Student loan payments: get advice and actual numbers here Forum

[Tiago Splitter]

anyone else making minimum PAYE payments and counting on government collapse by 2034?

yep with 160k salary as well. im a risk seeker though so we will see. so far im coming out way ahead.

How do you judge whether you're ahead or behind?

[fats provolone]

i just feel like in 20 years anything is possible. and the npv of the tax bomb is pretty small. the risk of retroactive elimination of PAYE or whatever seems minimal. and who knows i might die before then. the only scenario where it really sucks is if i make partner or something and make enough money to afford the 10 yr repayment. which a.) is never gonna happen and b.) would be like winning the lotto anyway

so fuck it.

[Johann]

anyone else making minimum PAYE payments and counting on government collapse by 2034?

yep with 160k salary as well. im a risk seeker though so we will see. so far im coming out way ahead.

How do you judge whether you're ahead or behind?

Because the money I have invested has grown more than the debt I have avoided paying back.

[Johann]

i just feel like in 20 years anything is possible. and the npv of the tax bomb is pretty small. the risk of retroactive elimination of PAYE or whatever seems minimal. and who knows i might die before then. the only scenario where it really sucks is if i make partner or something and make enough money to afford the 10 yr repayment. which a.) is never gonna happen and b.) would be like winning the lotto anyway

so fuck it.

exactly my reasoning. with time value of money the most likely only way i come out behind is if I make partner, which I won't be pissed about.

[Elston Gunn]

i just feel like in 20 years anything is possible. and the npv of the tax bomb is pretty small. the risk of retroactive elimination of PAYE or whatever seems minimal. and who knows i might die before then. the only scenario where it really sucks is if i make partner or something and make enough money to afford the 10 yr repayment. which a.) is never gonna happen and b.) would be like winning the lotto anyway

so fuck it.

Leaning toward this too. Now to convince my wife I'm not insane...

[Tiago Splitter]

i just feel like in 20 years anything is possible. and the npv of the tax bomb is pretty small. the risk of retroactive elimination of PAYE or whatever seems minimal. and who knows i might die before then. the only scenario where it really sucks is if i make partner or something and make enough money to afford the 10 yr repayment. which a.) is never gonna happen and b.) would be like winning the lotto anyway

so fuck it.

Leaning toward this too. Now to convince my wife I'm not insane...

I've been leaning that way for a while but the 4% or whatever rate is pretty tempting. Hopefully rates rise in the next year so the decision is easy.

[Elston Gunn]

The other thing is that, while I don't really have gov ambitions, there's considerably more than 0 chance there will be 120 months within that 20 years when I'll be working for a gov agency.

[fats provolone]

The other thing is that, while I don't really have gov ambitions, there's considerably more than 0 chance there will be 120 months within that 20 years when I'll be working for a gov agency.

also a real consideration, esp. if you're in litigation.

[v5junior]

Checking in here so we can all know what "market" rates are. It'd be awesome if more folks chipped in.

Income: 160k + bonus (10k probably)
Credit Score: ~775
Debt: 106k

CommonBond rate: 4.15% (with autopay)

I'm the 4.5% anon.

Income: 160k
Credit Score: ~765
Debt: 250k at time of refinance
Rate: 4.25% (with autopay)

CommonBond or SoFi? Fixed or variable?

[v5junior]

Checking in here so we can all know what "market" rates are. It'd be awesome if more folks chipped in.

Income: 160k + bonus (10k probably)
Credit Score: ~775
Debt: 106k

CommonBond rate: 4.15% (with autopay)

Fixed or variable?

[GOATlawman]

Fixed or variable?

NECESSARY info posting your rates.

Thanks.

[hous]

I have 50k in loans. I plan on paying it off within 2 years of now as my house is paid for. My loans have interest rates of 5.8-6.8. Should I consolidate my loans for a lower interest rate and pay it back over a longer period / at the same rate?

I have good credit.

[Anonymous User]

Debt: 163k (mostly 6.8% and 7.9% - weighted average of 7.1%)
Salary: 160k (170k in Jan 2015)
Credit score: 788

SoFi:
10 yr variable @ 4.160% (3.910% with AutoPay)
10 yr fixed @ 6.125% (5.875% with AutoPay)

Waiting for final approval but might go with the variable and hope to pay off asap. I was originally approved for rates that were about .4% lower across the board and got a rate update based on the explanation that they could not verify my 10k biglaw bonus. Seems bogus to me. Do you think the above rates are competitive?

[Old Gregg]

Do you think the above rates are competitive?

Yes, but this is dumb:

hope to pay off asap.

Better to split that aggressive payment with making min payments and building up some savings...

[Johann]

I have 50k in loans. I plan on paying it off within 2 years of now as my house is paid for. My loans have interest rates of 5.8-6.8. Should I consolidate my loans for a lower interest rate and pay it back over a longer period / at the same rate?

I have good credit.

Aggressively paying down debt in this market is so crazy. Conservative investing strategies are yielding 10% a year. Diversify people. Try to cop a 4% rate and spread out payments over 5 years. The market is running right now. Put the rest in the market.

Also if anyone in this thread is a lawyer making 75kish - you should be diversifying by making some after tax retirment contributions. It's likely this will be your lowest tax rate you face in your entire career. If you are below a 30% rate, thats an almost 5% guaranteed savings off the top before you factor in market gains. And could be something like a 20% savings with how liberal our age group is and where the country may be moving.

[15 styx]

Very similar situation. Would it be better to pay off the entire tuition debt now (by tapping into investments that are increasing annually by +12%) or pay the debt off over X years thinking that down the road money is likely inflated? Either way is doable, just trying to figure out the most advantageous tactic.

[Anonymous User]

Debt: 190k refinanced (260k total)
Salary: 170k
Credit score: 755

SoFi:
10 yr variable @ 3.410% (3.160% with AutoPay)
10 yr fixed @ 5.375% (5.125% with AutoPay)

CommonBond:
10 yr variable @ 5.025% (4.775% with AutoPay)

Charterone:
Wouldn't even give me a quote, said I was ineligible to refinance through them after filling out application (and running my credit).


I went with SoFI 10 year variable rate loan. Splitting my excess funds between accelerated repayments and investments for flexibility/safety.

[hous]

I have 50k in loans. I plan on paying it off within 2 years of now as my house is paid for. My loans have interest rates of 5.8-6.8. Should I consolidate my loans for a lower interest rate and pay it back over a longer period / at the same rate?

I have good credit.

Aggressively paying down debt in this market is so crazy. Conservative investing strategies are yielding 10% a year. Diversify people. Try to cop a 4% rate and spread out payments over 5 years. The market is running right now. Put the rest in the market.

Also if anyone in this thread is a lawyer making 75kish - you should be diversifying by making some after tax retirment contributions. It's likely this will be your lowest tax rate you face in your entire career. If you are below a 30% rate, thats an almost 5% guaranteed savings off the top before you factor in market gains. And could be something like a 20% savings with how liberal our age group is and where the country may be moving.

So you think I should refinance my student loan debt and pay it off over a longer period of time. Any recommendations on where to go to refinance my student loans? I was under the impression the 6.8% APR on the student loans would outweigh any IRA. Should I open an IRA and throw 5.5k in before the end of the year? What do I do with the rest of my money after paying off my monthly minimum student loans and maxing out on the IRA?

Can I put more after tax income away to retirement? My plan is to put in the max into the Roth IRA and max my firm will match into a 401k. I will still have some money left over because my student loans are pretty low and my house is paid off already.

[anonnymouse]

I have 50k in loans. I plan on paying it off within 2 years of now as my house is paid for. My loans have interest rates of 5.8-6.8. Should I consolidate my loans for a lower interest rate and pay it back over a longer period / at the same rate?

I have good credit.

Aggressively paying down debt in this market is so crazy. Conservative investing strategies are yielding 10% a year. Diversify people. Try to cop a 4% rate and spread out payments over 5 years. The market is running right now. Put the rest in the market.

Also if anyone in this thread is a lawyer making 75kish - you should be diversifying by making some after tax retirment contributions. It's likely this will be your lowest tax rate you face in your entire career. If you are below a 30% rate, thats an almost 5% guaranteed savings off the top before you factor in market gains. And could be something like a 20% savings with how liberal our age group is and where the country may be moving.

1. Any decision under MPT or CAPM would be to take the project that generates outsized return relative to risk. Since paying down debt is a risk-free after-tax return of OP's interest rate, even at a low 4% the MPT/CAPM decision is to pay down the debt before investing. However...

2. Anyone that's at $75k should try like hell to max out (or get as close as they can) 401k to get below the student loan interest deduction phaseout beginning at $60k MAGI. That boosts the risk-free after-tax return even higher to somewhere around 5% (still assuming refi). Apples to apples, a risk-free taxable investment would have to yield around 6-7% to shift the decision toward investing. When was the last time a T-bill had a real yield of 6-7%?

3. Once the debt is exhausted though, your after-tax/tax-advantaged tip is spot on.

4. Hous, you should see what the refi options are but still strongly consider aggressively paying down debt. And if you're a bit above the final phaseout for student loan interest deduction (kicks in at $60k, gone at $75k), don't skimp on the 401k contributions just to pay down more debt.

[Anonymous User]

Checking in here so we can all know what "market" rates are. It'd be awesome if more folks chipped in.

Income: 160k + bonus (10k probably)
Credit Score: ~775
Debt: 106k

CommonBond rate: 4.15% (with autopay)

I'm the 4.5% anon.

Income: 160k
Credit Score: ~765
Debt: 250k at time of refinance
Rate: 4.25% (with autopay)

CommonBond or SoFi? Fixed or variable?

Sofi variable

[Anonymous User]

If I use my 2013 AGI for PAYE, and don't check the "Is your current income significantly different than the income reflected above?" box (currently in stub year of biglaw), will I get yelled at by somebody?

[fats provolone]

If I use my 2013 AGI for PAYE, and don't check the "Is your current income significantly different than the income reflected above?" box (currently in stub year of biglaw), will I get yelled at by somebody?

enjoy federal prison

[Anonymous User]

If I use my 2013 AGI for PAYE, and don't check the "Is your current income significantly different than the income reflected above?" box (currently in stub year of biglaw), will I get yelled at by somebody?

enjoy federal prison

ha, I just remember a poster who's name rhymed with Besert Box saying that's what he did if I remember correctly

seems like a good way to go for the first year anyways

[fats provolone]

DF got busted years ago. he's an undercover IRS agent now.

[Anonymous User]

If I use my 2013 AGI for PAYE, and don't check the "Is your current income significantly different than the income reflected above?" box (currently in stub year of biglaw), will I get yelled at by somebody?

enjoy federal prison

Lol, actually it's completely legit to use your 2013 AGI for PAYE (what does "significantly different" even mean?). When my gf was changing jobs, the loan servicer outright told her to get an application for PAYE before changing jobs so that she could lock in much lower payments (her salary literally doubled). And the payments qualify for PLSF (despite the fact that payments are based on a previous job). According to the loan servicer, the only reason to ever use the alternative documentation of income is where your salary goes down significantly (e.g. if you move to a lower paying job).

I've actually been curious as to whether you could get your payments down to $0 per month for a year by simply deferring nearly your entire salary to your 401k for a month or two, and using alternative documentation of income showing that your income is only $1 per month (or whatever). I suspect you probably could get away with this for a year or so.