does it really take that many years to pay off the loans? Forum

[Thomas Jefferson]

1. $3500/month is hardly frugal.
2. People ITT need to learn how to minimize tax liabilities better (but yes, $72k net from $75k gross is incredibly naive)
3. IBR ftw
4. ???
5. Profit

[ResolutePear]

1. $3500/month is hardly frugal.
2. People ITT need to learn how to minimize tax liabilities better (but yes, $72k net from $75k gross is incredibly naive)
3. IBR ftw
4. ???
5. Profit

TITMFCR

[094320]

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[Geist13]

1. $3500/month is hardly frugal.
2. People ITT need to learn how to minimize tax liabilities better (but yes, $72k net from $75k gross is incredibly naive)
3. IBR ftw
4. ???
5. Profit

I still don't know I how I feel about IBR if you're not getting loan forgiveness from the feds. That tax at the end is scary. I guess you can plan for it. I also don't like the idea of being in debt for that long. 25 years is almost 2/3 of a career.

[ResolutePear]

1. $3500/month is hardly frugal.
2. People ITT need to learn how to minimize tax liabilities better (but yes, $72k net from $75k gross is incredibly naive)
3. IBR ftw
4. ???
5. Profit

I still don't know I how I feel about IBR if you're not getting loan forgiveness from the feds. That tax at the end is scary. I guess you can plan for it. I also don't like the idea of being in debt for that long. 25 years is almost 2/3 of a career.

Kill yourself right before 25 years and move to a tropical island. That'll stick it to the man.

[Thomas Jefferson]

Actually this just got me thinking. Payments on student loan interest can be tax deductible. Does anyone know if/how IBR affects that? I'd assume the interest payments are still deductible, but idk.

[saladfiend]

Let's assume you make no retirement contributions and 2010's tax brackets stay the same in 2011. Unless Congress acts, however, taxes will go up in 2011.

Remember payroll tax or FICA (Social Security + Medicare) is 7.65%. That is $5,737.50.

Now let's move to Federal income tax. If you make $75k, subtract your personal exemption ($3,650) and standard deduction ($5,700) to calculate your income subject to federal income tax.

$75,000-$3,650-$5,700 = $65,650

Now you can look at federal tax brackets here:
http://en.wikipedia.org/wiki/Income_tax ... ted_States

You'll owe
10% bracket: $837.50
15% bracket: $3,843.75
25% bracket: $7,912.50

Your total federal income tax bill will be $12,598.75
Your total payroll tax bill will be $5,737.50
I don't know what state you're in, but let's assume you pay overall 4% state tax--$3,000 (This would be low for some states and high for others.)

Total tax: $21,336.25

Take-home pay: $53,663.75

Two more things:
1. If you start working at 75k annually in the fall, then for those first few months (before January) you will owe less taxes proportionally because you won't hit the 25% tax bracket.
2. There are some tax credits for tuition payments and tax deductions (even if the standard deduction is taken) available for student loan interest payments. Some of these benefits start to be phased out at the 75k income level.
See http://www.irs.gov/publications/p970/index.html for more information.

[saladfiend]

California's top income tax rate is 9.3%. State tax in California is very progressive, so you'll be taxed at much lower levels for your first half of your income.

See:
http://www.bankrate.com/brm/itax/edit/s ... ax_Cal.asp

Don't forget that California has an additional payroll tax for disability insurance. It's 1.1% in 2010.

http://www.edd.ca.gov/payroll_taxes/rat ... olding.htm

[ResolutePear]

Only 2 things certain in life: Death and Taxes.

[GermX]

I don't get it. How is 10 years on a 130k loan a long time. It seems reasonable to me.

[ResolutePear]

I don't get it. How is 10 years on a 130k loan a long time. It seems reasonable to me.

Because they havn't heard of a 30-year home loan.

[Razumikhin]

b/c on 75k, you should be able to pay off ~30k/yr in loans. It shouldn't take 10 years, more like 5.

[KibblesAndVick]

b/c on 75k, you should be able to pay off ~30k/yr in loans. It shouldn't take 10 years, more like 5.

OP is that you?

[Razumikhin]

b/c on 75k, you should be able to pay off ~30k/yr in loans. It shouldn't take 10 years, more like 5.

OP is that you?

No, it's someone who worked for a year @ 70k, paid off 10k in loans and saved up 20k+ in the bank.

[dominkay]

b/c on 75k, you should be able to pay off ~30k/yr in loans. It shouldn't take 10 years, more like 5.

OP is that you?

No, it's someone who worked for a year @ 70k, paid off 10k in loans and saved up 20k+ in the bank.

Russian? Russians are frugal as hell.

[angioletto]

I think your general idea makes sense, even if some of the numbers are distorted. In fact, my husband and I have a similar plan. We live on a very tight budget right now (with 2 kids) and are working towards my husband paying almost all of our expenses. As of right now I will be contributing $10k/year towards our living expenses (through student loans). When I graduate we will continue with the same budget and I will continue contributing ~$10k of my salary towards our living expenses (actually less because we have 2 major debts that will be paid off before I graduate). So our plan is that anything I make annually over $10k will go directly towards student loans. After about 5-6 years the loans will be paid off and we will have the freedom to upgrade our house, save for vacations, etc.

I do not think this plan is the best option for those going into public interest, considering they can make smaller payments and have their loans forgiven after 10 years.

[Razumikhin]

Russian? Russians are frugal as hell.

My mom is Russian. My dad is chinese. I was raised Jewish.

[D Brooks]

$75k is not a worst case scenario. I bet there are T17 3Ls right now who would slit their classmates' throats and watch them bleed out for $75k.

What's that?

[thepaintrain]

California has a 9.3% income tax rate? EFFF it I don't want to move there anymore.

Well I'm leaving no state income tax for that 9.3%....

[Grizz]

$75k is not a worst case scenario. I bet there are T17 3Ls right now who would slit their classmates' throats and watch them bleed out for $75k.

What's that?

Subtle anti-USC trolling.

[ze2151]

if you get a good-paying job, why in god's name would you pay over what they ask you to? a dollar right out of school is worth a lot more to you than a dollar 10 years out of school. apart from the fact that, as others have said, loan payments are deductible.

op- i assume you're 22 and carrying no debt. so i won't bury you for your naivete. but things add up. you won't live the same way at 25, 26, 27 that you do at 22. when i was right out of school, i made 25,000/year and felt like i was on top of the world if i could saved a couple hundred bucks a month. now it's different. charitable giving, higher taxes, better cable, bigger apt (and bigger utilities bills), pets, kids, travel. if you're making 75k/yr you will never live like you do now and put every extra dollar toward loans. nor should you.

[Thomas Jefferson]

if you get a good-paying job, why in god's name would you pay over what they ask you to?

Because interest compounds.

[blurbz]

Russian? Russians are frugal as hell.

My mom is Russian. My dad is chinese. I was raised Jewish.

Like the holy grail of frugality.

[D Brooks]

Russian? Russians are frugal as hell.

My mom is Russian. My dad is chinese. I was raised Jewish.

Like the holy grail of frugality.

[094320]

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