Student loan payments: get advice and actual numbers here Forum

[sparty99]

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.

You are acting like I am saying don't contribute for a decade. It is simply 2 years. Even if he maxed out the 401(k), that is only what? $38,000 in 2 years. In 2 years he would be debt free and could invest his entire salary into whatever. In 2 years and 6 months he could have $38,000 in all the stocks he wants and no debt. Additionally, I have said nothing of the bonus and raises that he will achieve, and if he wanted, he could invest that into the 401(k), but the focus should be paying off the debt over maxing out the 401(k) when you can have this accomplished in 2 years.

[nixy]

Or get the additional return from two more/earlier years of investment in the 401(k). Because it’s not $38k now, it’s what that grows to over time.

There’s an argument for doing it either way but what I have an issue with is you acting as if the argument for investing in the 401(k) is stupid and “merits no response.”

[sparty99]

Or get the additional return from two more/earlier years of investment in the 401(k). Because it’s not $38k now, it’s what that grows to over time.

There’s an argument for doing it either way but what I have an issue with is you acting as if the argument for investing in the 401(k) is stupid and “merits no response.”

It can also lose money. Even assuming 10%, then it only earned $3,800 on $38,000. Hardly impressive as he would have that amount in 2 years and 7 months and no debt.

[The Lsat Airbender]

Or get the additional return from two more/earlier years of investment in the 401(k). Because it’s not $38k now, it’s what that grows to over time.

There’s an argument for doing it either way but what I have an issue with is you acting as if the argument for investing in the 401(k) is stupid and “merits no response.”

It can also lose money. Even assuming 10%, then it only earned $3,800 on $38,000. Hardly impressive as he would have that amount in 2 years and 7 months and no debt.

10% > 7% FYI

[sparty99]

Or get the additional return from two more/earlier years of investment in the 401(k). Because it’s not $38k now, it’s what that grows to over time.

There’s an argument for doing it either way but what I have an issue with is you acting as if the argument for investing in the 401(k) is stupid and “merits no response.”

It can also lose money. Even assuming 10%, then it only earned $3,800 on $38,000. Hardly impressive as he would have that amount in 2 years and 7 months and no debt.

10% > 7% FYI

You are assuming it is past 10% and the spread is only 3% so even on 38,000 3% is only $1,140 difference. I can make that amount in a month doing Uber.

[Anonymous User]

Debt: $260,000
Salary: ~$70,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I need your advice. I am in the first year of a two-year federal clerkship that pays around $70,000. After I’m done clerking I am going back to the firm I summered at, and will start as a third year big law associate. If I make minimum payments over the next two years, and then make the largest payments I can afford once I’m in big law, how long do you think it will take me in big law to pay back my debt? I live in the NY/NJ area, for reference. Thanks!

[sparty99]

Debt: $260,000
Salary: ~$70,000
Mo. Payment: $3000 -$4000
Interest: Gradplus 7%

Hello all,

I need your advice. I am in the first year of a two-year federal clerkship that pays around $70,000. After I’m done clerking I am going back to the firm I summered at, and will start as a third year big law associate. If I make minimum payments over the next two years, and then make the largest payments I can afford once I’m in big law, how long do you think it will take me in big law to pay back my debt? I live in the NY/NJ area, for reference. Thanks!

You can easily calculate this yourself by preparing a budget with your living expenses and salary. Still, assuming a minimum payment of $6,000 a month once you start big law that would take you 3.6 years to pay off $260,000 not including any interest. Also, you won't be able to make a huge dent off of 70,000 so I guess you can assume it will take you a maximum 3.6 years. But coming in as a 3rd year you might be able to pay it off possibly have a half year quicker. You will have to run the numbers, but you can save $6,000 a month on a $190,000 salary (easily). Also, with your high debt load I wouldn't even consider 401(k) investing.

[The Lsat Airbender]

Or get the additional return from two more/earlier years of investment in the 401(k). Because it’s not $38k now, it’s what that grows to over time.

There’s an argument for doing it either way but what I have an issue with is you acting as if the argument for investing in the 401(k) is stupid and “merits no response.”

It can also lose money. Even assuming 10%, then it only earned $3,800 on $38,000. Hardly impressive as he would have that amount in 2 years and 7 months and no debt.

10% > 7% FYI

You are assuming it is past 10% and the spread is only 3% so even on 38,000 3% is only $1,140 difference. I can make that amount in a month doing Uber.

"Shortchanging your 401(k) to pay down debt faster will make you poorer, but only, like, a little bit poorer"

galaxy-brain financial advice

[Wubbles]

Or get the additional return from two more/earlier years of investment in the 401(k). Because it’s not $38k now, it’s what that grows to over time.

There’s an argument for doing it either way but what I have an issue with is you acting as if the argument for investing in the 401(k) is stupid and “merits no response.”

It can also lose money. Even assuming 10%, then it only earned $3,800 on $38,000. Hardly impressive as he would have that amount in 2 years and 7 months and no debt.

10% > 7% FYI

You are assuming it is past 10% and the spread is only 3% so even on 38,000 3% is only $1,140 difference. I can make that amount in a month doing Uber.

Driving for uber while working biglaw

[nixy]

[QContinuum]

$190k = $15.8k per month gross pay. If CA/DC/NY (and MA isn't too much better), you pay a little under $6k per month in state and federal taxes. So right away you're down to about $10k. So far, remember, you haven't done *anything* with your salary except get your taxes withheld.

Out of that $10k, you're going to be paying, very conservatively, $2k/month in rent. This is a very conservative estimate and $2.5k would still be pretty economical. But let's say you pay $2k/month. Now you're down to $8k. You still need to pay for health insurance ($400/month, factoring in employee contributions, deductibles and copays), food ($500/month), utilities ($200/month), transportation ($700/month which is the average cost of owning a car, per AAA), clothing ($150/month). So you're left with pretty much $6k/month, and this is without any spending on date nights, vacations, even basic holiday travel to see your relatives.

So let's not kid ourselves that paying $6000/month toward loans would be "easy". It's doable, maybe, but difficult and, I'd say, unwise. Unwise because if you're plowing every last dime toward your loans, you're not leaving yourself with any emergency cash reserves, meaning you'd easily tip over into the red (and be forced to take on credit card debt at ruinous interest rates) with a single large unexpected expense. A single accident or illness, whether yourself or a loved one.

Also, the "advice" earlier ITT to forego 401k saving is atrocious and should not be followed by anyone. I'm as debt-phobic as they come and even still I always max out my 401k. The tax advantages are so astronomical that anyone would be foolish not to save as much as possible. Further, the thing with saving for retirement is, the earlier you start, the more powerful it is. Saving $19k now is infinitely more valuable for future!you than saving $19k when you're 50, because that $19k will have had so many more years to grow without being burdened by taxes. And this is even without the other key benefit of 401ks, namely, first-in-class creditor protection. No one thinks they need creditor protection until they actually do, and then it's too late if you don't already have it.

[The Lsat Airbender]

And this is even without the other key benefit of 401ks, namely, first-in-class creditor protection. No one thinks they need creditor protection until they actually do, and then it's too late if you don't already have it.

Yeah, this is massive. Nobody can get to your 401k except 1) the feds, if you commit a crime or are delinquent on income taxes, and 2) your ex-spouse, if you are delinquent on child support.

[sparty99]

$190k = $15.8k per month gross pay. If CA/DC/NY (and MA isn't too much better), you pay a little under $6k per month in state and federal taxes. So right away you're down to about $10k. So far, remember, you haven't done *anything* with your salary except get your taxes withheld.

Out of that $10k, you're going to be paying, very conservatively, $2k/month in rent. This is a very conservative estimate and $2.5k would still be pretty economical. But let's say you pay $2k/month. Now you're down to $8k. You still need to pay for health insurance ($400/month, factoring in employee contributions, deductibles and copays), food ($500/month), utilities ($200/month), transportation ($700/month which is the average cost of owning a car, per AAA), clothing ($150/month). So you're left with pretty much $6k/month, and this is without any spending on date nights, vacations, even basic holiday travel to see your relatives.

So let's not kid ourselves that paying $6000/month toward loans would be "easy". It's doable, maybe, but difficult and, I'd say, unwise. Unwise because if you're plowing every last dime toward your loans, you're not leaving yourself with any emergency cash reserves, meaning you'd easily tip over into the red (and be forced to take on credit card debt at ruinous interest rates) with a single large unexpected expense. A single accident or illness, whether yourself or a loved one.

Also, the "advice" earlier ITT to forego 401k saving is atrocious and should not be followed by anyone. I'm as debt-phobic as they come and even still I always max out my 401k. The tax advantages are so astronomical that anyone would be foolish not to save as much as possible. Further, the thing with saving for retirement is, the earlier you start, the more powerful it is. Saving $19k now is infinitely more valuable for future!you than saving $19k when you're 50, because that $19k will have had so many more years to grow without being burdened by taxes. And this is even without the other key benefit of 401ks, namely, first-in-class creditor protection. No one thinks they need creditor protection until they actually do, and then it's too late if you don't already have it.

You seem to ignore that no one is saying start investing at 50. Nor 40. It is a 2 year temporary delay. Even still, your argument that $6,000 month is not easy is not true. I made $190k and saved $6,000 a month. And my rent has been $2k to 2.5k so please don't act like this is not possible.

[QContinuum]

$190k = $15.8k per month gross pay. If CA/DC/NY (and MA isn't too much better), you pay a little under $6k per month in state and federal taxes. So right away you're down to about $10k. So far, remember, you haven't done *anything* with your salary except get your taxes withheld.

Out of that $10k, you're going to be paying, very conservatively, $2k/month in rent. This is a very conservative estimate and $2.5k would still be pretty economical. But let's say you pay $2k/month. Now you're down to $8k. You still need to pay for health insurance ($400/month, factoring in employee contributions, deductibles and copays), food ($500/month), utilities ($200/month), transportation ($700/month which is the average cost of owning a car, per AAA), clothing ($150/month). So you're left with pretty much $6k/month, and this is without any spending on date nights, vacations, even basic holiday travel to see your relatives.

So let's not kid ourselves that paying $6000/month toward loans would be "easy". It's doable, maybe, but difficult and, I'd say, unwise. Unwise because if you're plowing every last dime toward your loans, you're not leaving yourself with any emergency cash reserves, meaning you'd easily tip over into the red (and be forced to take on credit card debt at ruinous interest rates) with a single large unexpected expense. A single accident or illness, whether yourself or a loved one.

Also, the "advice" earlier ITT to forego 401k saving is atrocious and should not be followed by anyone. I'm as debt-phobic as they come and even still I always max out my 401k. The tax advantages are so astronomical that anyone would be foolish not to save as much as possible. Further, the thing with saving for retirement is, the earlier you start, the more powerful it is. Saving $19k now is infinitely more valuable for future!you than saving $19k when you're 50, because that $19k will have had so many more years to grow without being burdened by taxes. And this is even without the other key benefit of 401ks, namely, first-in-class creditor protection. No one thinks they need creditor protection until they actually do, and then it's too late if you don't already have it.

You seem to ignore that no one is saying start investing at 50. Nor 40. It is a 2 year temporary delay. Even still, your argument that $6,000 month is not easy is not true. I made $190k and saved $6,000 a month. And my rent has been $2k to 2.5k so please don't act like this is not possible.

Dude, I specifically said "it's doable", so please don't act like I said "this is not possible" when I said the exact opposite.

Also, obviously, the fact that you've done it - and the fact that I said "it's doable" - is 100% consistent with the other fact that it's not easy, and is a bad decision. Even a "2 year temporary delay" is 2 years of paying additional taxes to Uncle Sam that you otherwise wouldn't have had to pay. We're talking $15k+ in tax savings over just two years. Add on the growth from investing funds over those two years, and factor in the risk/expense of taking on credit card debt when an unexpected expense (inevitably) hits. So really, your personal desire to pay down your loans in 2 years is costing you something like $18-20k*. Is it worth it? Maybe to you and some others, sure - it's apparent the debt is having a significant impact on your mental health, and mental health is important. But spending an extra $18-20k is not objectively a good financial move (mental health considerations aside).

[*I'd also note that, for many, it's not possible to pay down their loans in 2 years even at $6k/month. So for many, paying $6k/month toward loans really means spending 4, 5, maybe more years saving $0 for retirement, saving $0 for an emergency fund, and inevitably racking up credit card debt because no one is going to be able to completely avoid any significant unexpected expenses over the course of half a decade. And, let's not forget, paying $40k+ in additional taxes, plus foregone investment returns...]

I'm all for living frugally and for paying down debt aggressively. But sound financial planning also mandates maxing out the ol' 401k and maintaining some level of liquidity for life's unexpected expenses.

[The Lsat Airbender]

You seem to ignore that no one is saying start investing at 50. Nor 40. It is a 2 year temporary delay. Even still, your argument that $6,000 month is not easy is not true. I made $190k and saved $6,000 a month. And my rent has been $2k to 2.5k so please don't act like this is not possible.

"You guys don't understand! I'm only suggesting people flush a limited quantity of money directly down the toilet!"

[sparty99]

$190k = $15.8k per month gross pay. If CA/DC/NY (and MA isn't too much better), you pay a little under $6k per month in state and federal taxes. So right away you're down to about $10k. So far, remember, you haven't done *anything* with your salary except get your taxes withheld.

Out of that $10k, you're going to be paying, very conservatively, $2k/month in rent. This is a very conservative estimate and $2.5k would still be pretty economical. But let's say you pay $2k/month. Now you're down to $8k. You still need to pay for health insurance ($400/month, factoring in employee contributions, deductibles and copays), food ($500/month), utilities ($200/month), transportation ($700/month which is the average cost of owning a car, per AAA), clothing ($150/month). So you're left with pretty much $6k/month, and this is without any spending on date nights, vacations, even basic holiday travel to see your relatives.

So let's not kid ourselves that paying $6000/month toward loans would be "easy". It's doable, maybe, but difficult and, I'd say, unwise. Unwise because if you're plowing every last dime toward your loans, you're not leaving yourself with any emergency cash reserves, meaning you'd easily tip over into the red (and be forced to take on credit card debt at ruinous interest rates) with a single large unexpected expense. A single accident or illness, whether yourself or a loved one.

Also, the "advice" earlier ITT to forego 401k saving is atrocious and should not be followed by anyone. I'm as debt-phobic as they come and even still I always max out my 401k. The tax advantages are so astronomical that anyone would be foolish not to save as much as possible. Further, the thing with saving for retirement is, the earlier you start, the more powerful it is. Saving $19k now is infinitely more valuable for future!you than saving $19k when you're 50, because that $19k will have had so many more years to grow without being burdened by taxes. And this is even without the other key benefit of 401ks, namely, first-in-class creditor protection. No one thinks they need creditor protection until they actually do, and then it's too late if you don't already have it.

You seem to ignore that no one is saying start investing at 50. Nor 40. It is a 2 year temporary delay. Even still, your argument that $6,000 month is not easy is not true. I made $190k and saved $6,000 a month. And my rent has been $2k to 2.5k so please don't act like this is not possible.

Dude, I specifically said "it's doable", so please don't act like I said "this is not possible" when I said the exact opposite.

Also, obviously, the fact that you've done it - and the fact that I said "it's doable" - is 100% consistent with the other fact that it's not easy, and is a bad decision. Even a "2 year temporary delay" is 2 years of paying additional taxes to Uncle Sam that you otherwise wouldn't have had to pay. We're talking $15k+ in tax savings over just two years. Add on the growth from investing funds over those two years, and factor in the risk/expense of taking on credit card debt when an unexpected expense (inevitably) hits. So really, your personal desire to pay down your loans in 2 years is costing you something like $18-20k*. Is it worth it? Maybe to you and some others, sure - it's apparent the debt is having a significant impact on your mental health, and mental health is important. But spending an extra $18-20k is not objectively a good financial move (mental health considerations aside).

[*I'd also note that, for many, it's not possible to pay down their loans in 2 years even at $6k/month. So for many, paying $6k/month toward loans really means spending 4, 5, maybe more years saving $0 for retirement, saving $0 for an emergency fund, and inevitably racking up credit card debt because no one is going to be able to completely avoid any significant unexpected expenses over the course of half a decade. And, let's not forget, paying $40k+ in additional taxes, plus foregone investment returns...]

I'm all for living frugally and for paying down debt aggressively. But sound financial planning also mandates maxing out the ol' 401k and maintaining some level of liquidity for life's unexpected expenses.

You said it's not easy and claimed its difficult, but yet here I am, saving at least 6,000 if not 6,500 and could have done 7,000 if I did not move into a more expensive apt. You also ignore the automatic return that you get on paying 7 percent interest. And as I noted above the difference is minimal.

[nixy]

You saving that amount =\= it’s easy to save that amount.

[QContinuum]

Also, obviously, the fact that you've done it - and the fact that I said "it's doable" - is 100% consistent with the other fact that it's not easy, and is a bad decision. Even a "2 year temporary delay" is 2 years of paying additional taxes to Uncle Sam that you otherwise wouldn't have had to pay. We're talking $15k+ in tax savings over just two years. Add on the growth from investing funds over those two years, and factor in the risk/expense of taking on credit card debt when an unexpected expense (inevitably) hits. So really, your personal desire to pay down your loans in 2 years is costing you something like $18-20k. Is it worth it? Maybe to you and some others, sure - it's apparent the debt is having a significant impact on your mental health, and mental health is important. But spending an extra $18-20k is not objectively a good financial move (mental health considerations aside).

You said it's not easy and claimed its difficult, but yet here I am, saving at least 6,000 if not 6,500 and could have done 7,000 if I did not move into a more expensive apt. You also ignore the automatic return that you get on paying 7 percent interest. And as I noted above the difference is minimal.

So first, as nixy and I noted above, the fact that you are doing something doesn't mean it's "easy" (let alone a good or even decent idea).

Second, you are not "saving" $6000 per month. You are paying $6k/month toward your loan. That money is gone, kaput, you will never see it again. You are saving $0/month or close to it.

Third, there is no "automatic return" you get from paying down your loans rapidly. Quite the opposite: you are foregoing the "automatic return" you could otherwise get from, say, investing your maxed-out 401k.

Finally, the "difference" - an extra $18-20k over a mere two years - is anything but "minimal". It's kind of weird that someone as debt-phobic as you clearly are would consider $18-20k to be chump change.

[sparty99]

Also, obviously, the fact that you've done it - and the fact that I said "it's doable" - is 100% consistent with the other fact that it's not easy, and is a bad decision. Even a "2 year temporary delay" is 2 years of paying additional taxes to Uncle Sam that you otherwise wouldn't have had to pay. We're talking $15k+ in tax savings over just two years. Add on the growth from investing funds over those two years, and factor in the risk/expense of taking on credit card debt when an unexpected expense (inevitably) hits. So really, your personal desire to pay down your loans in 2 years is costing you something like $18-20k. Is it worth it? Maybe to you and some others, sure - it's apparent the debt is having a significant impact on your mental health, and mental health is important. But spending an extra $18-20k is not objectively a good financial move (mental health considerations aside).

You said it's not easy and claimed its difficult, but yet here I am, saving at least 6,000 if not 6,500 and could have done 7,000 if I did not move into a more expensive apt. You also ignore the automatic return that you get on paying 7 percent interest. And as I noted above the difference is minimal.

So first, as nixy and I noted above, the fact that you are doing something doesn't mean it's "easy" (let alone a good or even decent idea).

Second, you are not "saving" $6000 per month. You are paying $6k/month toward your loan. That money is gone, kaput, you will never see it again. You are saving $0/month or close to it.

Third, there is no "automatic return" you get from paying down your loans rapidly. Quite the opposite: you are foregoing the "automatic return" you could otherwise get from, say, investing your maxed-out 401k.

Finally, the "difference" - an extra $18-20k over a mere two years - is anything but "minimal". It's kind of weird that someone as debt-phobic as you clearly are would consider $18-20k to be chump change.

In terms of saving, I actually save that amount because I am just gonna do a lump sum payment or something and not pay on the loans until it is ready. Still, I don't see how you are arriving at 18-20k. And there is an automatic return of paying off the 7% that would accrue.

[nixy]

Or the OP could refinance and pay less interest, which was the original question.

(why are you waiting to pay a lump sum?? Interest is less on a smaller debt than on a bigger one.)

[TUwave]

This is like Johnnybgoode level trolling, finance edition.

[The Lsat Airbender]

Yeah, seriously, we don't need long explainers to show lower interest rates (refinancing) and lower tax rates (tax-advantaged retirement accounts) are objectively good absent some compelling outside factor.

Sparty, you're welcome to explain why shorting one's 401(k) to pay medium-yield debt would ever be a good idea -- some actual math would be enlightening. You're usually a decent poster but the last few pages are just asinine.

[wildcatatpenn]

In my opinion, I think many, if not most, people in here are SIGNIFICANTLY undervaluing staying on REPAYE if your debt is anything like 100-150k+. Even if you're at tip-top compensation biglaw.

My average loan rate is like 6%, with tons of gradplus loans, and if I refinanced to a fantastic fixed interest rate lets of like 3%. With my pretty hefty 160k student loans. And assuming AGI=salary-$40k, b/c that's about what mine came out to last year.

Using these numbers, my 3% refi monthly payments (10 yr) would be $1545. Regardless of salary.
OTOH, the 6% 10 year payment with no program help at all would be $1776. But only if you're stackin ca$$$h

Using REPAYE, the breakeven point where you'd be paying a maximum payment equal to a 10 year payment w/ 6% interest would be a salary of $‭271,120‬ (!!!), plus or minus a little bit depending on how much your tax savings vary from mine (I take tax avoidance pretty seriously, but I'm also single w/ no kids or house and shit).

The chances of you reaching that $270k+ salary, let's face it, aren't great. Including bonus, that's like, 4th yr biglaw assoc at Cravath scale when you hit that much? And even if you get there, you're proooobably not the dude staying at NY V50 for 10+ years, frfr. And if you do, well, I feel sorry for you, but you'll be super rich by then anyways. And then you're paying an extra $230 a month, or $2772 a year. Not thaaat bad. AND you can just go refinance then with your 99999999 credit score.

OTOHHHH, what if you move to a normal job paying $150k, either off the bat outside of NYC, or lateraling to inhouse, whatever...? Then, all of a sudden you're literally paying $767 a month. Saving like $800 a month versus refi. AND, since the 6% interest on $150k is $800 a month, the government is literally gonna pay $16 a month on your loan for you, just to be a nice guy.


But the best part... is the ZILLIONS of times in life you work less than 52 weeks of the year. You move jobs and take a few months of vacay in between. You have a kid and take a year off from work. You go travel for a year. You start a business. You get laid off. Literally a BAJILLION things......

Let's say your "salary" drops to $70k for that year.. Well, you're probably not gonna be getting $40k in deductions anymore, but let's say you still manage $25k (very easy), then you're paying $225 a month! And the Govt cuts you a check (to your loan) of $287. Just for shits.

Honestly, it's an ABSURD entitlement that Congress gave us, but it is friken awesome.

It gives you SOOOO much flexibility, and in reality, it's really more of a wage garnishment than a loan, since any time you choose to decrease your own AGI, you just don't have to pay and someone else pays if for you. lulz.

I'd wager that by the numbers, probably 19 out of 20 people would come out ahead by staying on it indefinitely (not that many of us are gonna be making those $500k partner salaries, sorry guyz).

Anddddd, after 25 years, even counting the tax bomb, you get one last massive gift of 70% or so of the value just gifted to you in the form of cancellation?? Like. Smfh. Absolute insanity, if we're being real.

(And I'm sure everyone knows, but if not... year 1 payments are based on law school salary, and year 2 payments are based on stub year, so those years you essentially pay diddley squat and get checks from the govt to boot)


Just sayinnnnn. Don't give up the stupidest/best program ever to benefit rich kids.

[nixy]

You have to be committed to carrying the debt for years and paying the tax bomb, though, because your payments won’t make a dent in the principal. I know some people are willing to do that, you just need to be really aware of what you’re doing.

(Also somewhere Sparty is screaming.)

[sparty99]

Or the OP could refinance and pay less interest, which was the original question.

(why are you waiting to pay a lump sum?? Interest is less on a smaller debt than on a bigger one.)

Because I was on deferment and saved up and paid off other stuff and now that it is growing, I have 15k for an emergency fund and then more on top of that might use for a downpayment on house or loans if i was smart. I will know more in 1.5 years as that will be around the time I am ready to pay off. I am not too worried about the interest as I have not even refinanced but might do so. I just figure keep piling up cash and I will decide what to do at some point.