Lsat Airbender]

Yeah, a 401(k) is so tax-advantaged that even if it got no returns it'd absolutely shit on paying down loans at 7%. It's apples and oranges. And if you put it in equities (which is reasonable at that age), it'll also get similar returns to that 7%, which is why reasonable people can decide to put post-tax money in the market even while they're carrying significant debt (personally I'm not a fan for psychological/self-discipline reasons).

People making six figures and up should only not max their 401(k) if they can't make ends meet otherwise.

[Anonymous User]

Debt: $130,000
Salary: Biglaw first year $190,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I am debating whether to re-finance my loans. I am single, but I'm supporting my sibling. I'm paying $2600 rent, and maxing out my 401K (pre-tax). I don't spend much money besides the essentials and have been paying the rest to pay off the loans. My goal is to pay off the loans ASAP and following the current plan, I believe I'll be able to pay it off within 3 years. Can anyone comment on this? Thank you so much!

So general advice seems to be not re-finance and pay off asap?

[nixy]

Am not a guru on this, but since your debt is relatively limited (as horrible as it is to call $130k limited) and you intend to pay it all off, I would definitely refinance, unless you don’t feel comfortable about your odds of staying employed in biglaw for however long it takes to pay off the debt. I’m not sure whether you mean stub year or you’ve been working for a year, but if this is your stub year, maybe hold off a bit on refinancing just to gauge your longevity. But generally, if you intend to pay down the debt quickly and you’re paying grad plus loan rates, I think refinancing makes sense.