Student loan payments: get advice and actual numbers here Forum

(On Campus Interviews, Summer Associate positions, Firm Reviews, Tips, ...)
Forum rules
Anonymous Posting

Anonymous posting is only appropriate when you are revealing sensitive employment related information about a firm, job, etc. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.

Failure to follow these rules will get you outed, warned, or banned.
Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Sat Jan 09, 2021 8:33 pm

Anonymous User wrote:
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).
Same situation with even more debt...I'm trying to both save aggressively and pay down my loans aggressively while I'm still in big law.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Sun Jan 10, 2021 11:00 am

2015 grad. At graduation:
$270K student loan debt
-$270K net worth

After 5 years of NYC biglaw (but left before fifth year bonus):
$0 student loan debt
Approx. $250K net worth

I remember thinking when I started that I'd probably have a net worth of zero after 5 years, if I even made it that long. Pleasantly surprised looking back how pessimistic that ended up being. Some of my circumstances were unusual however. Now in-house in a LCOL market making 170k and building net worth.

rec345

New
Posts: 20
Joined: Sun Sep 27, 2009 11:32 pm

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

Post by rec345 » Sun Jan 10, 2021 11:13 am

The Lsat Airbender wrote:
Wed Jan 22, 2020 2:56 pm
Agree broadly with nealric. One can find a reasonable studio/1BR in lower Manhattan for about $2500/mo. without trying very hard, and getting below $2k is doable with roommates. "$1000-1500" probably too optimistic.
Completely agreed. I've been renting a one bedroom walk-up in the East Village (not Alphabet City) for the last few years at 2.3-2.5k as rent has risen. Separate kitchen, separate living room, separate bedroom, in one of the most desirable locations in the city. Granted all the fixtures are old and it's a 4th floor walkup, but those are minor inconveniences to me at worst.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Wed Feb 10, 2021 5:27 pm

Luckily, in a bit of a non-traditional situation and unsure which way to go. Still have some time to decide though.

Debt: ~285K
Sector: public
Starting salary: ~105-110K (in moderately expensive secondary market; think ATL)
Nuance: job qualifies for PSLF and--at least at first--my school's LRAP program where you pay some and the school pays some, to not only defeat negative amortization but also cover you as if you were on a 10 yr repayment program

I think the no brainer is to take advantage of the LRAP at first (I think if I put down like 25ish year one, school will put down 18-19K). Things get complicated after. After year one, I'm clerking for a year, and then either going back to my job (employer gave green light for me to clerk and return) or clerking again and then go back. LRAP doesn't cover clerkships unless you go back to eligible job, which I believe includes meeting the programs income cap (like 140K). If I only clerk once I may--but probably won't--get phased out of the program; if I do two clerkships, I very likely will be phased out.

The question, then, is--upon returning to gov job, if/when ineligible for LRAP--whether to refi or bank on PSLF. Income on job should go up about 10K per year, plus some random larger increases for inflation, until in the mid to high 200s, and I don't think many people leave the office, so I probably can bank on being there long term. Also, really good pension so there's a financial incentive to stay long-term.

Other part of the problem is the clerkship. In my heart of hearts I want to clerk twice (circuit seems really cool), but I think if I only do one I may be able to stay in the LRAP program for 3 years, which would be really ideal because of the windfall from the clerkship year (like 6K contribution to receive like 38K of aid). Not sure if clerking twice would be worth the financial risk. And not really interested in private practice atm FWIW. Don't think I'd ever want to do biglaw except if I absolutely had to or the unlikely situation I got a chance as an equity partner.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Thu Feb 11, 2021 2:47 pm

2018 grad.

At graduation:
I had approximately $275K in debt. $10k was a particularly annoying undergrad institutional loan at 6%; over the summer studying for the bar but before working I took out $7k on a credit card at 0% for 15 months; last, and took the $10k loan offer from my firm (paid back over 12 months of working). The remaining 248k was all federal loans with a weighted average interest rate of 6.08%.

Stub and first year:
I paid off the institutional loan, the credit card, and the firm loan, but otherwise took advantage of the federal income driven repayment plans (I used REPAYE) to minimize monthly payments and invest instead of paying back my loans. I entered REPAYE first based on my summer pay, showing an AGI of 35k. Then I recertified my income in the first year with my stub-year AGI and maxed out my traditional 401k during my stub year, so I showed an AGI of around 20k. During this time my monthly payments were only ~$139 and ~$40, respectively. In REPAYE, the government provides an interest subsidy waiving 50% of the unpaid interest even for unsubsidized loans, which amounts to 500-600 bucks in interest waived each month. My low previous tax year AGI and the interest subsidy resulted in my nominal 6.08% weighted average interest rate to actually be closer to 3.05% interest, which I thought I could easily beat with a three fund portfolio (and I did).

Covid forbearance:
Federal student loan relief during the pandemic provided me with not merely a 3.05% interest rate on my loans, but actually a 0% interest and no obligation to pay anything for the past 11 months. The DOE also "pushed out" income recertification deadlines for most persons, including me, by a year. Because the DOE uses the previous tax year's AGI and imposes no obligation to update income if it goes UP (though you may elect to update income if it goes DOWN prior to your recertification date) The whole time I have been in big law, the DOE has understood my income to never be more than $35K. Typically a borrower must provide updated income information (AGI) from their most-recently filed tax return or other source every year (so there is usually only a 1 year delay in reporting income increases) but because I was originally scheduled to tell the government that I now make much more than my $20k stub year AGI during the pandemic, I got an extra year.

Today:
I am finally net worth positive. Student loan debt with principal plus interest is $256K. Assets (401k, HSA, backdoor roth, taxable brokerage account, emergency fund) amount to $270k. It is somewhat difficult to say how much of this is gains versus contributions because all of the different accounts, but I have seen pretty incredible returns with very diversified investments that everyone tells you to buy rather than picking stocks (VTI and similar). I have gone on vacations, I eat out, order seamless etc.

Future:
I will also have to recertify my income to stay in the income driven repayment plan in September/October, right after the covid forbearance ends. Barring anything further unforeseen changes, I will have to refinance because my effective interest rate will jump back up to 6.08% and, I will have to make payments that go to loan principal (not just part of accrued interest). I expect I can find a lower interest rate than that in the market. Maybe around 2-3%. I will probably take a 5 year payment plan and continue to invest as much as I can with an interest rate that I think simple investments will beat.

Not refinancing for class year 2018, I think, was clearly the right decision. The obvious risk when I graduated was that I was betting that the market would outperform the interest rate on my loans. In hindsight such a bet was clearly correct. Setting aside hindsight bias though, beating 3.05% in the market over a two year time frame was likely because the S&P500 clocks 7-10% returns as a historical average. Federal student loan programs further offer optionality over refinancing, which makes taking the risk especially worthwhile. If I hated big law, I could clerk or work some other lower paying job and take further advantage of the income driven repayment plans.

I think many people refinanced not fully understanding the options available to them. I expect that at least some people refinanced to private interest rates because they were lower than their nominal federal interest rates (most refinancing options beat my nominal 6.08% weighted average rate) but that were higher than what their true, post-REPAYE-subsidy effective rate would be. Yet they refinanced because they did not understand that they qualified for REPAYE, that it used their previous tax year's AGI, or that the subsidy exists. This is through no fault of their own--the reliance on a previous year's AGI and the REPAYE interest subsidy for loans that are literally called "unsubsidized" loans is confusing and opaque.

Want to continue reading?

Register now to search topics and post comments!

Absolutely FREE!


User avatar
AlbertParsons

New
Posts: 18
Joined: Thu Mar 09, 2017 11:00 pm

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

Post by AlbertParsons » Wed Mar 10, 2021 2:44 pm

I'm graduating this May from t-14 and currently slated to graduate with 147k in loans.

I have 20k in my bank account for living expenses, moving expenses etc. in my bank account right now. I'll also hopefully get around 10k from tax returns from SA. I intend to use 17k of that to further reduce my loan balance before I leave school. I figure 13k will be enough to cover rent during bar prep + secure an apartment in NYC if firms return to their offices.

Is it worthwhile to pay off the interest before it capitalizes (~7K)? Or should I just reduce my overall borrowing by 17k and let the interest capitalize?

I feel like it brings me back to the same principle balance, but I don't know if I'm missing something. Thank you for any advice!

showusyourtorts

New
Posts: 94
Joined: Tue Sep 01, 2020 5:59 pm

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

Post by showusyourtorts » Thu Mar 11, 2021 3:14 pm

AlbertParsons wrote:
Wed Mar 10, 2021 2:44 pm
I'm graduating this May from t-14 and currently slated to graduate with 147k in loans.

I have 20k in my bank account for living expenses, moving expenses etc. in my bank account right now. I'll also hopefully get around 10k from tax returns from SA. I intend to use 17k of that to further reduce my loan balance before I leave school. I figure 13k will be enough to cover rent during bar prep + secure an apartment in NYC if firms return to their offices.

Is it worthwhile to pay off the interest before it capitalizes (~7K)? Or should I just reduce my overall borrowing by 17k and let the interest capitalize?

I feel like it brings me back to the same principle balance, but I don't know if I'm missing something. Thank you for any advice!
Unless I'm missing something, I think there's absolutely no significance to paying off interest before it capitalizes. The prevailing wisdom is to just hold on to the extra cash in your pocket and use it to (1) reduce any borrowing you may have in your 3L year and (2) pad your pocket to get you through the bar/moving expenses/first few weeks of work. Once you start working, your first course of business will likely be to start building up an emergency fund anyway (while likely beginning to make regular payments on your debt, assuming the forbearance period was allowed to expire by then), so it's not a big deal to have "extra" amounts leftover.

Also, I think it will depend on what your withholdings were so it's not to say that $10k refund won't happen, but just wanted to give the heads up that my friends and I (scattered across a few different states) all received somewhere from $5k - $6.5k in our tax refund from our respective summer associate years.

Nothing brings people out of the woodwork like giving incorrect advice, so..... here is to hoping someone in the community will point out any flaws or holes in the above! Thanks.

User avatar
blackmamba8

Bronze
Posts: 406
Joined: Thu Sep 08, 2016 2:53 pm

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

Post by blackmamba8 » Thu Mar 11, 2021 7:59 pm

I'm graduating from a T-14 in May. Unfortunately, my SA was canceled due to Covid, so I will not be making a big six-figure salary after graduation. I'm doing a state clerkship for a year starting in August. After that, my goal is to get a job at a mid-size or large law firm. Here is my plan...

I will owe $145k in loans at graduation. Whenever the government ends the pause on interest/payments, I will make a $50k payment to get my balance under $100k. After that, I'll be paying $1800/month on them for the rest of my clerkship. My top priority is paying off my loans as fast as I possibly can. I understand that it might not be the smartest plan given the market, time value of money, etc., but I need to do this for my mental health. Is there anything else I should do to get my loans paid off as quickly as possible?

User avatar
AlbertParsons

New
Posts: 18
Joined: Thu Mar 09, 2017 11:00 pm

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

Post by AlbertParsons » Thu Mar 11, 2021 9:00 pm

showusyourtorts wrote:
Thu Mar 11, 2021 3:14 pm
AlbertParsons wrote:
Wed Mar 10, 2021 2:44 pm
I'm graduating this May from t-14 and currently slated to graduate with 147k in loans.

I have 20k in my bank account for living expenses, moving expenses etc. in my bank account right now. I'll also hopefully get around 10k from tax returns from SA. I intend to use 17k of that to further reduce my loan balance before I leave school. I figure 13k will be enough to cover rent during bar prep + secure an apartment in NYC if firms return to their offices.

Is it worthwhile to pay off the interest before it capitalizes (~7K)? Or should I just reduce my overall borrowing by 17k and let the interest capitalize?

I feel like it brings me back to the same principle balance, but I don't know if I'm missing something. Thank you for any advice!
Unless I'm missing something, I think there's absolutely no significance to paying off interest before it capitalizes. The prevailing wisdom is to just hold on to the extra cash in your pocket and use it to (1) reduce any borrowing you may have in your 3L year and (2) pad your pocket to get you through the bar/moving expenses/first few weeks of work. Once you start working, your first course of business will likely be to start building up an emergency fund anyway (while likely beginning to make regular payments on your debt, assuming the forbearance period was allowed to expire by then), so it's not a big deal to have "extra" amounts leftover.

Also, I think it will depend on what your withholdings were so it's not to say that $10k refund won't happen, but just wanted to give the heads up that my friends and I (scattered across a few different states) all received somewhere from $5k - $6.5k in our tax refund from our respective summer associate years.

Nothing brings people out of the woodwork like giving incorrect advice, so..... here is to hoping someone in the community will point out any flaws or holes in the above! Thanks.
Thanks for the response. I didn't know if there were tax implications/benefits that I was not aware of. Here's to paying $17k more for a bullshit, half-ass zoom law school education.

I did my taxes on turbo tax already, and my refund was around 10.5k (hopefully I didn't do something wrong lol). Were you working in a market other than New York? New York taxes are a lot of fun.

Want to continue reading?

Register for access!

Did I mention it was FREE ?


sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Sat Mar 13, 2021 12:36 pm

blackmamba8 wrote:
Thu Mar 11, 2021 7:59 pm
I'm graduating from a T-14 in May. Unfortunately, my SA was canceled due to Covid, so I will not be making a big six-figure salary after graduation. I'm doing a state clerkship for a year starting in August. After that, my goal is to get a job at a mid-size or large law firm. Here is my plan...

I will owe $145k in loans at graduation. Whenever the government ends the pause on interest/payments, I will make a $50k payment to get my balance under $100k. After that, I'll be paying $1800/month on them for the rest of my clerkship. My top priority is paying off my loans as fast as I possibly can. I understand that it might not be the smartest plan given the market, time value of money, etc., but I need to do this for my mental health. Is there anything else I should do to get my loans paid off as quickly as possible?
Get big law after your clerkship. You will be debt free after 1.5-2 years in big law.

User avatar
blackmamba8

Bronze
Posts: 406
Joined: Thu Sep 08, 2016 2:53 pm

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

Post by blackmamba8 » Sat Mar 13, 2021 12:57 pm

sparty99 wrote:
Sat Mar 13, 2021 12:36 pm
blackmamba8 wrote:
Thu Mar 11, 2021 7:59 pm
I'm graduating from a T-14 in May. Unfortunately, my SA was canceled due to Covid, so I will not be making a big six-figure salary after graduation. I'm doing a state clerkship for a year starting in August. After that, my goal is to get a job at a mid-size or large law firm. Here is my plan...

I will owe $145k in loans at graduation. Whenever the government ends the pause on interest/payments, I will make a $50k payment to get my balance under $100k. After that, I'll be paying $1800/month on them for the rest of my clerkship. My top priority is paying off my loans as fast as I possibly can. I understand that it might not be the smartest plan given the market, time value of money, etc., but I need to do this for my mental health. Is there anything else I should do to get my loans paid off as quickly as possible?
Get big law after your clerkship. You will be debt free after 1.5-2 years in big law.
Is that possible after a state trial clerkship? I'll be in NJ for whatever it's worth.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Sat Mar 13, 2021 1:48 pm

Anonymous User wrote:
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).
Reviving this bc I'm in the exact same situation but didn't see any responses - any advice?

User avatar
Elston Gunn

Gold
Posts: 3820
Joined: Mon Jul 18, 2011 4:09 pm

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

Post by Elston Gunn » Sat Mar 13, 2021 1:58 pm

Anonymous User wrote:
Sat Mar 13, 2021 1:48 pm
Anonymous User wrote:
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).
Reviving this bc I'm in the exact same situation but didn't see any responses - any advice?
Do you know what you want to exit to? If public interest/gov, you probably want to leave open the possibility of PSLF forgiveness.

Definitely max out 401k. After that, for now, I would aggressively save at least until the government starts charging interest on the loans again. Since you already sound like you have too much cash, you probably want to put the money in an index fun (betterment, vanguard etc).

At a Biglaw salary there really aren’t tax consequences to speak of in the short term, beyond large tax benefits to maxing your 401k, and the fact that any gains in your brokerage account will be taxed eventually.

If you’re talking about the “tax bomb” from using PAYE, that doesn’t apply if you go the PSLF route. If you do stay in the private sector, but get some amount forgiven after 20 years of PAYE, you would be taxed as if the amount forgiven was income for that year (at least under current law). I wouldn’t make a decision about whether to pursue this route until you know what your long term path is.

Register now!

Resources to assist law school applicants, students & graduates.

It's still FREE!


sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Sat Mar 13, 2021 6:40 pm

blackmamba8 wrote:
Sat Mar 13, 2021 12:57 pm
sparty99 wrote:
Sat Mar 13, 2021 12:36 pm
blackmamba8 wrote:
Thu Mar 11, 2021 7:59 pm
I'm graduating from a T-14 in May. Unfortunately, my SA was canceled due to Covid, so I will not be making a big six-figure salary after graduation. I'm doing a state clerkship for a year starting in August. After that, my goal is to get a job at a mid-size or large law firm. Here is my plan...

I will owe $145k in loans at graduation. Whenever the government ends the pause on interest/payments, I will make a $50k payment to get my balance under $100k. After that, I'll be paying $1800/month on them for the rest of my clerkship. My top priority is paying off my loans as fast as I possibly can. I understand that it might not be the smartest plan given the market, time value of money, etc., but I need to do this for my mental health. Is there anything else I should do to get my loans paid off as quickly as possible?
Get big law after your clerkship. You will be debt free after 1.5-2 years in big law.
Is that possible after a state trial clerkship? I'll be in NJ for whatever it's worth.
Anything is possible.

sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Sat Mar 13, 2021 6:48 pm

Elston Gunn wrote:
Sat Mar 13, 2021 1:58 pm
Anonymous User wrote:
Sat Mar 13, 2021 1:48 pm
Anonymous User wrote:
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).
Reviving this bc I'm in the exact same situation but didn't see any responses - any advice?
Do you know what you want to exit to? If public interest/gov, you probably want to leave open the possibility of PSLF forgiveness.

Definitely max out 401k. After that, for now, I would aggressively save at least until the government starts charging interest on the loans again. Since you already sound like you have too much cash, you probably want to put the money in an index fun (betterment, vanguard etc).

At a Biglaw salary there really aren’t tax consequences to speak of in the short term, beyond large tax benefits to maxing your 401k, and the fact that any gains in your brokerage account will be taxed eventually.

If you’re talking about the “tax bomb” from using PAYE, that doesn’t apply if you go the PSLF route. If you do stay in the private sector, but get some amount forgiven after 20 years of PAYE, you would be taxed as if the amount forgiven was income for that year (at least under current law). I wouldn’t make a decision about whether to pursue this route until you know what your long term path is.
You would be STUPID AS HELL if you quit after 6 months or a year with your debt load. You also have 10 month of rent payments? So what is that? $10,000 to $20,000? That should definitely be going to your loans or the stock market. If you would of had $10,000 in Rocket Loans it would have been worth $20,000 last week. You need to stay in Big law for 2-3 years. You put yourself in this horrible position and the only way to get out is to stick with it and fight through it. It is not that hard to lateral after 1 year to a new firm and do that for 1 year. You haven't even been working that long, how are you miserable? Is this your first job? Again, you have $210,000 in debt which is a house payment. You aint going nowhere with that much hanging over your head. YOu aint thinking long term. You can easily be out of this mess in 3 years. Whereas a job paying $70,000 would get you nowhere with that large debt load.

da.goat

New
Posts: 39
Joined: Wed Sep 27, 2017 8:05 pm

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

Post by da.goat » Sun Mar 14, 2021 1:09 pm

sparty99 wrote:
Sat Mar 13, 2021 6:48 pm
Elston Gunn wrote:
Sat Mar 13, 2021 1:58 pm
Anonymous User wrote:
Sat Mar 13, 2021 1:48 pm
Anonymous User wrote:
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).
Reviving this bc I'm in the exact same situation but didn't see any responses - any advice?
Do you know what you want to exit to? If public interest/gov, you probably want to leave open the possibility of PSLF forgiveness.

Definitely max out 401k. After that, for now, I would aggressively save at least until the government starts charging interest on the loans again. Since you already sound like you have too much cash, you probably want to put the money in an index fun (betterment, vanguard etc).

At a Biglaw salary there really aren’t tax consequences to speak of in the short term, beyond large tax benefits to maxing your 401k, and the fact that any gains in your brokerage account will be taxed eventually.

If you’re talking about the “tax bomb” from using PAYE, that doesn’t apply if you go the PSLF route. If you do stay in the private sector, but get some amount forgiven after 20 years of PAYE, you would be taxed as if the amount forgiven was income for that year (at least under current law). I wouldn’t make a decision about whether to pursue this route until you know what your long term path is.
You would be STUPID AS HELL if you quit after 6 months or a year with your debt load. You also have 10 month of rent payments? So what is that? $10,000 to $20,000? That should definitely be going to your loans or the stock market. If you would of had $10,000 in Rocket Loans it would have been worth $20,000 last week. You need to stay in Big law for 2-3 years. You put yourself in this horrible position and the only way to get out is to stick with it and fight through it. It is not that hard to lateral after 1 year to a new firm and do that for 1 year. You haven't even been working that long, how are you miserable? Is this your first job? Again, you have $210,000 in debt which is a house payment. You aint going nowhere with that much hanging over your head. YOu aint thinking long term. You can easily be out of this mess in 3 years. Whereas a job paying $70,000 would get you nowhere with that large debt load.
Maybe this is flame, but if this is a serious post I'm not sure I get it. First, if biglaw is miserable enough to the point it affects your mental health, no amount of debt/money is worth that. Second, assuming all of these loans are through the government, what is the drawback of taking a lower paying job and doing IDR? Worst case scenario, your job pays less but your payments are capped, and if it's not paid off in 25 years, it gets forgiven (with the caveat that the tax bomb exists). And if you go government/public interest, there's PSLF that reduces that down to 10 years of capped payments with no tax bomb. Of course, this is very binary and doesn't account for the people that like biglaw/have private loans, but if the choice is "extremely miserable for 3-5 years and debt free" vs "good work-life balance and a continued affordable monthly payment," I don't see how it's dumb to choose the latter.

nixy

Gold
Posts: 4446
Joined: Fri Feb 16, 2018 8:58 am

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

Post by nixy » Sun Mar 14, 2021 1:15 pm

Sparty has a hair up his ass about debt and how to handle it. People have very different personal comfort levels with debt and how best to handle it, but he believes his approach is the only way.

Get unlimited access to all forums and topics

Register now!

I'm pretty sure I told you it's FREE...


sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Sun Mar 14, 2021 9:44 pm

da.goat wrote:
Sun Mar 14, 2021 1:09 pm
sparty99 wrote:
Sat Mar 13, 2021 6:48 pm
Elston Gunn wrote:
Sat Mar 13, 2021 1:58 pm
Anonymous User wrote:
Sat Mar 13, 2021 1:48 pm
Anonymous User wrote:
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).
Reviving this bc I'm in the exact same situation but didn't see any responses - any advice?
Do you know what you want to exit to? If public interest/gov, you probably want to leave open the possibility of PSLF forgiveness.

Definitely max out 401k. After that, for now, I would aggressively save at least until the government starts charging interest on the loans again. Since you already sound like you have too much cash, you probably want to put the money in an index fun (betterment, vanguard etc).

At a Biglaw salary there really aren’t tax consequences to speak of in the short term, beyond large tax benefits to maxing your 401k, and the fact that any gains in your brokerage account will be taxed eventually.

If you’re talking about the “tax bomb” from using PAYE, that doesn’t apply if you go the PSLF route. If you do stay in the private sector, but get some amount forgiven after 20 years of PAYE, you would be taxed as if the amount forgiven was income for that year (at least under current law). I wouldn’t make a decision about whether to pursue this route until you know what your long term path is.
You would be STUPID AS HELL if you quit after 6 months or a year with your debt load. You also have 10 month of rent payments? So what is that? $10,000 to $20,000? That should definitely be going to your loans or the stock market. If you would of had $10,000 in Rocket Loans it would have been worth $20,000 last week. You need to stay in Big law for 2-3 years. You put yourself in this horrible position and the only way to get out is to stick with it and fight through it. It is not that hard to lateral after 1 year to a new firm and do that for 1 year. You haven't even been working that long, how are you miserable? Is this your first job? Again, you have $210,000 in debt which is a house payment. You aint going nowhere with that much hanging over your head. YOu aint thinking long term. You can easily be out of this mess in 3 years. Whereas a job paying $70,000 would get you nowhere with that large debt load.
Maybe this is flame, but if this is a serious post I'm not sure I get it. First, if biglaw is miserable enough to the point it affects your mental health, no amount of debt/money is worth that. Second, assuming all of these loans are through the government, what is the drawback of taking a lower paying job and doing IDR? Worst case scenario, your job pays less but your payments are capped, and if it's not paid off in 25 years, it gets forgiven (with the caveat that the tax bomb exists). And if you go government/public interest, there's PSLF that reduces that down to 10 years of capped payments with no tax bomb. Of course, this is very binary and doesn't account for the people that like biglaw/have private loans, but if the choice is "extremely miserable for 3-5 years and debt free" vs "good work-life balance and a continued affordable monthly payment," I don't see how it's dumb to choose the latter.
What is there not to get? What is miserable is being $210,000 in debt. So you are advocating making payments for 25 years and being in debt when it can be gone in 3 (or mostly gone). Even for the government, you are stuck working 10 years for an employer or in public interest when you can be done in 3 years. It is dumb because this person just started working. Is maybe on month 3 and is already complaining. Doing 1 year at his current firm then lateraling is no big deal. Then do another stint at a new firm. Most of the loans haven't even been forgiven so it's a scam. You also currently have 0 percent interest. Invest all the money into the stock market to celebrate payoff. This person should be saving 50 to 80k a year if they make 180k. They could also be making 10 to 30k in the stock market each year (or more). They ain't thinking long term. They are simply focusing on their current state which may not be fun, but 3 years is nothing compared a decade or 25 years of servitude.

sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Sun Mar 14, 2021 11:05 pm

nixy wrote:
Sun Mar 14, 2021 1:15 pm
Sparty has a hair up his ass about debt and how to handle it. People have very different personal comfort levels with debt and how best to handle it, but he believes his approach is the only way.
I believe you were told to not respond to my posts. Stop being obsessed with me, thank you.

nixy

Gold
Posts: 4446
Joined: Fri Feb 16, 2018 8:58 am

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

Post by nixy » Mon Mar 15, 2021 12:31 am

sparty99 wrote:
Sun Mar 14, 2021 11:05 pm
nixy wrote:
Sun Mar 14, 2021 1:15 pm
Sparty has a hair up his ass about debt and how to handle it. People have very different personal comfort levels with debt and how best to handle it, but he believes his approach is the only way.
I believe you were told to not respond to my posts. Stop being obsessed with me, thank you.
I think you have me confused with someone else - I haven't been told not to do anything.

sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Mon Mar 15, 2021 1:24 am

Void wrote:
Fri Mar 13, 2020 11:03 pm
Hey I started this thread like 7 years ago!

Still making payments. :(
Are you still making payments? What is your financial situation?

Communicate now with those who not only know what a legal education is, but can offer you worthy advice and commentary as you complete the three most educational, yet challenging years of your law related post graduate life.

Register now, it's still FREE!


sparty99

Gold
Posts: 1899
Joined: Sat Dec 11, 2010 8:41 pm

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

Post by sparty99 » Mon Mar 15, 2021 1:28 am

nixy wrote:
Mon Mar 15, 2021 12:31 am
sparty99 wrote:
Sun Mar 14, 2021 11:05 pm
nixy wrote:
Sun Mar 14, 2021 1:15 pm
Sparty has a hair up his ass about debt and how to handle it. People have very different personal comfort levels with debt and how best to handle it, but he believes his approach is the only way.
I believe you were told to not respond to my posts. Stop being obsessed with me, thank you.
I think you have me confused with someone else - I haven't been told not to do anything.
Mmmmm. I may, but regardless, I definitely know you are obsessed with me and you should stop responding to my posts and the name "Sparty" should not come out of your mouth. Thanks.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Mon Mar 15, 2021 7:35 am

Hi all, in light of the recent discussion above I thought I would shoot my shot with my similar question. Looking for advice one way or the other on this question. I'm a 2020 grad, and I work in big law.

background: I have about $10k saved, $270k in debt ($260 principal + $12ish in interest). As of now, I mostly pay the principal on my GradPlus with the higher interest during the deferment. I am also registered for REPAYE with my last year's tax return as of right now and my loans are scheduled to pick back up in Nov. 2021. My highest loan principal is now down about 5k since the beginning of 2021 when I started making payments). I spent Q4 of 2020 paying off the credit debt that I had accumulated from supporting my measly self during the covid apocalypse (around 8k). As of now, I save $1,500 from each check and pay that same amount on my loans which I started around December, but in smaller numbers.

I am signing a new lease which comes with 5 months free on a 16-month term. The gross is a bit high, but the net is exactly the same as the gross of my apartment now (which is cheap). This is an opportunity for me to accumulate around $30,000 on top of the $10,000 I currently have saved now. At $50,000 my roommate gave her money to a financial analyst, which is what I'm thinking of doing with the first $50,000 I myself accumulate.

Question: Is it better to save that money until it's ready to go into a financial planner's hand or to use it to pay down the principal on my higher interest loan while in deferment? I feel irresponsible not paying the loan while I'm eligible to put the money on principle to lower the threshold of my outrageous minimum payment ($3,200/month) but also know I could make a lot of money in the stonk market while the economy recovers from the covid apocalypse and goes right to the moon.

Any advice is appreciated as this is the first time I have money of my own and am financially ILLITERATE. Thanks.

Edit: accidental anon, NLS336 is my username.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Fri Mar 19, 2021 1:57 pm

Current debt
167k student loan (consolidated) with government still
Credit Card Debt: 12k (little to no interest luckily)
401k: 0
Cash on hand: 1k
Salary: 65k (not public sector)

I'm honestly not sure how to get back on track. Any help would be appreciated. Should I go with REPAYE and bite the bullet on 25 years of payments? My initial plan is to aggressively pay off credit cards in the next couple months, save ~20k for my emergency fund, and not entirely sure what to do about the student loans.

Anonymous User
Posts: 428117
Joined: Tue Aug 11, 2009 9:32 am

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

Post by Anonymous User » Sat Mar 20, 2021 6:14 pm

Student loan debt: about 80k
Cash saved: about 20k
401k: 6k

First year of big law. I want to pay off my loans ASAP but obviously don’t have to while forbearance is active. I know I’m supposed to invest in the stock market but what does that mean? Can someone tell me specifically where to do that and what to invest in? Thanks.

Seriously? What are you waiting for?

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


Post Reply Post Anonymous Reply  

Return to “Legal Employment”