Student loan payments: get advice and actual numbers here Forum

[XxSpyKEx]

well it started as a not-serious response to someone who didn't want to leave his money to his kids in trusts as a way of escaping tax bomb. yes, it is just blowing your money in a slightly more refined and gradual way than blow and hookers - but yeah blow and hookers is the same. I ran with the example because hey I'm sure some people holding a couple hundred grand would feel good knowing that everything you buy is 42% off that year.

Well, the new cars would need to be sold to pay taxes (assuming they don't exceed the amount of your taxes). Hookers and blow would be 100% free that year lol, since the federal government would've taken all your assets (as taxes) anyways.

[A. Nony Mouse]

Why do people choose IBR over PAYE if they qualify for both? Seems like that's the case for a few, if not many. I must be missing something.

The only difference I know of is that PAYE only applies to Direct Loans, whereas IBR can apply to Stafford loans as well. But if you were a new borrower as of July 2014, the terms for IBR are the same as the terms for PAYE, so no difference.

PAYE applies to all Stafford loans. PAYE does not apply to FEEL loans or consolidation loans, or PLUS loans to parents (but IBR doesn't cover these PLUS loans either).

PAYE is 20 years versus 25 years and payments are 10% of your discretionary income rather than 15% of your discretionary income.

There is no reason to my knowledge to choose IBR of you qualify for PAYE (unless you plan to payoff your loans and don't care about the size of your payments or term of forgiveness - in which case you should probably refi).

Late, but the point I was trying to make is that I don't think you can even pick IBR over PAYE, in the sense that IBR is worse than PAYE (20 v. 25 and 10 v. 15). There's PAYE, or if you don't qualify because you're not a new borrower, there's a new version of IBR that has the same terms as PAYE, but covers the loans that PAYE doesn't cover (I should have said FFEL, but some of those are labeled Stafford loans).

[Anonymous User]

My situation:

Current Debt - $44,000; minimum monthly payment $700, but I've paid ahead and have around a 6 month cushion
Income - $140,000 ($185,000 w/ wife's income included)
Family situation - Married w/ kid on the way (wife is a teacher and will take at least one year off with the kid)
Other relevant information - I hate my biglaw job and want out ASAP....except I have a kid on the way and a mortgage to pay. Every little bit of $ freed up is a good thing. Goal is to go in-house. I'm pretty risk adverse right now since I got to provide for my family.

SoFi is offering 5.00% for a 10 year term which will lower my payment by ~$240/month. Go for it? TYIA.

[Anastasia Dee Dualla]

My situation:

Current Debt - $44,000; minimum monthly payment $700, but I've paid ahead and have around a 6 month cushion
Income - $140,000 ($185,000 w/ wife's income included)
Family situation - Married w/ kid on the way (wife is a teacher and will take at least one year off with the kid)
Other relevant information - I hate my biglaw job and want out ASAP....except I have a kid on the way and a mortgage to pay. Every little bit of $ freed up is a good thing. Goal is to go in-house. I'm pretty risk adverse right now since I got to provide for my family.

SoFi is offering 5.00% for a 10 year term which will lower my payment by ~$240/month. Go for it? TYIA.

Did you check out the DRB rate? They are sometimes a little bit lower. If not, I would pull the trigger. (Disclaimer: I refinanced with SoFi.)

[JenDarby]

My situation:

Current Debt - $44,000; minimum monthly payment $700, but I've paid ahead and have around a 6 month cushion
Income - $140,000 ($185,000 w/ wife's income included)
Family situation - Married w/ kid on the way (wife is a teacher and will take at least one year off with the kid)
Other relevant information - I hate my biglaw job and want out ASAP....except I have a kid on the way and a mortgage to pay. Every little bit of $ freed up is a good thing. Goal is to go in-house. I'm pretty risk adverse right now since I got to provide for my family.

SoFi is offering 5.00% for a 10 year term which will lower my payment by ~$240/month. Go for it? TYIA.

With that little of debt I would take the lower rate variable and pay off asap, personally. If that doesn't interest you then ABSOLUTELY take the fixed rate and pay it down as quickly as you can.

[XxSpyKEx]

My situation:

Current Debt - $44,000; minimum monthly payment $700, but I've paid ahead and have around a 6 month cushion
Income - $140,000 ($185,000 w/ wife's income included)
Family situation - Married w/ kid on the way (wife is a teacher and will take at least one year off with the kid)
Other relevant information - I hate my biglaw job and want out ASAP....except I have a kid on the way and a mortgage to pay. Every little bit of $ freed up is a good thing. Goal is to go in-house. I'm pretty risk adverse right now since I got to provide for my family.

SoFi is offering 5.00% for a 10 year term which will lower my payment by ~$240/month. Go for it? TYIA.

With that little of debt I would take the lower rate variable and pay off asap, personally. If that doesn't interest you then ABSOLUTELY take the fixed rate and pay it down as quickly as you can.

+1. Economically speaking, at 5% it probably makes more sense to ride that out for 10 years (since you'll most likely make more by investing). But $44k is basically like a new car, so I'd just repay that shit immediately to avoid the hassle of making the monthly payments.

[Anonymous User]

Debt: 44K in fed loans from undergrad (11.5K subsidized, 32.5K unsubsidized). Not taking out loans for law school (so far).
Salary: No salary - 1L here. Full tuition scholly + 14K/yr stipend.

Looking for advice about whether I should refinance my unsubsidized fed loans. Govt is paying interest on subsidized loans while I'm in school, so they're in good shape for the time being. The unsubsidized have fixed rates between 5.4 and 6.8, and they're accumulating interest. Because the unsubsidized loans are fed, no payment is required until 2017 - but I've been paying on them each month, around $315. Maybe half of the $315 pays off the month's accumulated interest; the other half bites into the principal.

Other details: I've got a good credit score, around 780 (I assume this is helpful for refinancing?), but I don't have a true annual income, so my income/debt ratio looks very bad. I have a SA lined up where I'll make $20K pretax in medium COL market this summer. I don't think big law is for me longterm, but I imagine I'll end up there again next summer. I like the security of not having to pay on the loans through 2017 (should something go terribly wrong or should I decide to jump ship for PI). But if I can save enough money on lower interest rates to make giving that up worthwhile, I'd like to do it, even though I'm generally risk-averse. Does this make sense? Or am I jumping the gun/taking on too much?

Edit: I'd like to stay away from variable interest rates. (see above, re: me being risk-averse)
Edit #2: Different poster here than other guy w/ 44K debt above. Sorry for any confusion.

[Johann]

You're gonna end up paying the whole thing no matter what - whether you go PI, govt etc. No salary is low enough to not pay that pay back. Just try and pay down the loans with your SA money that are not subsidized. You're fine though. Just chill. I don't think youll get a good refi rate, so just focus on the unsubsidized.

[Anonymous User]

You're gonna end up paying the whole thing no matter what - whether you go PI, govt etc. No salary is low enough to not pay that pay back. Just try and pay down the loans with your SA money that are not subsidized. You're fine though. Just chill. I don't think youll get a good refi rate, so just focus on the unsubsidized.

Anon poster from above here. Yes, you're absolutely right that the money is going to get paid off. Rereading my post, I realize I came off a bit alarmist. I'm definitely in a great position and feel very fortunate.

Re: the likelihood of my not getting a good refi rate; I was wondering about that. Thanks for the input.

[Johann]

You're gonna end up paying the whole thing no matter what - whether you go PI, govt etc. No salary is low enough to not pay that pay back. Just try and pay down the loans with your SA money that are not subsidized. You're fine though. Just chill. I don't think youll get a good refi rate, so just focus on the unsubsidized.

Anon poster from above here. Yes, you're absolutely right that the money is going to get paid off. Rereading my post, I realize I came off a bit alarmist. I'm definitely in a great position and feel very fortunate.

Re: the likelihood of my not getting a good refi rate; I was wondering about that. Thanks for the input.

I mean you should still shop around after 1l year when you have time. I don't know and someone might beat the govt. I'm just guessing.

[Anonymous User]

My situation:

Current Debt - $44,000; minimum monthly payment $700, but I've paid ahead and have around a 6 month cushion
Income - $140,000 ($185,000 w/ wife's income included)
Family situation - Married w/ kid on the way (wife is a teacher and will take at least one year off with the kid)
Other relevant information - I hate my biglaw job and want out ASAP....except I have a kid on the way and a mortgage to pay. Every little bit of $ freed up is a good thing. Goal is to go in-house. I'm pretty risk adverse right now since I got to provide for my family.

SoFi is offering 5.00% for a 10 year term which will lower my payment by ~$240/month. Go for it? TYIA.

With that little of debt I would take the lower rate variable and pay off asap, personally. If that doesn't interest you then ABSOLUTELY take the fixed rate and pay it down as quickly as you can.

+1. Economically speaking, at 5% it probably makes more sense to ride that out for 10 years (since you'll most likely make more by investing). But $44k is basically like a new car, so I'd just repay that shit immediately to avoid the hassle of making the monthly payments.

Thanks. Paying down quickly would be an option if our household income wasn't going to take a likely 60-70k haircut (wife staying at home w/ kid and me getting the heck out of my firm). I'll lock in the 5% and pay as much as feasible under the changing circumstances.

[Johann]

I bet you could get a whole % less if you do a 5 year. Even more if you do 5 year variable. With your current SoFi rate, you are paying $55.2k over 10 years. If you pay it over 5 years at 3.75% interest (which you should easily be able to get) you are looking at $800/month payment and paying $48.3k total. This basically keeps your payment the same and clears the debt in half the time. Scrounging up $100 extra bucks a month shouldnt be that hard. With your wife staying at home you should be able to find some way to save an extra $100 a month.

Edit - actually, you'll be within the threshold for student loan interest deduction. I'd prolly take the 10 year sofi rate since you're getting a third off on your interest payments. And invest/keep the rest on hand.

[Anonymous User]

MFH COL is a joke. Here I am sitting on $25k in cash, ready to wipe out a third of my loans, but instead of paying off debt, earning a huge return and feeling free, I'm stuck earning next to nothing because my emergency fund isn't quite at 6-months' expenses. /vent

[Tiago Splitter]

MFH COL is a joke. Here I am sitting on $25k in cash, ready to wipe out a third of my loans, but instead of paying off debt, earning a huge return and feeling free, I'm stuck earning next to nothing because my emergency fund isn't quite at 6-months' expenses. /vent

Six months of expenses in pure cash is really high unless you have terrible job security and minimal prospects if you do lose you job.

[Anonymous User]

MFH COL is a joke. Here I am sitting on $25k in cash, ready to wipe out a third of my loans, but instead of paying off debt, earning a huge return and feeling free, I'm stuck earning next to nothing because my emergency fund isn't quite at 6-months' expenses. /vent

Six months of expenses in pure cash is really high unless you have terrible job security and minimal prospects if you do lose you job.

I've always heard 3-6 months is the rule of thumb for emergency funds, and considering biglaw has notoriously low job security, I'm gonna stick on the safer side of that.

But it's not sitting under the mattress; most is in high yield savings.

[XxSpyKEx]

MFH COL is a joke. Here I am sitting on $25k in cash, ready to wipe out a third of my loans, but instead of paying off debt, earning a huge return and feeling free, I'm stuck earning next to nothing because my emergency fund isn't quite at 6-months' expenses. /vent

Six months of expenses in pure cash is really high unless you have terrible job security and minimal prospects if you do lose you job.

I've always heard 3-6 months is the rule of thumb for emergency funds, and considering biglaw has notoriously low job security, I'm gonna stick on the safer side of that.

But it's not sitting under the mattress; most is in high yield savings.

You need $4166 per month and for 6 months? No idea what MFH is, but $4,166 per month is pretty ridiculous for an unemployed person even in a place like NY. Not to mention you'd get an unemployment check on top of that, so it's more like $5,500-5,600 per month. I would highly recommend considering downgrading your lifestyle a bit if you get canned from biglaw.

[AreJay711]

Yeah, I think the 6 month rule is for necessities. Obviously, you should throw your loans into forbearance and not go out to nice restaurants if you get canned.

[Anonymous User]

MFH COL is a joke. Here I am sitting on $25k in cash, ready to wipe out a third of my loans, but instead of paying off debt, earning a huge return and feeling free, I'm stuck earning next to nothing because my emergency fund isn't quite at 6-months' expenses. /vent

Six months of expenses in pure cash is really high unless you have terrible job security and minimal prospects if you do lose you job.

I've always heard 3-6 months is the rule of thumb for emergency funds, and considering biglaw has notoriously low job security, I'm gonna stick on the safer side of that.

But it's not sitting under the mattress; most is in high yield savings.

You need $4166 per month and for 6 months? No idea what MFH is, but $4,166 per month is pretty ridiculous for an unemployed person even in a place like NY. Not to mention you'd get an unemployment check on top of that, so it's more like $5,500-5,600 per month. I would highly recommend considering downgrading your lifestyle a bit if you get canned from biglaw.

I know people with ~700 sf apartments with rent about $4166. Mine's about 2500 but is going up 10% with rent increases.

That's why I'm complaining about MFH COL. It's nuts. It's impossible to find a decent apartment (500 or more sf, within 1 hr of the MFH office) for less than 2k.

[lhanvt13]

I'll have around 220k debt when I graduate. Would it be better to ask my wife for assistance in repaying so I can pay off ASAP or should I just ride out min payments and take the tax bomb? Sorry, I don't know anything about taxes or loan repayments... Our combined income will be ~ 375k.

[Tiago Splitter]

I'll have around 220k debt when I graduate. Would it be better to ask my wife for assistance in repaying so I can pay off ASAP or should I just ride out min payments and take the tax bomb? Sorry, I don't know anything about taxes or loan repayments... Our combined income will be ~ 375k.

You're going to get crushed on PAYE (and may not even qualify) unless you file separately which may not even work depending your situation. Assuming you have no intention of going into government or non-profit work you're probably best off just refinancing to get the lowest rate possible.

[Anonymous User]

Three questions:

1. Is the compounding difference for private vs. fed loans? If so, how does a 4.75% fixed rate 10-year DRB loan compare with a 6.5% fixed rate 10-year federal loan?

2. Assuming that DRB and SoFi offer the same interest rates (e.g., 3% for a 5-year variable rate loan), is there any advantage to taking one over the other? DRB uses the 3-month LIBOR while SoFi uses the 1-month LIBOR...so that favors DRB, right? (At least if we are assuming that the LIBOR is likely to rise over the next 5 years?) Any other advantages/disadvantages?

3. Any general feels about when variable makes sense over fixed? It should be a pretty easy calculation for someone who has a guess about when and how high LIBOR will rise. E.g., is variable worth a 1% premium (e.g., a 3% interest rate instead of 4% interest rate) over a 5-year repayment? Specifically, I'm looking at a 1.3% premium over about 2.5 years (I'm planning on paying down the loans more quickly) -- thoughts about how likely it is that LIBOR will rise ~2% over the next 2-3 years? Obviously this is an individual decision based on risk tolerance, but it'd be good to hear from some of the more finance-knowledgeable folks here with guesses about what the LIBOR is likely to do over the next couple years. I know my risk tolerance but don't have a good sense of how much risk variable actually entails in the current economic climate.

Bump.

[XxSpyKEx]

I know people with ~700 sf apartments with rent about $4166. Mine's about 2500 but is going up 10% with rent increases.

That's why I'm complaining about MFH COL. It's nuts. It's impossible to find a decent apartment (500 or more sf, within 1 hr of the MFH office) for less than 2k.

Well, most people would move to a not $2,500 month apartment and wouldn't blow another $3,000-3,100 per month on eating out and bullshit when they're unemployed. (Your budget seems to be $5,500-5,600 per month, including unemployment, for 6 months, which is kind of ridiculous for an unemployed person.)

[JenDarby]

I know people with ~700 sf apartments with rent about $4166. Mine's about 2500 but is going up 10% with rent increases.

That's why I'm complaining about MFH COL. It's nuts. It's impossible to find a decent apartment (500 or more sf, within 1 hr of the MFH office) for less than 2k.

Well, most people would move to a not $2,500 month apartment and wouldn't blow another $3,000-3,100 per month on eating out and bullshit when they're unemployed. (Your budget seems to be $5,500-5,600 per month, including unemployment, for 6 months, which is kind of ridiculous for an unemployed person.)

Its really hard to find a decent studio in the city for even $1600, and he may be married and/or have kids. You can of course move outside of NYC, but it's not always THAT much cheaper. not to mention if you are in a lease then you would have to pay whatever lease breaking fee.

[Johann]

I'll have around 220k debt when I graduate. Would it be better to ask my wife for assistance in repaying so I can pay off ASAP or should I just ride out min payments and take the tax bomb? Sorry, I don't know anything about taxes or loan repayments... Our combined income will be ~ 375k.

uhhhhhhh you would never have a tax bomb in this situation...

[lacrossebrother]

Three questions:

1. Is the compounding difference for private vs. fed loans? If so, how does a 4.75% fixed rate 10-year DRB loan compare with a 6.5% fixed rate 10-year federal loan?

2. Assuming that DRB and SoFi offer the same interest rates (e.g., 3% for a 5-year variable rate loan), is there any advantage to taking one over the other? DRB uses the 3-month LIBOR while SoFi uses the 1-month LIBOR...so that favors DRB, right? (At least if we are assuming that the LIBOR is likely to rise over the next 5 years?) Any other advantages/disadvantages?

3. Any general feels about when variable makes sense over fixed? It should be a pretty easy calculation for someone who has a guess about when and how high LIBOR will rise. E.g., is variable worth a 1% premium (e.g., a 3% interest rate instead of 4% interest rate) over a 5-year repayment? Specifically, I'm looking at a 1.3% premium over about 2.5 years (I'm planning on paying down the loans more quickly) -- thoughts about how likely it is that LIBOR will rise ~2% over the next 2-3 years? Obviously this is an individual decision based on risk tolerance, but it'd be good to hear from some of the more finance-knowledgeable folks here with guesses about what the LIBOR is likely to do over the next couple years. I know my risk tolerance but don't have a good sense of how much risk variable actually entails in the current economic climate.

Bump.

1. as far i can tell, the compounding is the same. federal is def. just once a year. i mean you should be able to compare APR apples-apples. the difference comes into effect in favor of federal if you don't pay at least the interest. in that case, the extra interest on a federal interest doesn't count as a new loan i.e. they're not charging you 6.5%, or anything, on that amount each year.
2. again, not totally sure, but conceptually, this shouldn't matter all, and your reasoning is off. the 1 month libor & 3 month libor pretty much move in unison. they're published everyday.
3. nobody can know. the people in the best position to know, the bankers setting the rates, are quoting you rates where they're indifferent between the two. i'm definitely not a proponent of a strong efficient market hypothesis...but trying to time the market on fucking interest rates is probably impossible. and you're not exactly liquid in your position here...to the extent that you probably value the bit of extra cash today more than you will 8 years from now, i'd say just sack up and take the variable. but doing fixed and rooting for the world to burn and inflate away your loans might be more fun.

or you can just play, "do i think this 5.5% unemployment number is real game." Latest jobs report suggested it's kind of bullshit. But it's not conclusive. If you were Yellen, do you think that ALL THIS EMPLOYMENT means there's gonna be inflation? Either way, it's going to be more fun if you pick for yourself