Student loan payments: get advice and actual numbers here Forum

[lacrossebrother]

everyone seems to be forgetting that you might die in 20 years. or, even more likely, life won't be worth living in 2035. what's the point of being debt free then?

There are also a few betting on some 70s-80s style inflation wiping out their debts. Death is probably a better bet, however.

Inflation imminent with dat 5.5 employment bro

[skiridedrive]

Solicitation for Advice:

Thanks for the info so far everyone. Here is a situation, if anyone has advice/experience to add.

Original Situation
154K in loans - all federal
1 Year in Big Law
1.5 years outside big law
Paid loans fairly aggressively

Current Situation
125K plus 20% target bonus (almost certainty)
Current Federal Loans - 112k at weighted average of 7% (some at 7.65 some at 6.55)
Expected payoff in approximately 6 to 7 years.
Currently on 25 year repayment, paying minimum on all accounts except highest interest rate, dumping aggressively into high interest rate account (7.65%).
Never missed a payment on anything, ever. Assuming cred is good, but high debt (also owe 14,000 on vehicle).

Preferences:
Low risk, fixed rate (I can be talked out of either with solid reasoning). Going private scares me a bit as it does not offer the federal protection if by chance I lost my job. Not likely, but I am risk averse.

Plan moving forward:

Apply to SoFi, DRB, Common Bond - and see what rates they offer for 10 year fixed. I prefer 10 year since it gives me some flexibility moving forward. Assuming it will end up with something around 5% fixed for 10 years?

Thoughts on risks of private vs federal? Thoughts on any differences between the way the interest is calculated? Thoughts on fixed vs variable?

Thank you!

[Johann]

skidrive - your loan balance is low enough that you should just refi. you arent gonna fall into so low of a paying job that you cant service your debt - id pull the sofi trigger. especially if you are inhouse which your compensation package makes it look like you arent in the firm life anymore. unless you are dying to work for the govt time to pay the shit down.

[Doritos]

Solicitation for Advice:

Thanks for the info so far everyone. Here is a situation, if anyone has advice/experience to add.

Original Situation
154K in loans - all federal
1 Year in Big Law
1.5 years outside big law
Paid loans fairly aggressively

Current Situation
125K plus 20% target bonus (almost certainty)
Current Federal Loans - 112k at weighted average of 7% (some at 7.65 some at 6.55)
Expected payoff in approximately 6 to 7 years.
Currently on 25 year repayment, paying minimum on all accounts except highest interest rate, dumping aggressively into high interest rate account (7.65%).
Never missed a payment on anything, ever. Assuming cred is good, but high debt (also owe 14,000 on vehicle).

Preferences:
Low risk, fixed rate (I can be talked out of either with solid reasoning). Going private scares me a bit as it does not offer the federal protection if by chance I lost my job. Not likely, but I am risk averse.

Plan moving forward:

Apply to SoFi, DRB, Common Bond - and see what rates they offer for 10 year fixed. I prefer 10 year since it gives me some flexibility moving forward. Assuming it will end up with something around 5% fixed for 10 years?

Thoughts on risks of private vs federal? Thoughts on any differences between the way the interest is calculated? Thoughts on fixed vs variable?

Thank you!

I would re-finance with your debt load and job situation. With good credit you could get 10 year 2.5-3% variable and your monthly payments are around $1,000. If you have GREAT credit maybe you'll get the lowest possible rate which is 1.9% at Sofi right now. That is serviceable by a non-biglaw job and if you pay into the principal it will be even lower than that. Maybe pay above minimums until your monthly rate is low enough for you to feel comfortable you can handle it even if you left to go into one of your most likely exit options based on your practice group and whatnot.

Why don't you want variable? I'm not a finance bro but based on my google research it seems unlikely interest rates are going to SKYROCKET in the coming years. It also sounds like you've got some cash-money stashed away in that high interest account. If something happens and interest rates start to really go up you can either (a) pay down the loans significantly with that stashed cash or (b) re-finance again at a better rate while you still have that nice job.

[itascot1992]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

[JenDarby]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

It would be considered good for you to gain some self awareness.

[itascot1992]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

It would be considered good for you to gain some self awareness.

Obviously if I get a biglaw job that will be easy to pay off, but if i don't?

[tortsandtiaras]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

That is kind of a lot of money to be in debt before entering law school :/

I would suggest working for 3 years and trying to pay it off, and THEN consider going to law school.

[itascot1992]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

That is kind of a lot of money to be in debt before entering law school :/

I would suggest working for 3 years and trying to pay it off, and THEN consider going to law school.

I am def going to law school in the fall. I have calculated that by the time i graduate, my loans with be approximately 68K with the accrued interest. Even if I have a low paying job, i feel like that amount can be reasonably handled, or am I wrong

[tortsandtiaras]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

That is kind of a lot of money to be in debt before entering law school :/

I would suggest working for 3 years and trying to pay it off, and THEN consider going to law school.

I am def going to law school in the fall. I have calculated that by the time i graduate, my loans with be approximately 68K with the accrued interest. Even if I have a low paying job, i feel like that amount can be reasonably handled, or am I wrong

Given that your TOTAL loan debt isn't that high, I would say it is reasonable. Just wondering, why is your loan debt so high for undergrad?

edit: I'm assuming this total includes law school loan debt as well, right?

[itascot1992]

Would entering law school with 58k in undergrad loans be considered good. I will not be taking out any loans for tuition or COA.

That is kind of a lot of money to be in debt before entering law school :/

I would suggest working for 3 years and trying to pay it off, and THEN consider going to law school.

I am def going to law school in the fall. I have calculated that by the time i graduate, my loans with be approximately 68K with the accrued interest. Even if I have a low paying job, i feel like that amount can be reasonably handled, or am I wrong

Given that your TOTAL loan debt isn't that high, I would say it is reasonable. Just wondering, why is your loan debt so high for undergrad?

edit: I'm assuming this total includes law school loan debt as well, right?

four years at a high price private school that increased tuition 2k each year i was there. technically 27k of it is parent plus but still my responsibility. Law school will not increase my debt whatsoever with money saved and what will be earned by the time i actually start

[kcdc1]

Solicitation for Advice:

Thanks for the info so far everyone. Here is a situation, if anyone has advice/experience to add.

Original Situation
154K in loans - all federal
1 Year in Big Law
1.5 years outside big law
Paid loans fairly aggressively

Current Situation
125K plus 20% target bonus (almost certainty)
Current Federal Loans - 112k at weighted average of 7% (some at 7.65 some at 6.55)
Expected payoff in approximately 6 to 7 years.
Currently on 25 year repayment, paying minimum on all accounts except highest interest rate, dumping aggressively into high interest rate account (7.65%).
Never missed a payment on anything, ever. Assuming cred is good, but high debt (also owe 14,000 on vehicle).

Preferences:
Low risk, fixed rate (I can be talked out of either with solid reasoning). Going private scares me a bit as it does not offer the federal protection if by chance I lost my job. Not likely, but I am risk averse.

Plan moving forward:

Apply to SoFi, DRB, Common Bond - and see what rates they offer for 10 year fixed. I prefer 10 year since it gives me some flexibility moving forward. Assuming it will end up with something around 5% fixed for 10 years?

Thoughts on risks of private vs federal? Thoughts on any differences between the way the interest is calculated? Thoughts on fixed vs variable?

Thank you!

I would definitely refinance and would probably take the lowest variable rate available. Unless your expenses are high, you're earning enough to put away significant cash. You can either put that money into investments (likely mostly stocks or real estate since you're in the early stage of your career) or use it to pay down your loans more quickly.

The high-return play would be to pay the minimum on your loans and gamble for investment returns that outpace your loan interest. The low-risk play would be to put enough money aside to weather unexpected financial shocks (losing job, car replacement, medical expenses, etc) and then dump excess earnings into your loans to get the guaranteed ROI of reducing interest on the outstanding principal.

Standing pat with 7% loans is, in my opinion, simply wasteful given your position. I don't see how it's lower risk than refinancing to a lower rate private loan and keeping a rainy day fund to buffer any financial shocks. And standing pat is certainly more costly given the lower rate you could get by refinancing.

I would lean toward a variable rate because your debt to income ratio will likely be low enough that you'll have the option to pay off the principal quickly in the event that the interest rate increases significantly. You're going to be able to handle changes to the minimum payment amount, so I don't see a good reason to pay extra to fix your rate.

[skiridedrive]

Wow, thanks a lot for the advice everyone.

So it looks like it is a good idea for me to go ahead and apply for refinancing. I am also going to look into the variable rate vs fixed rate issue.

To answer a few questions, I do keep some cash on hand in an uh-oh account, usually about 10k. I much prefer to pay off loans for the guaranteed ROI of reducing interest on outstanding principal versus gambling on investment returns.

Follow up questions.

1. Best places to try? My list at the moment is: SoFi, DRB, and Common Bond. Id be happy to report back after applying with which offered the best rates/terms.

2. Thoughts on applying for multiple loans at the same time. From what I recall, as long as the multiple requests are done in the same time range, you only get the credit hit of one request. Any strategies like requesting all on the 1st of the month?

3. Any thoughts on the fed planning on raising rates soon and how that would affect a variable rate loan?

Thanks again! Great info.

[Doritos]

Wow, thanks a lot for the advice everyone.

So it looks like it is a good idea for me to go ahead and apply for refinancing. I am also going to look into the variable rate vs fixed rate issue.

To answer a few questions, I do keep some cash on hand in an uh-oh account, usually about 10k. I much prefer to pay off loans for the guaranteed ROI of reducing interest on outstanding principal versus gambling on investment returns.

Follow up questions.

1. Best places to try? My list at the moment is: SoFi, DRB, and Common Bond. Id be happy to report back after applying with which offered the best rates/terms.

2. Thoughts on applying for multiple loans at the same time. From what I recall, as long as the multiple requests are done in the same time range, you only get the credit hit of one request. Any strategies like requesting all on the 1st of the month?

3. Any thoughts on the fed planning on raising rates soon and how that would affect a variable rate loan?

Thanks again! Great info.

For #1, those are the main players I'm aware of. Sofi was real quick and DRB took forever. Someone earlier in this thread said they were able to negotiate rates between the lenders so if you get a sweet sofi rate it's worth letting DRB/Common know.

Regarding #2, I believe that's correct. When I refinanced I did DRB and Sofi on like the same day and my score only reflected one hard pull. The affect is minimal too, I recall it affecting my score by like 2-3 points. Really insignificant when it comes to your rates.

[fats provolone]

We established you can't avoid the tax bomb by reducing your assets. You need other debt.

No that is the opposite of what we established. 450k in debt 0 assets is no tax bomb. tax bomb up to assets.

right. ultimately you pay taxes on your net worth (disregarding the student loans), or the amount of the forgiveness, whichever is less.

here's my plan: right before i file my taxes in the tax bomb year, buy enough diamond rings with credit cards to zero out my net worth. give the rings to friends (as many as necessary to stay under the gift tax exemption). file taxes, pay no tax bomb. get rings back from friends to return them to the store. friends refuse to return rings and i have no legal claim to them. kill myself.

[skiridedrive]

Wow, thanks a lot for the advice everyone.

So it looks like it is a good idea for me to go ahead and apply for refinancing. I am also going to look into the variable rate vs fixed rate issue.

To answer a few questions, I do keep some cash on hand in an uh-oh account, usually about 10k. I much prefer to pay off loans for the guaranteed ROI of reducing interest on outstanding principal versus gambling on investment returns.

Follow up questions.

1. Best places to try? My list at the moment is: SoFi, DRB, and Common Bond. Id be happy to report back after applying with which offered the best rates/terms.

2. Thoughts on applying for multiple loans at the same time. From what I recall, as long as the multiple requests are done in the same time range, you only get the credit hit of one request. Any strategies like requesting all on the 1st of the month?

3. Any thoughts on the fed planning on raising rates soon and how that would affect a variable rate loan?

Thanks again! Great info.

For #1, those are the main players I'm aware of. Sofi was real quick and DRB took forever. Someone earlier in this thread said they were able to negotiate rates between the lenders so if you get a sweet sofi rate it's worth letting DRB/Common know.

Regarding #2, I believe that's correct. When I refinanced I did DRB and Sofi on like the same day and my score only reflected one hard pull. The affect is minimal too, I recall it affecting my score by like 2-3 points. Really insignificant when it comes to your rates.

Thanks for the info.

Regarding interest rates:

One data point from WSJ: "The median forecast of Fed officials put the fed funds rate at 0.625% by year-end, which implies two quarter-percentage-point rate increases this year. Then Fed officials see the rate rising to 1.875% at the end of 2016 and 3.125% by the end of 2017."
http://www.wsj.com/articles/feds-janet- ... 1427485501

[XxSpyKEx]

We established you can't avoid the tax bomb by reducing your assets. You need other debt.

No that is the opposite of what we established. 450k in debt 0 assets is no tax bomb. tax bomb up to assets.

right. ultimately you pay taxes on your net worth (disregarding the student loans), or the amount of the forgiveness, whichever is less.

here's my plan: right before i file my taxes in the tax bomb year, buy enough diamond rings with credit cards to zero out my net worth. give the rings to friends (as many as necessary to stay under the gift tax exemption). file taxes, pay no tax bomb. get rings back from friends to return them to the store. friends refuse to return rings and i have no legal claim to them. kill myself.

you'd def gonna hit with the fraudulent transfer if you do that. It'll be clear as day what you're doing largely because of the time constraints here (i.e. you need to stay within the store's return policy, so you're big ticket purchases will be really close to the date when you file your taxes). Probably better off just cashing out everything, putting it into a Swiss bank account and telling the IRS you blew all your money on roulette, hookers, and blow. Alternatively, you could always just be one payment short of forgiveness and move out of the country with all your money. Your loan servicer won't be able to garnish income in another country, and it needs to get a judgment to take your other assets. These loan servicer isn't going to successfully serve you, if you're in another country. Not really a very practical solution, though, since it requires relocating to another country for the rest of your life lol.

[JonTheMandamus]

awesome thread and info thanks! (current 0L)

[Anonymous User]

Debt: $106k
Salary: $115k
Payments: $1300/mo.
Plan: 10 yr repayment
Bonus Debt-free spouse making $100k, Midwest city with low COL

Almost have a full three month emergency fund saved up, but then we're also going to start saving for a down payment on a house, since we want to raise a family here.

Haven't thought about refinancing, but 1/3 of my loans are at that killer 7.9%, so maybe I should.

[Johann]

You should refinance asap.

[Anonymous User]

Debt: Started at $212k, now at $171k
Salary: $92k right now, about to switch jobs and new salary will be $145k
Payments: $2100ish/mo, with all extra going to 7.9% interest loans (which make up the bulk of my debt)
Plan: 25 year repayment
Currently in low COL market, moving to a high COL market for the new job. Want to pay off loans as quickly as possible, but a little bit worried with starting a new job that I might hate it and want to switch to a lower-paying public interest or government job and use PSLF.

[XxSpyKEx]

Debt: Started at $212k, now at $171k
Salary: $92k right now, about to switch jobs and new salary will be $145k
Payments: $2100ish/mo, with all extra going to 7.9% interest loans (which make up the bulk of my debt)
Plan: 25 year repayment
Currently in low COL market, moving to a high COL market for the new job. Want to pay off loans as quickly as possible, but a little bit worried with starting a new job that I might hate it and want to switch to a lower-paying public interest or government job and use PSLF.

Might be worth putting some thought into what you want to do. If you decide you want to switch to a PSLF qualifying job, you might as well repay as little as possible. Just use PAYE and/or forbearance, and toss all your money into savings. When you're at the PSLF job, make min payments with PAYE, get the loans forgiven after 10 years, and enjoy a really early retirement with all the money you saved by not repaying your student loans (and the interest that money accrued across a decade or two)

[Johann]

Debt: Started at $212k, now at $171k
Salary: $92k right now, about to switch jobs and new salary will be $145k
Payments: $2100ish/mo, with all extra going to 7.9% interest loans (which make up the bulk of my debt)
Plan: 25 year repayment
Currently in low COL market, moving to a high COL market for the new job. Want to pay off loans as quickly as possible, but a little bit worried with starting a new job that I might hate it and want to switch to a lower-paying public interest or government job and use PSLF.

Might be worth putting some thought into what you want to do. If you decide you want to switch to a PSLF qualifying job, you might as well repay as little as possible. Just use PAYE and/or forbearance, and toss all your money into savings. When you're at the PSLF job, make min payments with PAYE, get the loans forgiven after 10 years, and enjoy a really early retirement with all the money you saved by not repaying your student loans (and the interest that money accrued across a decade or two)

I agree with this. Based on a 25 year repayment plan, if you might be joining public sector in the next 5 years, this is a good option. Stop throwing so much at the debt and ride out that PAYE. Keep your money in savings or investments so that if it's clear you won't be going PSLF, you can just pay down a lot of debt in a chunk.

[Anonymous User]

Debt: Started at $212k, now at $171k
Salary: $92k right now, about to switch jobs and new salary will be $145k
Payments: $2100ish/mo, with all extra going to 7.9% interest loans (which make up the bulk of my debt)
Plan: 25 year repayment
Currently in low COL market, moving to a high COL market for the new job. Want to pay off loans as quickly as possible, but a little bit worried with starting a new job that I might hate it and want to switch to a lower-paying public interest or government job and use PSLF.

Might be worth putting some thought into what you want to do. If you decide you want to switch to a PSLF qualifying job, you might as well repay as little as possible. Just use PAYE and/or forbearance, and toss all your money into savings. When you're at the PSLF job, make min payments with PAYE, get the loans forgiven after 10 years, and enjoy a really early retirement with all the money you saved by not repaying your student loans (and the interest that money accrued across a decade or two)

I agree with this. Based on a 25 year repayment plan, if you might be joining public sector in the next 5 years, this is a good option. Stop throwing so much at the debt and ride out that PAYE. Keep your money in savings or investments so that if it's clear you won't be going PSLF, you can just pay down a lot of debt in a chunk.

Thanks to both of you -- that makes sense. If I get to the new job and love it and see myself staying for a good long while, should I look into refinancing? Or just throw everything at loans so I at least still have the option of PAYE if things go awry? The new job has huge bonus potential, so there a good chance I could have them paid off in 3-4 years.

[Johann]

If you can pay off within 4 years, I'd save the money for probably about 6-8 months, and if you like it then, try to refinance. But just because you "can" pay something down in 3-4 years doesn't make it smart. If you like the job and are very confident you will be in it for 10 years, pay down the debt aggressively and refinance after about the 8 month mark or 1 year mark (to make sure you like your job). If you are not confident you will be in this job for 10 years and there's a real chance you'll go to PSLF eligible jobs, then don't pay the debt down aggressively or refinance.

consider the situation where you stay in this job for 5 years, and then go PSLF:

Based on $145k salary you are looking at yearly payments of $12k under PAYE. I'd lock in PAYE right now for monthly payments of like $500 for the next year. If salary goes up, you may be looking at $15-20k in payments a year - or $25k a year based on your 25 year repayment if you get kicked off PAYE because of salary exceeding debt. PAYE is based on tax return so you are always paying based on last year's salary (another huge benefit that people overlook). I'd estimate you pay around $80k over the next 5 years.

If you pay down the 171k over the next 5 years, you just blew like 210k. That's 210k spent compared to 80k.

Then if you take a PSLF job the 80k would be like another 10k of payments under PAYE a year (assuming average $100k salary) * 10 years for forgiveness equals $100k. Thats $180k total payments spread out over 15 years instead of $210k over 5 years. Huge difference. If you take a PSLF job earlier into the 5 years, the results are even more drastic.

Go on PAYE right now, stack your money in conservative investments or even just a bank CD, if you love your job and see yourself there for the long haul or at least in the private sector for the long haul, refinance onto 10 year plan and throw a chunk of your savings youve been accumulating at the loan.