Student loan payments: get advice and actual numbers here Forum

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blair.waldorf

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Re: Student loan payments: get advice and actual numbers here

Post by blair.waldorf » Wed Aug 19, 2020 5:49 pm

The Lsat Airbender wrote:
Wed Aug 19, 2020 2:19 pm
Anonymous User wrote:
Wed Aug 19, 2020 1:40 pm
3L here. Yearly tuition after aid = $28k. My spouse works in a relatively low-income job and just barely covers our living expenses during law school.
Debt load: I just paid off my accumulated 7.2% interest loans ($42k total) from 1L and 2L. No undergraduate loans as I paid those off when I worked before law school. I have an after-aid $13.5k tuition bill for the next two semesters.
IRA: ~18k
Cash on hand: 20k
Taxable investments in brokerage account: 16k (I recently liquidated $42k to pay off my 1L/2L loans).

I have accepted a biglaw job in a major market for next year. I've been thinking about taking an interest-free loan to cover tuition for this fall. On Jan 1, I can withdraw my IRA proceeds penalty-free to pay for Spring tuition, and pay off the interest-free loan out of pocket. By delaying my IRA withdrawal, I defer having to pay the tax on that income until 2021. Am I an idiot to do this? I know the conventional wisdom is to not touch the IRA money, but it'd be great to get out of school debt-free.
"Debt-free" is nice psychologically but it's not worth ransacking your savings for (unless the interest is crazy high). The numbers that matter most are liquid assets, in the short term, and net worth, in the medium/long term. You're harming both here.

Definitely leave the money in the IRA. Its long-term value is much higher there (better long-term returns and it's tax-advantages). That money is sacred until you retire. Even drawing down the taxable account is negative RoI, reduces your liquidity, and probably is tax-inefficient to boot.

eta: Interest-free loan? That's a free lunch. Don't throw free lunch in the garbage.
Also, in this economy, you really can’t have too much cash accessible. I don’t want to scare you, OP, because the likelihood of this happening is probably low, but there’s definitely a chance that biglaw firms defer incoming associates next fall and/or rescind offers they have to their summers. We just don’t know the extent of coronavirus economic damage yet. Anything could happen. If worst comes to worst, you can defer your student loan payments. You can’t make cash appear out of thin air.

Take out the loans for tuition and don’t worry about it. You are barely going to have any debt.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Thu Aug 20, 2020 5:05 pm

If I'm going to refinance, what's the argument against taking the variable rate?

I'm a year into BigLaw; I already refinanced my ~200k debt last year (at a fixed rate) when I graduated law school. My credit score is better and I'm considering refinancing the remaining ~170k (because why not?). The rate is far lower if I choose a variable loan. If I don't mind the "uncertainty" of knowing what my monthly payments are (as I'm aggressively paying off loans anyway), is there any reason not to? The classic catch seems to be that "rates can increase" and to "go with fixed if you plan to take a while to pay off the debt [because rates can increase over time]". Could I not just refinance with a different company (at a fixed rate) if rates were to increase? Is the only "catch" that if the industry at large were to increase their rates, then all other refinancing companies at that time would also only be offering similarly higher rates (even if I were to refinance at that point with a fixed rate)?

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Thu Aug 20, 2020 6:37 pm

Anonymous User wrote:
Thu Aug 20, 2020 5:05 pm
If I'm going to refinance, what's the argument against taking the variable rate?

I'm a year into BigLaw; I already refinanced my ~200k debt last year (at a fixed rate) when I graduated law school. My credit score is better and I'm considering refinancing the remaining ~170k (because why not?). The rate is far lower if I choose a variable loan. If I don't mind the "uncertainty" of knowing what my monthly payments are (as I'm aggressively paying off loans anyway), is there any reason not to? The classic catch seems to be that "rates can increase" and to "go with fixed if you plan to take a while to pay off the debt [because rates can increase over time]". Could I not just refinance with a different company (at a fixed rate) if rates were to increase? Is the only "catch" that if the industry at large were to increase their rates, then all other refinancing companies at that time would also only be offering similarly higher rates (even if I were to refinance at that point with a fixed rate)?
Refinancing rates for all providers are very closely tied to the federal funds rate (set by the federal reserve) and if that rate is increased, there is no gap where you could refinance your now higher variable rate at a still-low fixed rate. There's no gotcha -- there's added risk with a variable rate and you receive a lower initial rate because of it.

That being said, it seems unlikely this federal reserve will be increasing this rate anytime soon. I'm also not really sure it makes financial sense to prepay a 3% interest rate loan but if it brings you peace of mind, all the power to you.

One risk I haven't seen discussed is if congress pushes to make private student loan debt discharagable in bankruptcy, I could see private providers significantly increase their variable and non-variable rates in the short-term to account for the new added risk.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Thu Aug 20, 2020 7:17 pm

Anonymous User wrote:
Thu Aug 20, 2020 6:37 pm
Anonymous User wrote:
Thu Aug 20, 2020 5:05 pm
If I'm going to refinance, what's the argument against taking the variable rate?

I'm a year into BigLaw; I already refinanced my ~200k debt last year (at a fixed rate) when I graduated law school. My credit score is better and I'm considering refinancing the remaining ~170k (because why not?). The rate is far lower if I choose a variable loan. If I don't mind the "uncertainty" of knowing what my monthly payments are (as I'm aggressively paying off loans anyway), is there any reason not to? The classic catch seems to be that "rates can increase" and to "go with fixed if you plan to take a while to pay off the debt [because rates can increase over time]". Could I not just refinance with a different company (at a fixed rate) if rates were to increase? Is the only "catch" that if the industry at large were to increase their rates, then all other refinancing companies at that time would also only be offering similarly higher rates (even if I were to refinance at that point with a fixed rate)?
Refinancing rates for all providers are very closely tied to the federal funds rate (set by the federal reserve) and if that rate is increased, there is no gap where you could refinance your now higher variable rate at a still-low fixed rate. There's no gotcha -- there's added risk with a variable rate and you receive a lower initial rate because of it.

That being said, it seems unlikely this federal reserve will be increasing this rate anytime soon. I'm also not really sure it makes financial sense to prepay a 3% interest rate loan but if it brings you peace of mind, all the power to you.

One risk I haven't seen discussed is if congress pushes to make private student loan debt discharagable in bankruptcy, I could see private providers significantly increase their variable and non-variable rates in the short-term to account for the new added risk.
I'm this original Anon. Thank you for your insight.

Are you saying that, for example, if we take as a given that the current variable rate that I'm being offered is 3% and the current fixed rate that I'm being offered is 4%, then in three years if my variable rate were to rise by two points to 5%, then the fixed rates that I would be offered if I were to refinance at that time (assuming no change in credit score) would be somewhere quite close to 6%?

Separately - are you thinking of that discharge-in-bankruptcy effect as something that would only affect people that affirmatively refinance in the future, or do you think that would also affect somebody with an existing refinanced variable rate loan? I'm not sure whether these companies' (Earnest, SoFi, etc) variable rates are only variable to the extent that the federal funds rate changes, or whether they also vary their margin on existing variable rate loans.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Thu Aug 20, 2020 11:20 pm

Anonymous User wrote:
Thu Aug 20, 2020 7:17 pm
Anonymous User wrote:
Thu Aug 20, 2020 6:37 pm
Anonymous User wrote:
Thu Aug 20, 2020 5:05 pm
If I'm going to refinance, what's the argument against taking the variable rate?

I'm a year into BigLaw; I already refinanced my ~200k debt last year (at a fixed rate) when I graduated law school. My credit score is better and I'm considering refinancing the remaining ~170k (because why not?). The rate is far lower if I choose a variable loan. If I don't mind the "uncertainty" of knowing what my monthly payments are (as I'm aggressively paying off loans anyway), is there any reason not to? The classic catch seems to be that "rates can increase" and to "go with fixed if you plan to take a while to pay off the debt [because rates can increase over time]". Could I not just refinance with a different company (at a fixed rate) if rates were to increase? Is the only "catch" that if the industry at large were to increase their rates, then all other refinancing companies at that time would also only be offering similarly higher rates (even if I were to refinance at that point with a fixed rate)?
Refinancing rates for all providers are very closely tied to the federal funds rate (set by the federal reserve) and if that rate is increased, there is no gap where you could refinance your now higher variable rate at a still-low fixed rate. There's no gotcha -- there's added risk with a variable rate and you receive a lower initial rate because of it.

That being said, it seems unlikely this federal reserve will be increasing this rate anytime soon. I'm also not really sure it makes financial sense to prepay a 3% interest rate loan but if it brings you peace of mind, all the power to you.

One risk I haven't seen discussed is if congress pushes to make private student loan debt discharagable in bankruptcy, I could see private providers significantly increase their variable and non-variable rates in the short-term to account for the new added risk.
I'm this original Anon. Thank you for your insight.

Are you saying that, for example, if we take as a given that the current variable rate that I'm being offered is 3% and the current fixed rate that I'm being offered is 4%, then in three years if my variable rate were to rise by two points to 5%, then the fixed rates that I would be offered if I were to refinance at that time (assuming no change in credit score) would be somewhere quite close to 6%?

Separately - are you thinking of that discharge-in-bankruptcy effect as something that would only affect people that affirmatively refinance in the future, or do you think that would also affect somebody with an existing refinanced variable rate loan? I'm not sure whether these companies' (Earnest, SoFi, etc) variable rates are only variable to the extent that the federal funds rate changes, or whether they also vary their margin on existing variable rate loans.
Yes, basically. I have pretty high doubts that rates will increase much in the next two-three years but once you start projecting further than that, things become more uncertain.

I haven't looked at variable rate terms from private student loan entities closely but I would be fairly surprised if they would not be permitted to be increase based on legal changes to the bankruptcy code.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Wed Aug 26, 2020 10:02 pm

Looking for some advice on a second refinancing of my loans. I started big law with $122,000, and had refinanced with Earnest at 3.89%. I'm down to $55,000 now and my current schedule has me repaying that in the next 14ish months (assuming clerkship bonuses remain a thing...).

I was looking at the options to refinance this again, and Earnest seems to be offering a 1.99% variable rate and a 2.98% fixed rate (with the monthly payments for the shortest 5-year loans being essentially identical to what my current minimum payment is, so no change there). It's nothing massive, but seems like either would save me at least a couple hundred dollars in interest, if not more. I admittedly know very little about LIBOR rates or how this stuff generally goes historically, so figured I should check here to see if there was any serious risk for me going with that variable rate given the short time frame I'm planning on paying the rest of my loans in.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Tue Nov 24, 2020 3:33 pm

Class of 2019 grad checking in 13 months into biglaw:

Status when starting work:
-$0 assets/savings
-$10k credit card debt
-$200k student loans
Net worth: $-210,000

Status now, 13 months later:
-no credit card debt
-$24.5k retirement investments (401k/IRA/HSA)
-$59k fully liquid emergency fund (far too much)
-176k student loans
Net worth: $-92,500

I refinanced 3 weeks into my job on a 7-year, 4.75% fixed rate at SoFi, paying $2900 a month (of which about ~$750 went to interest). I just refinanced again with Earnest to a 5-year, 2.5% variable rate, paying $3100 a month.

I built up my emergency fund so high because I was bearish on my job security/the market, but I'm now far past the point where I need to decide how aggressively I'll prepay my debt -- which I'll be paying off pretty aggressively on Earnest's 5-year schedule, anyway -- versus invest in the market. In either case, I'm also not sure how many months' expenses I'll need to leave in my emergency fund. I think that I could affirmatively refinance to a lower monthly payment if I were to be laid off, but someone else please chime in if that seems incorrect.

My firm offers the ability to do an additional $37k annually in post-tax contributions to my 401k, which I would utilize if I were to invest.

I've been living pretty frugally and am proud of the difference in net worth, even if it doesn't feel like I've made a sizeable dent in the loans yet. I'm praying that I don't get laid off and can keep up this clip for another year or two and get myself in a decent financial position. I took a half ride at a T6 versus a full ride at a lower T14 and part of me regrets it every day, though perhaps I'll feel differently in five years.

lomp123

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Re: Student loan payments: get advice and actual numbers here

Post by lomp123 » Sat Dec 05, 2020 4:29 pm

As a 2020 grad, is there any reason to refinance while federal loan payments are still deferred? To be honest, I’m not following the situation as closely as I should be, but as long my federal student loans aren’t accruing interest I don’t see why I should refinance (in which case they would start accruing interest).

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Definitely Not North

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Re: Student loan payments: get advice and actual numbers here

Post by Definitely Not North » Sat Dec 05, 2020 10:52 pm

lomp123 wrote:
Sat Dec 05, 2020 4:29 pm
As a 2020 grad, is there any reason to refinance while federal loan payments are still deferred? To be honest, I’m not following the situation as closely as I should be, but as long my federal student loans aren’t accruing interest I don’t see why I should refinance (in which case they would start accruing interest).
Idk why you would want to pay to have the opportunity to pay for something you’re currently getting for free

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Whatislaw

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Re: Student loan payments: get advice and actual numbers here

Post by Whatislaw » Sun Dec 06, 2020 3:02 am

The answer is an definite no. Also, refinancing is not always the option for everyone and this recent year of deferrals is a great example of benefit of not refinancing.

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Re: Student loan payments: get advice and actual numbers here

Post by sparty99 » Sun Dec 06, 2020 4:42 pm

Anonymous User wrote:
Tue Nov 24, 2020 3:33 pm
Class of 2019 grad checking in 13 months into biglaw:

Status when starting work:
-$0 assets/savings
-$10k credit card debt
-$200k student loans
Net worth: $-210,000

Status now, 13 months later:
-no credit card debt
-$24.5k retirement investments (401k/IRA/HSA)
-$59k fully liquid emergency fund (far too much)
-176k student loans
Net worth: $-92,500

I refinanced 3 weeks into my job on a 7-year, 4.75% fixed rate at SoFi, paying $2900 a month (of which about ~$750 went to interest). I just refinanced again with Earnest to a 5-year, 2.5% variable rate, paying $3100 a month.

I built up my emergency fund so high because I was bearish on my job security/the market, but I'm now far past the point where I need to decide how aggressively I'll prepay my debt -- which I'll be paying off pretty aggressively on Earnest's 5-year schedule, anyway -- versus invest in the market. In either case, I'm also not sure how many months' expenses I'll need to leave in my emergency fund. I think that I could affirmatively refinance to a lower monthly payment if I were to be laid off, but someone else please chime in if that seems incorrect.

My firm offers the ability to do an additional $37k annually in post-tax contributions to my 401k, which I would utilize if I were to invest.

I've been living pretty frugally and am proud of the difference in net worth, even if it doesn't feel like I've made a sizeable dent in the loans yet. I'm praying that I don't get laid off and can keep up this clip for another year or two and get myself in a decent financial position. I took a half ride at a T6 versus a full ride at a lower T14 and part of me regrets it every day, though perhaps I'll feel differently in five years.
60k in savings is too much. Especially with the stock market surfing. You are missing out on stock market gains.

showusyourtorts

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Re: Student loan payments: get advice and actual numbers here

Post by showusyourtorts » Sun Dec 06, 2020 6:54 pm

lomp123 wrote:
Sat Dec 05, 2020 4:29 pm
As a 2020 grad, is there any reason to refinance while federal loan payments are still deferred? To be honest, I’m not following the situation as closely as I should be, but as long my federal student loans aren’t accruing interest I don’t see why I should refinance (in which case they would start accruing interest).
I don't see any scenario where I would recommend refinancing while there's still a grace period.

With that said, just to play Devil's Advocate -- the only reason (that I can think of) why you would even consider refinancing right now is to lock in low rates. For example, if you somehow knew that rates were going to skyrocket in early January, then you may be able to lock in a better fixed rate right now (say, 2.5%) than you would in two months (say, 3.5%). But the reality is that interest rates don't move THAT quickly (or even anywhere near that quickly).

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Tue Dec 15, 2020 7:56 pm

Class of 2016, just finished fourth year of biglaw:

At graduation:
$245K student loan debt
-$245K net worth

End of fourth year biglaw:
$0 student loan debt
Approx. $280K net worth

$245K seemed insurmountable at graduation but in hindsight, wasn’t that bad and just required some discipline. I didn’t even live frugally—lived in an expensive apartment until I ultimately bought a house in a high COL area, went on expensive international vacations each year before COVID, and generally didn’t watch my expenses super closely. Obviously market (and sometimes above market) bonuses helped, and these COVID bonuses put me over the top. I would have a lot more money if I didn’t have student loans initially but moral of the story here is biglaw pays a ton of money. Don’t think I would have done anything differently.

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The Lsat Airbender

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Re: Student loan payments: get advice and actual numbers here

Post by The Lsat Airbender » Tue Dec 15, 2020 9:07 pm

Anonymous User wrote:
Tue Dec 15, 2020 7:56 pm
At graduation:
$245K student loan debt
-$245K net worth

End of fourth year biglaw:
$0 student loan debt
Approx. $280K net worth

This is insane. You've been averaging like $125k/year of savings/payments? Would love to see a more detailed schedule so that future generations have something to strive for.

showusyourtorts

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Re: Student loan payments: get advice and actual numbers here

Post by showusyourtorts » Tue Dec 15, 2020 9:37 pm

The Lsat Airbender wrote:
Tue Dec 15, 2020 9:07 pm
Anonymous User wrote:
Tue Dec 15, 2020 7:56 pm
At graduation:
$245K student loan debt
-$245K net worth

End of fourth year biglaw:
$0 student loan debt
Approx. $280K net worth

This is insane. You've been averaging like $125k/year of savings/payments? Would love to see a more detailed schedule so that future generations have something to strive for.
+1. That's absolutely wild. :!: :shock:

Here's my best guess: immediately and repeatedly refinanced to find low, 5-year variable rates. Didn't make a habit of regularly eating out / getting delivery that wasn't comped by work. Made the minimum monthly payments, besides perhaps pouring some bonuses into loans. Invested the balance aggressively in equities and rode the bull run for all it was worth.

However you did it - I'm impressed and would love to hear any good good inspiration you may have to share besides what you already have. Congrats on paying everything off!

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Tue Dec 15, 2020 9:42 pm

Sure. I basically paid $3,150 per month for four years ($152,200), plus threw all of my market bonuses ($7.5K + $15K + $25K + $50K + $65K = $162.5K x .7 take home = $113,750) and my above-market portions ($10K x 3 years . 7 take home = $21K) at them. That comes out to $286,950 I believe, which is about right when you take interest into account.

Summer bonus in 2018, COVID bonus this year, plus monthly extra money went into savings/investments, retirement, and house down payment. Good market returns and appreciating house value in major metro area gets me to the +$280K number.

With regard to refinancing, I immediately refinanced half of them to a very low rate, kept the other half in fed loans (on PAYE) to hedge risk of burning out, and paid the private loans off first. Got lucky and it worked out—had 0% on the fed loans due to COVID for the last 8 months.

Ate out on my own dime 1-2 per week. Took advantage of firm client development budgets to do social activities (sporting events, concerts, fancy dinners) with friends that are business professionals/lawyers.

For vacations always booked the cheapest plane ticket possible, even if it meant a weird connection on a weird airline at a weird time. Traveled a decent amount for work so used a lot of accumulated credit card points to cover a lot of hotels/some plane tickets.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Sat Dec 19, 2020 11:23 pm

Quick (and maybe silly) question: Have about $60k in loans, currently at 5.5% fixed for 10 years (private lender), which is a monthly payment of roughly $640. Going into biglaw and will probably just pay this down as I have spare savings over the coming 1-3 years.

Is there any reason not to refi for a 20-year fixed rate (seeing ~4.8% at sofi, but haven't looked widely yet), which would bring my monthly payment down to roughly $350?

It seems to me that I can just add flexibility into my life while doing this (with the lower payment), while also borrowing money for longer and cheaper than I currently am... Only downside is less forced discipline financially, but I do not worry about that with myself. Apologies if I'm coming at this ignorantly, I just found this forum and am not super literate in this type of thing. Thank you!

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The Lsat Airbender

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Re: Student loan payments: get advice and actual numbers here

Post by The Lsat Airbender » Mon Dec 21, 2020 11:24 am

Only reason not to refi to a low 20-year rate would be if you could get an even lower rate on a shorter-term loan. And even then it's a tradeoff.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Tue Dec 22, 2020 4:59 am

Anonymous User wrote:
Tue Nov 24, 2020 3:33 pm
Class of 2019 grad checking in 13 months into biglaw:

Status when starting work:
-$0 assets/savings
-$10k credit card debt
-$200k student loans
Net worth: $-210,000

Status now, 13 months later:
-no credit card debt
-$24.5k retirement investments (401k/IRA/HSA)
-$59k fully liquid emergency fund (far too much)
-176k student loans
Net worth: $-92,500

I refinanced 3 weeks into my job on a 7-year, 4.75% fixed rate at SoFi, paying $2900 a month (of which about ~$750 went to interest). I just refinanced again with Earnest to a 5-year, 2.5% variable rate, paying $3100 a month.

I built up my emergency fund so high because I was bearish on my job security/the market, but I'm now far past the point where I need to decide how aggressively I'll prepay my debt -- which I'll be paying off pretty aggressively on Earnest's 5-year schedule, anyway -- versus invest in the market. In either case, I'm also not sure how many months' expenses I'll need to leave in my emergency fund. I think that I could affirmatively refinance to a lower monthly payment if I were to be laid off, but someone else please chime in if that seems incorrect.

My firm offers the ability to do an additional $37k annually in post-tax contributions to my 401k, which I would utilize if I were to invest.

I've been living pretty frugally and am proud of the difference in net worth, even if it doesn't feel like I've made a sizeable dent in the loans yet. I'm praying that I don't get laid off and can keep up this clip for another year or two and get myself in a decent financial position. I took a half ride at a T6 versus a full ride at a lower T14 and part of me regrets it every day, though perhaps I'll feel differently in five years.
Anon, how on earth did you pay off/save ~$118K in 13 months? Can you describe your lifestyle/monthly budgeting a bit more?

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Tue Dec 22, 2020 7:02 pm

Anonymous User wrote:
Tue Dec 22, 2020 4:59 am
Anonymous User wrote:
Tue Nov 24, 2020 3:33 pm
Class of 2019 grad checking in 13 months into biglaw:

Status when starting work:
-$0 assets/savings
-$10k credit card debt
-$200k student loans
Net worth: $-210,000

Status now, 13 months later:
-no credit card debt
-$24.5k retirement investments (401k/IRA/HSA)
-$59k fully liquid emergency fund (far too much)
-176k student loans
Net worth: $-92,500

I refinanced 3 weeks into my job on a 7-year, 4.75% fixed rate at SoFi, paying $2900 a month (of which about ~$750 went to interest). I just refinanced again with Earnest to a 5-year, 2.5% variable rate, paying $3100 a month.

I built up my emergency fund so high because I was bearish on my job security/the market, but I'm now far past the point where I need to decide how aggressively I'll prepay my debt -- which I'll be paying off pretty aggressively on Earnest's 5-year schedule, anyway -- versus invest in the market. In either case, I'm also not sure how many months' expenses I'll need to leave in my emergency fund. I think that I could affirmatively refinance to a lower monthly payment if I were to be laid off, but someone else please chime in if that seems incorrect.

My firm offers the ability to do an additional $37k annually in post-tax contributions to my 401k, which I would utilize if I were to invest.

I've been living pretty frugally and am proud of the difference in net worth, even if it doesn't feel like I've made a sizeable dent in the loans yet. I'm praying that I don't get laid off and can keep up this clip for another year or two and get myself in a decent financial position. I took a half ride at a T6 versus a full ride at a lower T14 and part of me regrets it every day, though perhaps I'll feel differently in five years.
Anon, how on earth did you pay off/save ~$118K in 13 months? Can you describe your lifestyle/monthly budgeting a bit more?
Anon here - Sure.

Most/all of this has to do with the fact that I have been living rent-free with my parents since April (and was able to immediately find a subletter at full price). My household expenses since then have been limited to contributing some to the groceries and electric bills, as my parents are thankfully financially quite comfortable and want me to focus on paying down my debt. Every now and then we (or usually just I) would want to pick up restaurant food to-go, which I would purchase when so. My parents live in a city/suburb that requires a car, and so I have been able to use their car while I've been staying with them (as I do not have my own car and thus have not had any car-related expenses throughout these 13 months).

Before that, for the first ~6 months, I had been living in an apartment with rent at about ~2600 monthly. I walked to work, usually ate comped meals for dinner and their leftovers for lunch, and ate super cheaply (think: ramen and Kraft) to fill up the gaps, as I was mostly too lazy and unhealthy to cook or go buy real groceries at the store. I would be able to party with friends on a night out, which usually would cost ~50-$100 dollars tops (Ubering there and back, securing party favors, usually drinking the most at a pregame and spending little at a bar or event itself). I went to a few concerts. I was able to have fun on weekends without feeling like I sacrificed anything.

Other points: About $23,000 of the investments (consisting of my HSA and my traditional 401k) are pre-tax. The gain includes the IRS refund that I received in April this year for FY19 (about ~6k). It also includes a full stimulus check (1200). About ~4k of the difference has been market growth just from the small investments that I do have. The above obviously doesn't account for the massive amounts of interest that I was paying at 4.75% on an almost-200k loan. I didn't take a proper "vacation" in this time period. I did buy a new iPhone 12 and the newest Air Pods. My health insurance premiums through work is $150 monthly. I spend another $300 a month on a specific prescription that unfortunately isn't covered through my plan. I don't really buy much besides that - I've always been the type of person that - probably due to depression/laziness more than anything else - only ever bought clothes when absolutely necessary, and, likely due to the same, I don't really buy anything related to random makeup/skincare/lifestyle things around the house, etc.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Fri Jan 01, 2021 10:48 pm

2017 grad, NYC biglaw.

Dec. 31, 2017
- Student Loans: $220k ($190k from law school, interest rates ranging from 5 to 6.5%; remaining $30k from spouse's undergrad, interest rates ranging from 3.2 to 6.5%)
- Assets: $90k (cash + two Roth IRAs + two 401(k)s)
- Net Worth: -$130k

Dec. 31, 2020
- Student Loans: $0
- Net Worth: $360k (cash + two Roth IRAs + two 401(k)s + family HSA)

Law School & Loans: I was very fortunate to have no undergrad debt. My parents also helped cover a portion of my rent while I was in law school. During that time, I split expenses 50/50 with my spouse, who was working full time. Other things that helped lower my total debt amount: (1) lowering our cost of living (having housemates for the first two years, cooking meals at home, etc.) and (2) using whatever excess money I had at the end of the semester + a portion of my 2L summer salary to take advantage of the 120-day post-disbursement period in which any payments made operated as a partial cancellation--meaning less borrowed overall and, more importantly, no interest or fees charged on the cancelled portion. The total amount I borrowed on paper was $200k, but I ended up graduating with less ($180k principle and $10k interest). I refinanced about half of my loans in Feb. 2018 to a 3.2% fixed rate. The amount saved in interest by refinancing all vs. half of my loans wasn't (to me) worth losing the protections on my federal loans.

Post Graduation: Spouse works in the non-profit sector for not a lot of money (most of that paycheck goes towards spouse's 401(k)), and also does most of the chores/errands and cooks most of our meals. We've been contributing the full amount to both of our IRAs and to my 401(k) since 2017. Spouse also had about $35k in a Roth IRA from prior years. Our rent is $2100/month, and our other fixed expenses are minimal. For non-work travel / vacation, I estimate that we've spent $15k total over the past three years (in addition to using credit card points earned from reimbursable work expenses and airline miles from work travel). Our food/entertainment spending has gone down during COVID, but has always seemed low compared to my peers.

tl;dr: -$130k to +$360k in three years. We maxed out our taxed-advantaged retirement accounts every year (including my stub year) & put all extra money and bonuses towards loans.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Sun Jan 03, 2021 11:34 am

2016 grad also

Day 1 of fulltime biglaw:
-227k Loans
-10k credit card debt
-10k salary advance

After 4 years:
225k net worth (still $130k loans but in no hurry to repay)
$75k in help to parents

I think like many others here, maxing out pre-tax 401ks is huge (though this somewhat inflates net worth). I didn't have the cash flow my first year to do so and regret it. I also had some above market stock returns this year which was offset by loss in returns to cash given to parents. Spent approx $55-70k/year (goes up each year, gulp) in rent/personal expenses.

Still regret law school but slowly less so financially

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Sun Jan 03, 2021 1:25 pm

Anonymous User wrote:
Tue Dec 15, 2020 9:42 pm
Sure. I basically paid $3,150 per month for four years ($152,200), plus threw all of my market bonuses ($7.5K + $15K + $25K + $50K + $65K = $162.5K x .7 take home = $113,750) and my above-market portions ($10K x 3 years . 7 take home = $21K) at them. That comes out to $286,950 I believe, which is about right when you take interest into account.

Summer bonus in 2018, COVID bonus this year, plus monthly extra money went into savings/investments, retirement, and house down payment. Good market returns and appreciating house value in major metro area gets me to the +$280K number.

With regard to refinancing, I immediately refinanced half of them to a very low rate, kept the other half in fed loans (on PAYE) to hedge risk of burning out, and paid the private loans off first. Got lucky and it worked out—had 0% on the fed loans due to COVID for the last 8 months.

Ate out on my own dime 1-2 per week. Took advantage of firm client development budgets to do social activities (sporting events, concerts, fancy dinners) with friends that are business professionals/lawyers.

For vacations always booked the cheapest plane ticket possible, even if it meant a weird connection on a weird airline at a weird time. Traveled a decent amount for work so used a lot of accumulated credit card points to cover a lot of hotels/some plane tickets.
Wow! Inspiring!

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Mon Jan 04, 2021 1:20 pm

Anonymous User wrote:
Thu Jan 04, 2018 1:15 pm
Sorry for posting anon, pure paranoia and self-consciousness about being identified. I’m thinking about my finances going forward and wanted to solicit TLS thoughts.

Debt at graduation: $207k ($92k to parents, which is a sweetheart loan but I do actually have to pay it back, and $115 in fed loans)
Interest rates: ~5.8% for the Feds, 2.5% for the family
Income: $195k (i.e. biglaw 1st year associate)
Savings: $10k (not counting some minor previous 401k contributions)
Other info: no credit card or other debt, job is in high COL major market, medium-term goal is to get enough for a home down payment.

I’ve been tracking the TLS hive-mind relatively loyally about finances, so am I right in thinking that the smart plan is: move into income-based repayment for initially smaller payments, work 6-12 months at the firm, make the minimum payments on my loans, create an emergency fund to cover 6 months worth of expenses, then refinance my fed loans? Because almost half my debt is to family, I assume my credit will appear better if I refinance, or somehow manage to get a mortgage, and if I fell on hard times my family wouldn’t break my kneecaps to keep the payments coming, so that’s a psychological relief. Half of it is left over from undergrad in any case. No idea where my career will go in the future (i.e. it’s not like I have some family business to eventually go to, and I have no idea how the whole biglaw/in-house/government/other??? professional path will shake out).

Thanks!
Wow. It's been three years. That went by in a flash and also feels like a lifetime ago.

Current debt: $153k ($76k to parents, $77k in refinanced loans)
Interest rates: 0% for the refinanced loans (due to COVID), 2.5% for the family
Income: $220k (i.e. 3rd year associate)
Savings: $113k
Retirement/investments: $101k

I managed to save enough for a down payment on a property, which I sort of regret either not doing already or alternatively putting in the market, but I'm pretty risk averse. I could wipe out my non-family debt at any time, which is a good feeling and psychologically a major improvement since graduating, but I think 2021 might be the year I bite the bullet on getting a home while rates are so low. If I can do that, and at least pay off my refinanced loans, I'll get out of this biglaw grind.

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Re: Student loan payments: get advice and actual numbers here

Post by Anonymous User » Sat Jan 09, 2021 6:05 pm

I'm financially illiterate so would love some thoughts from anyone experienced with PAYE/IBR:

I'm a 2020 grad in biglaw with $210k in federal loans right now (down from $220k since I've been making payments during the COVID forbearance period).

I am pretty miserable and know for sure I don't want to be here for the years it would take to fully pay off my loans. I would like to leave at the 1-year mark (or the 6-month mark if I really want out). I have enough savings right now to pay for about 10 months of rent and will continue to save aggressively. I absolutely refuse to feel trapped in this shitty job so please don't tell me to refinance and stick it out for 3 years or whatever. I'd probably jump at the first available opportunity that pays $60-$70k a year and offers a 40-hour workweek, even if that means not practicing law.

Best path forward re: loan repayment? I'm not sure whether to make large payments or minimum payments while saving more. Don't really have a good grasp on the tax consequences. Any advice appreciated (other than to refinance/grind it out in biglaw).

Seriously? What are you waiting for?

Now there's a charge.
Just kidding ... it's still FREE!


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