Student loan payments: get advice and actual numbers here Forum

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

Post by Anonymous User » Thu Jul 09, 2020 4:11 pm

Some #content from a slightly older Alum.

Class of 2013

Debt load at graduation: 215k at about 7.2% (average of 6.8% and 7.6% federal loans) (My wife and I handle all of our money as one big pot, we paid off her 85k in debt in mid-2018, but I'm not including it in this total. The 215k is all me from law school).
Current debt load: 20.5k (@ 3.64% rate with Lendkey I got in mid-2019. Had refinanced to a variable rate through Sofi in 2015 that was at 4% but slowly crept up to 5.5% by the middle of 2019. When I refied in early 2015 I had about 185k).
401k: ~124k (another 15k in an IRA)
Cash on hand: 40k
Mortgage Debt: 265k @ 3.25% due in 2048
Industry: Mid-law Litigation Associate after 5ish years in big law.
City: Mid-size, mid-western market (think Cleveland, Indy, Milwaukee)
Salary: 150k

I wasn't that thrifty for the last 7 years. We lived in a nice apartment but paid less than many of our peers. We bought used cars when we needed them, like a Corolla with about 30k miles on it. Other than that we eat well, including eating out, spend a decent amount on craft beer and expensive coffee and took several international vacations.

Like others said, the key is making a shit ton of money in big law to get on your feet after school or clerkship. Even with paying over 300k in student loan principal and interest, we still saved up 100k to buy a house and pay off a car. I had a good 5 years in big law at a firm that's closer to a "lifestyle" firm. I worked a lot, but I never thought it was unfair given the salary. I'd do it again knowing where I stand now.

Being able to make a million in salary and another 300k in bonuses in 5 or 6 years is hugely powerful for someone in their 20s or 30s. Someone without significant loans could probably have 500k net worth by the time they're 30 if they worked at it. Then you can stay in Big Law if you love it or (more likely) use the savings and financial freedom to do whatever you want.
Last edited by Anonymous User on Fri Jul 10, 2020 10:08 am, edited 1 time in total.

TigerIsBack

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

Post by TigerIsBack » Fri Jul 10, 2020 7:53 am

Anonymous User wrote:
Thu Jul 09, 2020 4:11 pm
Some #content from a slightly older Alum.

Class of 2013

Debt load at graduation: 215k at about 7.2% (average of 6.8% and 7.6% federal loans) (My wife and I handle all of our money as one big pot, we paid off her 85k in debt in mid-2018, but I'm not including it in this total. The 215k is all me from law school).
Current debt load: 20.5k (@ 3.64% rate with Lendkey I got in mid-2019. Had refinanced to a variable rate through Sofi in 2015 that was at 4% but slowly crept up to 5.5% by the middle of 2019. When I refied in early 2015 I had about 185k).
401k: ~124k (another 15k in an IRA)
Cash on hand: 40k
Mortgage Debt: 265k @ 3.25% due in 2048
Industry: Mid-law Litigation Associate after 5ish years in big law.
City: Mid-size, mid-western market (think Cleveland, Indy, Milwaukee)
Salary: 150k

I wasn't that thrifty for the last 7 years. We lived in a nice apartment but paid less than many of our peers. We bought used car when we needed them, like a Corolla with about 30k miles on it. Other than that we eat well, including eating out, spend a decent amount on craft beer and expensive coffee and took several international vacations.

Like others said, the key is making a shit ton of money in big law to get on your feet after school or clerkship. Even with paying over 300k in student loan principal and interest, we still saved up 100k to buy a house and pay off a car. I had a good 5 years in big law at a firm that's closer to a "lifestyle" firm. I worked a lot, but I never thought it was unfair given the salary. I'd do it again knowing where I stand now.

Being able to make a million in salary and another 300k in bonuses in 5 or 6 years is hugely powerful for someone in their 20s or 30s. Someone without significant loans could probably have 500k net worth by the time they're 30 if they worked at it. Then you can stay in Big Law if you love it or (more likely) use the savings and financial freedom to do whatever you want.
Nice to hear your perspective. I needed this today.

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

Post by Anon115523 » Sun Jul 12, 2020 2:21 pm

I'm sure that this has been discussed somewhere already ITT, but I was wondering if the following strategy for an incoming first-year (NYC Biglaw) is prudent. I first came across this strategy here: https://www.studentloanplanner.com/big- ... ary-scale/

The set up: Incoming first year at NYC V100. Deferred until January 2021. About $150k in total debt (undergrad and law). Plan on staying in biglaw as long as possible--ok with working miserable hours for the foreseeable future.

Although I'm not sure if recent legislation (e.g. CARES Act) has changed this, but my loan payments are set to be due starting in December of this year.

The proposed strategy: According the link above, it makes the most financial sense for an incoming associate to apply for REPAYE right now, during the grace period. By consolidating all loans in order to waive the grace period and start REPAYE payments, the payments would be $0 because income is $0. Under REPAYE, the interest subsidy will take away half of any interest not covered by payments for that year. Becuase there are no payments to offset interest, the interest subsidy offered by REPAYE would half the net interest accrual for that year. So by utilizing this strategy, an associate in my position would have the interest accrued for this year (although the CARES Act paused interest accrual, there is still some interest accrued for 2020).

This only works for one year, because when you recertify your income, your required payments will likely be high enough that the interest subsidy goes away. After that, refinance at a better rate than normal, having a full year of $190k salary under the belt.


I'm curious if there are any downsides to this strategy (or reasons it wouldn't work) that I'm not seeing or just general advice to the contrary. Thanks.

nls336

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

Post by nls336 » Mon Jul 27, 2020 10:22 am

Hi all, I'm just looking for some advice on this whole process, especially with covid factored in. I've been reading through this forum for a while now, it's been super helpful seeing other people's stories but my debt is higher than averge and could use some tailored advice for the times if anyone is available. I just graduated law school. I have about $280k in debt (kms, I had some from undergrad as well), currently all federal debt, but unconsolidated.

Currently:
I have a set start date this fall. I'll be working in big law in the NYC market at a major counter-cyclical group; I'm not worried about job security...for now... I'll be starting at the 190k payscale. I have an apartment close to work, montly rent payments come to around $2,000, but with COVID crisis I got May-August free of rent, so it nets out to be around $1,850.

I'm trying to budget and plan smartly but I really don't understand what my average salary will be when all of the benefits and taxes are factored in (or taken out). If anyone remembers what their avg., recent take home salary was from their first year in the city please let me know!

My minimum payment currently is ~$3,200 on the student loan website. Should I, as the poster above wondered, go for REPAYE now with my taxes from last year? Should I consolidate? If I consolidate can I later refinance? Is it wise to refinance with a private company given coronavirus and all of the political movement with student debt forgiveness that's been happening?

Thanks so much for any responses! Wishing you guys well and hoping your safe from covid at present.

Fireworks2016

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

Post by Fireworks2016 » Mon Jul 27, 2020 10:28 am

nls336 wrote:
Mon Jul 27, 2020 10:22 am
Hi all, I'm just looking for some advice on this whole process, especially with covid factored in. I've been reading through this forum for a while now, it's been super helpful seeing other people's stories but my debt is higher than averge and could use some tailored advice for the times if anyone is available. I just graduated law school. I have about $280k in debt (kms, I had some from undergrad as well), currently all federal debt, but unconsolidated.

Currently:
I have a set start date this fall. I'll be working in big law in the NYC market at a major counter-cyclical group; I'm not worried about job security...for now... I'll be starting at the 190k payscale. I have an apartment close to work, montly rent payments come to around $2,000, but with COVID crisis I got May-August free of rent, so it nets out to be around $1,850.

I'm trying to budget and plan smartly but I really don't understand what my average salary will be when all of the benefits and taxes are factored in (or taken out). If anyone remembers what their avg., recent take home salary was from their first year in the city please let me know!

My minimum payment currently is ~$3,200 on the student loan website. Should I, as the poster above wondered, go for REPAYE now with my taxes from last year? Should I consolidate? If I consolidate can I later refinance? Is it wise to refinance with a private company given coronavirus and all of the political movement with student debt forgiveness that's been happening?

Thanks so much for any responses! Wishing you guys well and hoping your safe from covid at present.
I am certain that others will have more concrete advice, but with that kind of debt load, I would be very wary to consolidate before you're like 2-3 years into firm life. I would think REPAYE is a no-brainer to drop your monthly payment to give you a year of runway to pile up some savings, assess your job security, and keep flexibility for future repayment plans.

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RustyLaw

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

Post by RustyLaw » Thu Aug 06, 2020 12:42 pm

sparty99 wrote:
Wed May 27, 2020 10:36 pm
RustyLaw wrote:
Tue May 26, 2020 3:45 pm
sparty99 wrote:
Sun May 17, 2020 8:12 pm
RustyLaw wrote:
Tue May 12, 2020 1:49 am
Looking for some advice as I am admittedly a bit under-informed on good financial strategy and TLS has helped me get where I am now.

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

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

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

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

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

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

Appreciate your time and thoughts.
How old are you? What is your starting salary?
26 - 190K NY lockstep
I would make it my goal to spend $60,000 your first year on loans, 401k, and retirement. Thus, pay the minimum every month on your loans, like $1,000. At the end of the year dump an extra $18,000 to the loans. Thus, you should have $30,000 left. Use $15,000 for 401(k) and $15,000 for an emergency fund. Any bonus should go to your student loans..By year 2 you should only invest $10,000 into 401(k). Add $10,000 to your emergency fund. $40,000 should go to the loans. By year 3 you should invest $5,000 into your 401(k) and throw $55,000 at the loans. End of year 3 you should have paid off $30k + 40K + 55K. The loans should most likely be paid off since you are using your bonus and any raises to attack the loans. You will also have $30k in the 401(k) and $25,000 in savings. If you are still around in year 4, invest everything. Do not worry about maxing out the 401(k) in year 1 to 3. If you invest $100 every month from 25 to 65 you will automatically be a millionaire.
Thanks for all the feedback folks. Really gave me stuff to mull over. Happy to take anymore thoughts!

AlexFergusonLS

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

Post by AlexFergusonLS » Thu Aug 06, 2020 6:14 pm

What do people suggest as the cheapest refinance rates? And when should I refinance? (biglaw job starting later this month)

sparty99

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

Post by sparty99 » Thu Aug 06, 2020 6:42 pm

AlexFergusonLS wrote:
Thu Aug 06, 2020 6:14 pm
What do people suggest as the cheapest refinance rates? And when should I refinance? (biglaw job starting later this month)
refinance after a year unless you can lock in like 2 percent now.

AlexFergusonLS

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

Post by AlexFergusonLS » Thu Aug 06, 2020 7:49 pm

sparty99 wrote:
Thu Aug 06, 2020 6:42 pm
AlexFergusonLS wrote:
Thu Aug 06, 2020 6:14 pm
What do people suggest as the cheapest refinance rates? And when should I refinance? (biglaw job starting later this month)
refinance after a year unless you can lock in like 2 percent now.
Why after a year? And I was getting like 4% quotes for a 10 year fixed. I have a credit score 750-775, ~200K in loans.

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nixy

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

Post by nixy » Thu Aug 06, 2020 9:01 pm

Don't mean to speak for sparty, but many people say wait some period (a year sounds good) to make sure you can deal with biglaw and aren't going to ragequit in 6 months. Enough people hate it and bail quickly enough that you might not want to give up federal loan protections (like income-based repayment plans) until you feel certain you can be in biglaw long enough to pay off the loans successfully.

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

Post by Anonymous User » Sat Aug 08, 2020 12:06 pm

3L looking to take advantage of the inrerest subsidy while clerking; is it taxable income?

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

Post by cavalier1138 » Mon Aug 10, 2020 12:37 pm

Anonymous User wrote:
Sat Aug 08, 2020 12:06 pm
3L looking to take advantage of the inrerest subsidy while clerking; is it taxable income?
Are you talking about the current forbearance?

If so, it's not a subsidy, so it's not taxable (as far as I know). Loans aren't accruing interest, and payments aren't due until... December. We think. For now.

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

Post by SamuelDanforth » Mon Aug 10, 2020 2:09 pm

cavalier1138 wrote:
Mon Aug 10, 2020 12:37 pm
Loans aren't accruing interest, and payments aren't due until... December. We think. For now.
I really hope so. I wish there was more clarity on this point.

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

Post by Anonymous User » Mon Aug 10, 2020 3:02 pm

cavalier1138 wrote:
Mon Aug 10, 2020 12:37 pm
Anonymous User wrote:
Sat Aug 08, 2020 12:06 pm
3L looking to take advantage of the inrerest subsidy while clerking; is it taxable income?
Are you talking about the current forbearance?

If so, it's not a subsidy, so it's not taxable (as far as I know). Loans aren't accruing interest, and payments aren't due until... December. We think. For now.
If you are on REPAYE, I believe half of unpaid interest is forgiven during your first three years post-LS. I was referring to that, as I would like to make the minimum payment and just have the negative amort. forgiven as much as possible; this looks like it is income from what little I know about the IRC since debt forgiveness is usually income absent some sort of public interest program. I did not mean to ask ab the forbearance, as I assumer interest will be accruing once I graduate (may 2021)

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

Post by decimalsanddollars » Mon Aug 10, 2020 3:11 pm

Anonymous User wrote:
Mon Aug 10, 2020 3:02 pm
cavalier1138 wrote:
Mon Aug 10, 2020 12:37 pm
Anonymous User wrote:
Sat Aug 08, 2020 12:06 pm
3L looking to take advantage of the inrerest subsidy while clerking; is it taxable income?
Are you talking about the current forbearance?

If so, it's not a subsidy, so it's not taxable (as far as I know). Loans aren't accruing interest, and payments aren't due until... December. We think. For now.
If you are on REPAYE, I believe half of unpaid interest is forgiven during your first three years post-LS. I was referring to that, as I would like to make the minimum payment and just have the negative amort. forgiven as much as possible; this looks like it is income from what little I know about the IRC since debt forgiveness is usually income absent some sort of public interest program. I did not mean to ask ab the forbearance, as I assumer interest will be accruing once I graduate (may 2021)
I am not a/your tax lawyer, but it's income. As some non-legal advice, if you plan on participating in any program involving forgiveness/subsidy/help from the govt, keep. your. receipts. I've had a few friends get screwed trying to wrangle the aid they thought they were getting.

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clarion

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

Post by clarion » Mon Aug 10, 2020 7:36 pm

decimalsanddollars wrote:
Mon Aug 10, 2020 3:11 pm
Anonymous User wrote:
Mon Aug 10, 2020 3:02 pm
cavalier1138 wrote:
Mon Aug 10, 2020 12:37 pm
Anonymous User wrote:
Sat Aug 08, 2020 12:06 pm
3L looking to take advantage of the inrerest subsidy while clerking; is it taxable income?
Are you talking about the current forbearance?

If so, it's not a subsidy, so it's not taxable (as far as I know). Loans aren't accruing interest, and payments aren't due until... December. We think. For now.
If you are on REPAYE, I believe half of unpaid interest is forgiven during your first three years post-LS. I was referring to that, as I would like to make the minimum payment and just have the negative amort. forgiven as much as possible; this looks like it is income from what little I know about the IRC since debt forgiveness is usually income absent some sort of public interest program. I did not mean to ask ab the forbearance, as I assumer interest will be accruing once I graduate (may 2021)
I am not a/your tax lawyer, but it's income. As some non-legal advice, if you plan on participating in any program involving forgiveness/subsidy/help from the govt, keep. your. receipts. I've had a few friends get screwed trying to wrangle the aid they thought they were getting.
I am fairly certain that the interest subsidy is not considered income for tax purposes. I welcome someone to provide evidence to the contrary, but I didn't want to just let your comment that "it's income" stand without some pushback. Also, I don't believe it's correct to frame it as "forgiveness" of the unpaid interest--rather, it's "paid" by the government.

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

Post by Anonymous User » Mon Aug 10, 2020 8:39 pm

I'm not asking for tax research help as much as an anecdata of people who have taken advantage of the interest subsidy and paid taxes on it (or not).

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

Post by Anonymous User » Mon Aug 10, 2020 8:39 pm

Double poast

decimalsanddollars

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

Post by decimalsanddollars » Tue Aug 11, 2020 9:55 am

clarion wrote:
Mon Aug 10, 2020 7:36 pm
decimalsanddollars wrote:
Mon Aug 10, 2020 3:11 pm
Anonymous User wrote:
Mon Aug 10, 2020 3:02 pm
cavalier1138 wrote:
Mon Aug 10, 2020 12:37 pm
Anonymous User wrote:
Sat Aug 08, 2020 12:06 pm
3L looking to take advantage of the inrerest subsidy while clerking; is it taxable income?
Are you talking about the current forbearance?

If so, it's not a subsidy, so it's not taxable (as far as I know). Loans aren't accruing interest, and payments aren't due until... December. We think. For now.
If you are on REPAYE, I believe half of unpaid interest is forgiven during your first three years post-LS. I was referring to that, as I would like to make the minimum payment and just have the negative amort. forgiven as much as possible; this looks like it is income from what little I know about the IRC since debt forgiveness is usually income absent some sort of public interest program. I did not mean to ask ab the forbearance, as I assumer interest will be accruing once I graduate (may 2021)
I am not a/your tax lawyer, but it's income. As some non-legal advice, if you plan on participating in any program involving forgiveness/subsidy/help from the govt, keep. your. receipts. I've had a few friends get screwed trying to wrangle the aid they thought they were getting.
I am fairly certain that the interest subsidy is not considered income for tax purposes. I welcome someone to provide evidence to the contrary, but I didn't want to just let your comment that "it's income" stand without some pushback. Also, I don't believe it's correct to frame it as "forgiveness" of the unpaid interest--rather, it's "paid" by the government.
Sorry, I should clarify that I confused this and the ultimate IBR forgiveness benefit 25 years down the line, which the REPAYE benefit would affect less directly. I haven't found anything online that speaks specifically to the taxability of the REPAYE interest subsidy (which, as you pointed out, is technically the govt paying the interest and not forgiving it).

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

Post by Anonymous User » Mon Aug 17, 2020 10:40 pm

  • Debt at graduation (2019): $180,000
    Current debt: $138,000
    Income: $190,000 (NYC Big law)
    Repayment plan: 10 year standard federal repayment/10 year university credit union (hoping to pay off in ~3 years so I can leave biglaw debt free)
    Current interest rates: 4.5-7%, fixed, depending on loan
    Current savings: just under $25,000 (all in a regular savings account… I’m awful I know that’s why I’m here)
    Important notes: I preface all of this by saying that I’m a first-gen college grad/lawyer and no one in my family (everyone’s always made minimum wage, at most) has ever had a formal savings account, let alone investment accounts, of any kind so I’m flying blind here.
I’ve been at my firm for a year now and while I am eager to go in-house and gtfo out of here, I know I can make it to mid-level (planning to leave 3rd or 4th year) when those options become more realistic and when my debt is (hopefully) paid off.

I’m looking to refi eventually but am taking full advantage of the current 0% interest rate on my federal loans (~$80,000) since the rest of my loans are at 4.5-5% so I’m not in a huge rush to lower those right now.

I have somewhat unique living circumstances right now under which I don’t have to pay rent so, since the CARES act kicked in, I’ve been putting $6,300/month to loans ($5,000 to fed, remainder to other loans) and I anticipate being able to do so until May 2021 when I have to get my own place (expected debt load at that time is ~$82,000), at which point I will go down to $4,000/month in repayment and likely refinance.

That said, I haven’t set up any kind of retirement or investment accounts which I’ve recently come to understand is a very big mistake. I assume I should put good chunk of my $25K in savings into those? Maxing out a 401(k) and then the rest in a mutual fund? Would that be a solid strategy? If the goal is to put $18k a year to 401K and some amount above that into a mutual fund (or whatever people tend to put beyond $18K year in savings/investment into…), it will likely add a year onto my repayment plan - which I think is probably okay since I plan on going in-house in a corporate role in a major market (so I’d expect ~$150k a year in comp) though the prospect of having such a large amount of debt for another year is psychologically draining.

I’d really appreciate any thoughts or advice and, maybe more importantly, good resources for retirement/investment strategy 101, particularly for anything that takes into account the standard biglaw circumstances (high pay/high debt).

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

Post by champ33 » Tue Aug 18, 2020 10:04 am

I would definitely advise contributing the max $19,500 per year to your 401k ($750 per pay check, although you may want to contribute more to get up to the max in 2020 if you choose). Then I'd start an IRA (Individual Retirement Account) which allows another $6000 per year toward retirement. These can be Traditional (pre-tax contributions) or Roth (post-tax contributions). Many people prefer the Roth since once the money is in the account, it grows tax free and can be withdrawn tax free later on. You are above the income limit for the Roth, so if you wanted to do Roth you'd have to contribute the $6000 to a Traditional IRA and then fill out paperwork to convert it to a Roth account (a ridiculous but often-used loophole called the "backdoor Roth").

Otherwise, you could certainly fund another brokerage account. Many people calculate this is the right way to go because you will often make more in the market than the interest you are paying on your loans (7-10% average return on stocks/bonds over 30 years vs. 2-3% interest on loans). Many people, however, prefer the peace of mind of being debt free, and I myself fall into this category. It sounds like you may too, as you are aggressively paying off your loans. In my opinion there's nothing wrong with this, and I don't think it would be a mistake to pay your loans off in a few years while contributing to retirement accounts. You certainly do want to keep at least 3-6 months of expenses in a regular savings account for emergencies, and may want to add more to savings for any big future purchases (car, house, etc.).

Good luck!

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

Post by The Lsat Airbender » Tue Aug 18, 2020 10:46 am

Anonymous User wrote:
Mon Aug 17, 2020 10:40 pm
Current savings: just under $25,000 (all in a regular savings account… I’m awful I know that’s why I’m here)
$25k cash savings actually isn't a bad thing. 3-6 months' expenses in cash is standard advice and $25k is (hopefully) a bit more than that but not outrageously so.

It's good to have liquid savings and you'll be glad you have the cushion if and when you transition out of biglaw. Make sure you're getting a decent interest rate (I think the best you'll find right now is 0.80-0.90% APY or so).

Agree with the above post. Maxing your 401(k) contribution is a no-brainer with biglaw income/taxes. After that, choose between early debt repayment and taxable investing, depending on what feels better psychologically to you. If and when you refinance the loans, investments will pull farther ahead.

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

Post by Anonymous User » Wed Aug 19, 2020 1:14 pm

Class of 2016

Industry: 4th year NYC corporate biglaw
Debt load at graduation: 235k (200k @ 7% law school student loans (after 90k scholarship...!), 25k undergrad student loans @ 5% and $10k in credit card debt to cover living expenses until October start date)
Current debt: $135k student loans @ 2.55% at 7 years (First Republic rates are amazing -- refinanced early in 2017 to SoFi and again in early 2018 to FR)
401k: $71k (I wish I contributed to my 401k and backdoor roth IRA my first year but glad I did not my stub year)
IRA: $28k
Other Investments: $131k
Cash: $10k
Net Worth: $100k!

Notes: I've also been helping the parents with $1500/mo since Oct 2016. I'm very glad I refinanced early, maxed tax advantage accounts and invested cash instead of repaying very cheap student loan debt early. I've lived off between $50-60k/year for my personal living expenses in biglaw.

If you are in NYC, pick either a nice apartment or eating and going out often. My first three years, I lived in $1600-2000/mo apartments and would eat out and go to bars very often. The past year and this next year, I am spending $3k-3.5k (with SO now also covering additional $1k+) on rent and hanging out at home almost exclusively (even pre-COVID).

Law school is a scam and biglaw is awful but glad I'm at least not financially ruined by the choice.

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

Post by Anonymous User » 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.

The Lsat Airbender

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Posts: 1750
Joined: Wed Jan 30, 2019 7:34 pm

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

Post by The Lsat Airbender » 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.

Seriously? What are you waiting for?

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


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