Student loan payments: get advice and actual numbers here Forum

[Anonymous User]

Looking for some advice.

Graduated law school a few years ago and moved from big law to in-house counsel at a PE/VC firm. Current comp is 250k, with likely annual increases. No job security concerns. Large debt from UG and law school - around 310k at the moment. Have about 150k in savings. Currently on REPAYE and trying to decide whether to re-fi.

Thoughts?

[The Lsat Airbender]

Looking for some advice.

Graduated law school a few years ago and moved from big law to in-house counsel at a PE/VC firm. Current comp is 250k, with likely annual increases. No job security concerns. Large debt from UG and law school - around 310k at the moment. Have about 150k in savings. Currently on REPAYE and trying to decide whether to re-fi.

Thoughts?

What is the interest rate on the existing debt? Refinancing is a no-brainer if you can improve by a few points (which I assume you can). $310k is a big enough pile, and you're liquid enough, that it might make sense to refi and retire some.

[Anonymous User]

Looking for some advice.

Graduated law school a few years ago and moved from big law to in-house counsel at a PE/VC firm. Current comp is 250k, with likely annual increases. No job security concerns. Large debt from UG and law school - around 310k at the moment. Have about 150k in savings. Currently on REPAYE and trying to decide whether to re-fi.

Thoughts?

What is the interest rate on the existing debt? Refinancing is a no-brainer if you can improve by a few points (which I assume you can). $310k is a big enough pile, and you're liquid enough, that it might make sense to refi and retire some.

Thanks. ~6.5% average on the current debt. I've gotten refi quotes around 4%, with some in the mid 3's. Debating pulling the trigger vs. waiting a bit longer to see if any further student loan relief is coming (they've already stopped payments/interest through Sept 2020).

[sparty99]

Hey I started this thread like 7 years ago!

Still making payments.

Please provide an update on your financial situation.

[Anonymous User]

Hey I started this thread like 7 years ago!

Still making payments.

Please provide an update on your financial situation.

I’m doing ok. What’s your financial situation like?

[RustyLaw]

Looking for some advice as I am admittedly a bit under-informed on good financial strategy and TLS has helped me get where I am now.

I'm a graduating 3L headed to Am Law top 50 NY big law (I specify am law to indicate financial strength given the impending recession but that may be useless info)

I have 120k of debt at ~7% all in law school loans and no familial support. Sitting on approx 20k of savings to last me through my start date. Could be January defferal but no announcement so far.

I honestly have no idea how long I'll last in big law but I am not necessarily itching to GTFO. I dug the substantive portions of my summer and the group I got put in is historically chill on hours expectations. Firm has never been known for layoffs. I assume I could last a while if the economy allows me and am prone to hard work/long hours anyway.

Will be living with an SO who will be in school on loans. No roommates. I know rent can be murder on financials but I am not into the idea of sacrificing too much on my living space. I otherwise have no expensive hobbies, spendy taste, etc. Grew up poor so I can cut costs elsewhere with ease.

My tentative plan is to make minimum payments while maxing 401K and building some substantial liquid savings before transitioning to aggressive payments.

I appreciate general advice. Also would like to hear thoughts on an appropriate savings to repayment ratios and related timelines. My initial reaction was to burn it off in 2 or 3 years but given the economic circumstances I feel like a safety net of cash is probably more prudent for a while.

Appreciate your time and thoughts.

[sparty99]

Hey I started this thread like 7 years ago!

Still making payments.

Please provide an update on your financial situation.

I’m doing ok. What’s your financial situation like?

Not good.

[sparty99]

Looking for some advice as I am admittedly a bit under-informed on good financial strategy and TLS has helped me get where I am now.

I'm a graduating 3L headed to Am Law top 50 NY big law (I specify am law to indicate financial strength given the impending recession but that may be useless info)

I have 120k of debt at ~7% all in law school loans and no familial support. Sitting on approx 20k of savings to last me through my start date. Could be January defferal but no announcement so far.

I honestly have no idea how long I'll last in big law but I am not necessarily itching to GTFO. I dug the substantive portions of my summer and the group I got put in is historically chill on hours expectations. Firm has never been known for layoffs. I assume I could last a while if the economy allows me and am prone to hard work/long hours anyway.

Will be living with an SO who will be in school on loans. No roommates. I know rent can be murder on financials but I am not into the idea of sacrificing too much on my living space. I otherwise have no expensive hobbies, spendy taste, etc. Grew up poor so I can cut costs elsewhere with ease.

My tentative plan is to make minimum payments while maxing 401K and building some substantial liquid savings before transitioning to aggressive payments.

I appreciate general advice. Also would like to hear thoughts on an appropriate savings to repayment ratios and related timelines. My initial reaction was to burn it off in 2 or 3 years but given the economic circumstances I feel like a safety net of cash is probably more prudent for a while.

Appreciate your time and thoughts.

How old are you? What is your starting salary?

[idontwannausername]

Thanks OP for starting this thread. My payments are deferred until Nov. 2020, I'll return and add my info then if that helps anyone.

[RustyLaw]

Looking for some advice as I am admittedly a bit under-informed on good financial strategy and TLS has helped me get where I am now.

I'm a graduating 3L headed to Am Law top 50 NY big law (I specify am law to indicate financial strength given the impending recession but that may be useless info)

I have 120k of debt at ~7% all in law school loans and no familial support. Sitting on approx 20k of savings to last me through my start date. Could be January defferal but no announcement so far.

I honestly have no idea how long I'll last in big law but I am not necessarily itching to GTFO. I dug the substantive portions of my summer and the group I got put in is historically chill on hours expectations. Firm has never been known for layoffs. I assume I could last a while if the economy allows me and am prone to hard work/long hours anyway.

Will be living with an SO who will be in school on loans. No roommates. I know rent can be murder on financials but I am not into the idea of sacrificing too much on my living space. I otherwise have no expensive hobbies, spendy taste, etc. Grew up poor so I can cut costs elsewhere with ease.

My tentative plan is to make minimum payments while maxing 401K and building some substantial liquid savings before transitioning to aggressive payments.

I appreciate general advice. Also would like to hear thoughts on an appropriate savings to repayment ratios and related timelines. My initial reaction was to burn it off in 2 or 3 years but given the economic circumstances I feel like a safety net of cash is probably more prudent for a while.

Appreciate your time and thoughts.

How old are you? What is your starting salary?

26 - 190K NY lockstep

[Anonymous User]

My summer firm allows summers to contribute to their 401k plan. Would you guys suggest contributing to it? Or just save all the money and chuck it at loans? I have around 40K in loans right now (all private loans so still accruing interest) and likely will finish off law school with around 110K after 3L. Thanks for the help!

[papermateflair]

My summer firm allows summers to contribute to their 401k plan. Would you guys suggest contributing to it? Or just save all the money and chuck it at loans? I have around 40K in loans right now (all private loans so still accruing interest) and likely will finish off law school with around 110K after 3L. Thanks for the help!

The major benefit of the 401(k) is your ability to make pre-tax contributions and reduce your taxes. I think most summer associates don't make enough for taxes to be a big issue, unless you have another job or your program is pretty long, but it may be worth running the numbers to see what the benefits are for you personally.

If your firm does a match, then it may be worth it to put in enough to get the match, but most firms don't match associate contributions. I'm usually all for putting as much in the 401(k) as possible, but if you have loans and presumably little in liquid savings, I would personally use the money to build up emergency savings, and then put any extras on the loans or to reduce the amount of loans you'll need next year. Back in the day I used mine to pay part of my tuition and take out smaller loans my 3L year.

[decimalsanddollars]

26 - 190K NY lockstep

I like your plan of beginning with savings and then ratcheting up loan payments, particularly if you can save at a pretty high rate. I'd try for 6-12 months of expenses in liquid savings, then refocus to loans. Continue saving, but your ratio should be heavily toward paying down whatever balance is accruing interest at the highest rate.

[rshackleford123]

My summer firm allows summers to contribute to their 401k plan. Would you guys suggest contributing to it? Or just save all the money and chuck it at loans? I have around 40K in loans right now (all private loans so still accruing interest) and likely will finish off law school with around 110K after 3L. Thanks for the help!

The major benefit of the 401(k) is your ability to make pre-tax contributions and reduce your taxes. I think most summer associates don't make enough for taxes to be a big issue, unless you have another job or your program is pretty long, but it may be worth running the numbers to see what the benefits are for you personally.

If your firm does a match, then it may be worth it to put in enough to get the match, but most firms don't match associate contributions. I'm usually all for putting as much in the 401(k) as possible, but if you have loans and presumably little in liquid savings, I would personally use the money to build up emergency savings, and then put any extras on the loans or to reduce the amount of loans you'll need next year. Back in the day I used mine to pay part of my tuition and take out smaller loans my 3L year.

Agreed on the pre-tax part, but SA year likely will be the lowest year of taxable income for the foreseeable future. If the 401(k) offers a Roth option, that would be a great alternative way to take advantage of the 401(k) and the lower taxable income.

[blair.waldorf]

Y’all are too risk averse. Time value of money, people. Contribute to the 401(k) (if there is a Roth option, that is preferable). Average annual returns if you are invested in the S&P 500 are 10%. Student loan interest is what, 6.5%? Better to invest.

I’d actually max out your Roth IRA contribution first since you can invest in individual stocks and not whatever crappy ETFs your firm offers.

I do agree that it is good to have additional liquidity, especially in this economy. I would not max out both your Roth IRA and your 401(k) for the year.

[sparty99]

My summer firm allows summers to contribute to their 401k plan. Would you guys suggest contributing to it? Or just save all the money and chuck it at loans? I have around 40K in loans right now (all private loans so still accruing interest) and likely will finish off law school with around 110K after 3L. Thanks for the help!

I would save all the money that you can so you can cash flow next year and be debt free and graduate with only $40k in loans. Thus, I would save all your earnings and get a job as a pizza delivery driver your last year. Do anything you can to make next year free. Start applying to scholarships for your last year if possible. Ask your firm if you can work as a law clerk.

[sparty99]

Looking for some advice as I am admittedly a bit under-informed on good financial strategy and TLS has helped me get where I am now.

I'm a graduating 3L headed to Am Law top 50 NY big law (I specify am law to indicate financial strength given the impending recession but that may be useless info)

I have 120k of debt at ~7% all in law school loans and no familial support. Sitting on approx 20k of savings to last me through my start date. Could be January defferal but no announcement so far.

I honestly have no idea how long I'll last in big law but I am not necessarily itching to GTFO. I dug the substantive portions of my summer and the group I got put in is historically chill on hours expectations. Firm has never been known for layoffs. I assume I could last a while if the economy allows me and am prone to hard work/long hours anyway.

Will be living with an SO who will be in school on loans. No roommates. I know rent can be murder on financials but I am not into the idea of sacrificing too much on my living space. I otherwise have no expensive hobbies, spendy taste, etc. Grew up poor so I can cut costs elsewhere with ease.

My tentative plan is to make minimum payments while maxing 401K and building some substantial liquid savings before transitioning to aggressive payments.

I appreciate general advice. Also would like to hear thoughts on an appropriate savings to repayment ratios and related timelines. My initial reaction was to burn it off in 2 or 3 years but given the economic circumstances I feel like a safety net of cash is probably more prudent for a while.

Appreciate your time and thoughts.

How old are you? What is your starting salary?

26 - 190K NY lockstep

I would make it my goal to spend $60,000 your first year on loans, 401k, and retirement. Thus, pay the minimum every month on your loans, like $1,000. At the end of the year dump an extra $18,000 to the loans. Thus, you should have $30,000 left. Use $15,000 for 401(k) and $15,000 for an emergency fund. Any bonus should go to your student loans..By year 2 you should only invest $10,000 into 401(k). Add $10,000 to your emergency fund. $40,000 should go to the loans. By year 3 you should invest $5,000 into your 401(k) and throw $55,000 at the loans. End of year 3 you should have paid off $30k + 40K + 55K. The loans should most likely be paid off since you are using your bonus and any raises to attack the loans. You will also have $30k in the 401(k) and $25,000 in savings. If you are still around in year 4, invest everything. Do not worry about maxing out the 401(k) in year 1 to 3. If you invest $100 every month from 25 to 65 you will automatically be a millionaire.

[The Lsat Airbender]

Y’all are too risk averse. Time value of money, people. Contribute to the 401(k) (if there is a Roth option, that is preferable). Average annual returns if you are invested in the S&P 500 are 10%. Student loan interest is what, 6.5%? Better to invest.

I’d actually max out your Roth IRA contribution first since you can invest in individual stocks and not whatever crappy ETFs your firm offers.

I do agree that it is good to have additional liquidity, especially in this economy. I would not max out both your Roth IRA and your 401(k) for the year.

- I'm bullish, but counting on the stock market to reliably beat 6.5% in the medium term seems wildly optimistic to me. Average returns from 1957-2018 were 8% and we're up against some significant headwinds at the moment thanks to COVID. Not a great risk premium considering that the return on loan payments is guaranteed. Investing in equities makes sense if OC can refinance down to a lower interest rate, but if they're stuck at 6.5% then aggressively paying that down is a no-brainer.

- Low-cost, broad ETFs are perfectly good investment choices and definitely a good idea for someone new to investing. And trading individual stocks can be a headache if you work in biglaw and therefore are exposed to a lot of material nonpublic information. Would not recommend unless you really know what you're doing on both the investing and compliance fronts, and even then you probably won't beat the market.

[Anonymous User]

Looking for some thoughts in these uncertain times.

Class of 2017
Debt load at graduation: 170k
Current debt load: 24k (at ~5%, $1900 monthly repayment schedule)
Investment (Index fund/crypto): 46k
Cash on hand: 8k
Salary: 220k
City: NYC

I've been pretty aggressive about paying back my loans, and I certainly will pay them off within this year. The question is whether I should just transfer some of my cash and investment to the debt and get rid of the debt now, or hold onto the investment and cash given uncertain times and pay off the loans a little later. FWIW I work at V5 that has not yet entered any austerity measures, although nothing is guaranteed in this climate.

I also want to buy real estate soon given the low mortgage rate, but maybe that's too aggressive? I've lived with roommates in a very cheap area to lower my living expenses, but now I'm ready to move onto an "adult" living setting, especially with wfh being extended.

Any thoughts are appreciated.

[sparty99]

Looking for some thoughts in these uncertain times.

Class of 2017
Debt load at graduation: 170k
Current debt load: 24k (at ~5%, $1900 monthly repayment schedule)
Investment (Index fund/crypto): 46k
Cash on hand: 8k
Salary: 220k
City: NYC

I've been pretty aggressive about paying back my loans, and I certainly will pay them off within this year. The question is whether I should just transfer some of my cash and investment to the debt and get rid of the debt now, or hold onto the investment and cash given uncertain times and pay off the loans a little later. FWIW I work at V5 that has not yet entered any austerity measures, although nothing is guaranteed in this climate.

I also want to buy real estate soon given the low mortgage rate, but maybe that's too aggressive? I've lived with roommates in a very cheap area to lower my living expenses, but now I'm ready to move onto an "adult" living setting, especially with wfh being extended.

Any thoughts are appreciated.

Can't you refinance that 24K? I mean basically it would be paid off in 4 months. It really does not matter. Pay it or keep it. I would build up cash right now if you want to buy real estate. You make a good salary. You need more cash on hand. You don't want to cash out on investments right now. Might want to start investing more since stocks are low. 5% is a high interest rate.

[rshackleford123]

Looking for some thoughts in these uncertain times.

Class of 2017
Debt load at graduation: 170k
Current debt load: 24k (at ~5%, $1900 monthly repayment schedule)
Investment (Index fund/crypto): 46k
Cash on hand: 8k
Salary: 220k
City: NYC

I've been pretty aggressive about paying back my loans, and I certainly will pay them off within this year. The question is whether I should just transfer some of my cash and investment to the debt and get rid of the debt now, or hold onto the investment and cash given uncertain times and pay off the loans a little later. FWIW I work at V5 that has not yet entered any austerity measures, although nothing is guaranteed in this climate.

I also want to buy real estate soon given the low mortgage rate, but maybe that's too aggressive? I've lived with roommates in a very cheap area to lower my living expenses, but now I'm ready to move onto an "adult" living setting, especially with wfh being extended.

Any thoughts are appreciated.

I would not liquidate any of your investments to pay the outstanding debt. You likely will be taking a loss (even after the market returns after the last 2 months) and a 5% student loan isn't worth that. I agree with the poster above - see if you can refinance that amount to a lower rate. If you can, it might be worth paying the loans a bit less aggressively and allocating more toward your 401(k) (though I understand the peace of mind involved in having your loans paid off). If not, 5% isn't the greatest interest rate, but it's not so bad that it's worth liquidating investments or using all of your cash on hand (which I assume is the only cash you have).

[Anonymous User]

Looking for some thoughts in these uncertain times.

Class of 2017
Debt load at graduation: 170k
Current debt load: 24k (at ~5%, $1900 monthly repayment schedule)
Investment (Index fund/crypto): 46k
Cash on hand: 8k
Salary: 220k
City: NYC

I've been pretty aggressive about paying back my loans, and I certainly will pay them off within this year. The question is whether I should just transfer some of my cash and investment to the debt and get rid of the debt now, or hold onto the investment and cash given uncertain times and pay off the loans a little later. FWIW I work at V5 that has not yet entered any austerity measures, although nothing is guaranteed in this climate.

I also want to buy real estate soon given the low mortgage rate, but maybe that's too aggressive? I've lived with roommates in a very cheap area to lower my living expenses, but now I'm ready to move onto an "adult" living setting, especially with wfh being extended.

Any thoughts are appreciated.

I would not liquidate any of your investments to pay the outstanding debt. You likely will be taking a loss (even after the market returns after the last 2 months) and a 5% student loan isn't worth that. I agree with the poster above - see if you can refinance that amount to a lower rate. If you can, it might be worth paying the loans a bit less aggressively and allocating more toward your 401(k) (though I understand the peace of mind involved in having your loans paid off). If not, 5% isn't the greatest interest rate, but it's not so bad that it's worth liquidating investments or using all of your cash on hand (which I assume is the only cash you have).

Hello, this is OP and thanks everyone so far for your advice. So it looks like I actually reaped a 9% return on my investments in the market in the index fund right now (I recovered from my losses in March). Would that change the calculus? One thing I notice is that the market seems overly optimistic and I suspect it'll crash again in the short/medium term future. This feeling is just based on very casual reading and browsing online.

[rshackleford123]

Looking for some thoughts in these uncertain times.

Class of 2017
Debt load at graduation: 170k
Current debt load: 24k (at ~5%, $1900 monthly repayment schedule)
Investment (Index fund/crypto): 46k
Cash on hand: 8k
Salary: 220k
City: NYC

I've been pretty aggressive about paying back my loans, and I certainly will pay them off within this year. The question is whether I should just transfer some of my cash and investment to the debt and get rid of the debt now, or hold onto the investment and cash given uncertain times and pay off the loans a little later. FWIW I work at V5 that has not yet entered any austerity measures, although nothing is guaranteed in this climate.

I also want to buy real estate soon given the low mortgage rate, but maybe that's too aggressive? I've lived with roommates in a very cheap area to lower my living expenses, but now I'm ready to move onto an "adult" living setting, especially with wfh being extended.

Any thoughts are appreciated.

I would not liquidate any of your investments to pay the outstanding debt. You likely will be taking a loss (even after the market returns after the last 2 months) and a 5% student loan isn't worth that. I agree with the poster above - see if you can refinance that amount to a lower rate. If you can, it might be worth paying the loans a bit less aggressively and allocating more toward your 401(k) (though I understand the peace of mind involved in having your loans paid off). If not, 5% isn't the greatest interest rate, but it's not so bad that it's worth liquidating investments or using all of your cash on hand (which I assume is the only cash you have).

Hello, this is OP and thanks everyone so far for your advice. So it looks like I actually reaped a 9% return on my investments in the market in the index fund right now (I recovered from my losses in March). Would that change the calculus? One thing I notice is that the market seems overly optimistic and I suspect it'll crash again in the short/medium term future. This feeling is just based on very casual reading and browsing online.

You are trying to time the market. It could tank again, or it could shoot up another 20%. I'm assuming you are in your late 20s if you are class of 2017, which means you have a long investment time horizon. Over that time horizon, volatile markets with significant pullbacks (like right now) are good for you, especially if you keep investing during those times. In 30 years, a 30% pullback in 2020 will not matter too much. (Note: if it does matter, we have bigger problems.)

If you are planning to pay off the loans this year regardless, I would just leave your investments where they are and continue paying your loans. (Also, don't forget about the taxes you would pay if you liquidated investments.) Unless you can get a refinance without fees, refinancing likely won't save enough in interest over the next 6 months to outweigh the fees.

[Anonymous User]

Checking in here.

Class of 2017
Debt load at graduation: 310k
Current debt load: 279k (at ~4.8%, $1855 monthly repayment schedule)
Investments (401k): 51k
Cash on hand: 80k
Salary: 220k
City: DC

I am coming into some additional cash soon (~$66k) and planning to throw all of that at my loans to bring the balance down to ~$213k and then refi because I think I can lower my rate to get closer to 4%.

Long term plan is to (1) knock out these student loans first and foremost and throw all of my bonuses at the principal (I've also started making payments higher than the monthly minimum payment) and then (2) try to save for a down payment on a house (without spending the current amount of cash I have on hand). Still unsure whether I'll stick it out in biglaw or eventually look to do something else once my loans are gone.

[Anonymous User]

Checking in here for those who may clerk.

Class of 2017
Debt load at graduation: 130k
Current debt load: 92k (at < 1% due to COVID plummeting my variable rate post-REFI, ~$1700 monthly repayment schedule)
Investments (401k): ~24K
Investments (other): ~8k
Cash on hand: ~24k
Salary: ~220k
City: NYC/DC
Industry: Biglaw/lit boutique

Clerked twice. Didn’t pay anything above a couple hundred bucks to my loans during that time, so I started seriously paying them off once I entered private practice less than a year ago. All $ (savings and retirement) came from this job. Started off in the red and spent most of my clerkship time with little to no savings at all (less than $1k always).

Now at a place where above-market bonuses are the norm (and not like KE), but I’m expecting a substantial decrease from the norm given the economy and the effects it’s had on firm matters. Still hoping to pay my student loans off by year end (depending on bonus) or early-to-mid next year (especially with the big bump that comes with 4th year salary).

I don’t live frugally by any means but also don’t spend much money at all. Typically I pay 3k to loans; 1800 to rent (shared apt with SO); 3k to savings; and 1k to the market. Also put it $1800 a month to 401k. Only a couple hundred bucks of non-savings disposable income remain after paying bills, but it’s still more disposable income than I’ve ever had in my life (and more savings). If i have loans outstanding come next year, when salaries go to ~255k, then I’ll probably start paying $4k a month.

For kids at home, you really do get paid a lot in Biglaw, especially as you move to midlevel and senior status. The $3k loan payments aren’t really crippling to a decent lifestyle especially if you split rent with someone. The problem arises when you’re at a firm billing ungodly amounts a year, whether you enjoy the work or not. It takes a big toll on you mentally and physically. Definitely cannot see myself doing this for the next three years even. Maybe 1 or 2 more tops after the end of this year.

Also, I’m aware that I’m burning, absolutely burning, cash by throwing it at loans instead of throwing it in stocks. Personal choice, as seeing my SL balance go down feels a lot better than watching my savings and investments rise, for whatever reason.