Paying of debt in 10 years instead of 5 years Forum

[Sgt Brody.]

I recently stumbled across this posting in another thread "200k in 5 years is 4k a month. Every month. That's half your salary.

300k in 5 years is 6k a month. Every month. ---- This is impossible unless someone is paying for your costs."

So, I feel like a popular opinion about paying of debt is that it should be done in 5 years. Does anybody decide to pay of the debt in 10 years to lessen the burden. Because, I thought that instead paying 4k and 6k every month, paying off a lesser amount every month over a span of 10 years would be better and I during that span, I plan on living in a simple apartment, and dont plan on buying a house and all that, so is this a valid plan?

[A. Nony Mouse]

I think the reason people here talk about 5 years instead of 10 years is that they're usually talking about paying off debt on a biglaw salary, and many people don't believe they're going to last in big law for 10 years. The default repayment plan for government loans is actually 10 years - you can get an extended plan and pay it off over 30 years, or get on one of the income-based repayment plans and have it spread over 20-25 years, or you can pay extra and pay it off more quickly. I'm pretty sure some people use 5 years as a calculation because they don't want to gamble on staying in biglaw more than 5 years (and the example you've cited is referring to a biglaw salary). If you spend 10 years in biglaw, I suspect you have a decent chance of staying in as long as you like, and the debt isn't as big an issue (especially if you make partner).

(The simpler answer is that the quicker you pay it off, the less interest you accumulate.)

[Sgt Brody.]

I think the reason people here talk about 5 years instead of 10 years is that they're usually talking about paying off debt on a biglaw salary, and many people don't believe they're going to last in big law for 10 years. The default repayment plan for government loans is actually 10 years - you can get an extended plan and pay it off over 30 years, or get on one of the income-based repayment plans and have it spread over 20-25 years, or you can pay extra and pay it off more quickly. I'm pretty sure some people use 5 years as a calculation because they don't want to gamble on staying in biglaw more than 5 years (and the example you've cited is referring to a biglaw salary). If you spend 10 years in biglaw, I suspect you have a decent chance of staying in as long as you like, and the debt isn't as big an issue (especially if you make partner).

(The simpler answer is that the quicker you pay it off, the less interest you accumulate.)

makes a lot of sense, the interest is a killer and is graduate plus loan preferable in terms of interest to the private loans from the bank? And thank you so much Nony!

[A. Nony Mouse]

My take is that government loans are way more desirable because they're the only loans that are eligible for the income-based repayment plans that the government offers - private loans aren't. I also think government loans have better interest rates (also fixed rather than variable) and better repayment plans, but I have to admit I haven't looked into private loans lately. It's just I don't know anyone who funded law school through private loans (except where private = your family pays and you repay them without interest).

[09042014]

300k in ten years is still 3500 a month. 42k in after tax money. Not a problem for big lawyers. But it's basically subtracting 55k (accounting for pretax salary) off your salary.

[Sgt Brody.]

My take is that government loans are way more desirable because they're the only loans that are eligible for the income-based repayment plans that the government offers - private loans aren't. I also think government loans have better interest rates (also fixed rather than variable) and better repayment plans, but I have to admit I haven't looked into private loans lately. It's just I don't know anyone who funded law school through private loans (except where private = your family pays and you repay them without interest).

Just to confirm, graduate plus loans are govt loans right? Yea, After doing some research I realised that graduate plus loans are much better. They have interest rates of 6.4 percent. And the private loans for example from wells fargo can have intereste rates as high as 9 percent. Thats crazy!. And thanks for your help Nony!, And sorry if these are silly questions, Im just an anxious 0L.

[DebtMuch]

Extended and save cash to begin is best. Something else to consider….actually….there are many many better options to consider but I can't (won't) list them all now. After a few years buy a condo with cash, put loans against condo at 3.9%….pay much less in interest…transfer loans after a few years into a private account….hope PSLF stays and work in public for 120 months…..


but if you still have 6.4 - 7.0% loans after 5 years and are not in some sort of job that will forgive via PSLF then you are doing something wrong….there are many ways to move the money into much lower interest after you have established yourself for a few years.