Student loan payments: get advice and actual numbers here Forum

[Anonymous User]

Throwing my hat into the ring just to add my data point.

Current 1st year associate.

Debt: $139.4k in principal, plus $2.1k in unpaid interest for student loans. Also, about $31k in credit card debt sitting at 0% interest, which I lived off from about March of 3L through Bar study, Bar trip, and starting my job in Sept. Hoping to have cash on hand to pay these off once the real interest rate comes back up (unfortunately, I got hit with $10k of extraordinary expenses covering for my girlfriend....working on paying me back...slowly...)

Also, since I'm on REPAYE, 50% of my eventual unpaid interest balance will get paid by Uncle Sam which is great

Payments: $63.40 a month.
Income: $140k plus unknown probably small (or zero) bonus.
Plan: REPAYE

Regional BigLaw firm, 1800 billable hr req.

Just got my Personal Capital account set up, and looks like I have a net worth of -$114,379.86. Not too bad, considering I probably graduated somewhere around $140-150k in debt from my t14 (based on my $139.4k in principal, which I never touched, and I probably had a little CC debt at 0% interest by graduation in April/May).

I prioritized maxing out every 2016 investment account (rIRA, r401k, HSA), so that cut into my ability to knock out the credit card debt, but focusing on that now.

Will check back in around the end of the year, and hopefully by then I'll be a lot closer to a positive net worth... we'll see.

[A. Nony Mouse]

I'm not disputing that PAYE exists, you TTT moron. I'm disputing that "lol, just plan on loan forgiveness" is any kind of reasonable strategy.

Also, I'm 99% confident that I'm older than you. I've taken out loans for school and switched careers a couple different times now. So save your old man tirade for someone else and have fun with your excel sheets. Your advice is wrong and dumb.

saw that you have loans from pre law school. you should really read this thread because it sounds like youre mismanaging your finances. happy to help if you have any questions. (sorry if im overstepping my boundaries but people making financial mistakes is a really big peeve of mine).

"I've taken out loans for school" doesn't mean that person still has those loans or is mismanaging their finances, Johann. Nor does not wanting to rely on loan forgiveness.

[August Wilson]

I'm going to graduate with probably 220K and going into biglaw. Is there any reason why I shouldn't just do repaye and stack cash for as long as I can stay in biglaw? The calculator I've run on the fed loans website makes it seem like a really attractive option. I used to be really freaked out by the psychological weight of loan debt, but now I'm thinking "fuck it, let it ride and see what it do." Am I missing something? It seems like saving/investing 2-4K a month (depending on lifestyle) and having that liquid is much better than throwing it all at loans just to be out of debt as quickly as possible only to leave biglaw for a lower paying job. (Also doing lit so lol at me).

[Tiago Splitter]

I'm going to graduate with probably 220K and going into biglaw. Is there any reason why I shouldn't just do repaye and stack cash for as long as I can stay in biglaw? The calculator I've run on the fed loans website makes it seem like a really attractive option. I used to be really freaked out by the psychological weight of loan debt, but now I'm thinking "fuck it, let it ride and see what it do." Am I missing something? It seems like saving/investing 2-4K a month (depending on lifestyle) and having that liquid is much better than throwing it all at loans just to be out of debt as quickly as possible only to leave biglaw for a lower paying job. (Also doing lit so lol at me).

Other than the lit part, that's what I'm doing.

[Johann]

I'm going to graduate with probably 220K and going into biglaw. Is there any reason why I shouldn't just do repaye and stack cash for as long as I can stay in biglaw? The calculator I've run on the fed loans website makes it seem like a really attractive option. I used to be really freaked out by the psychological weight of loan debt, but now I'm thinking "fuck it, let it ride and see what it do." Am I missing something? It seems like saving/investing 2-4K a month (depending on lifestyle) and having that liquid is much better than throwing it all at loans just to be out of debt as quickly as possible only to leave biglaw for a lower paying job. (Also doing lit so lol at me).

the most financially literate biglawyers i know have unanimously done this at the 200k loan mark. at least for the first year. theres no reason to commit yourself to 10 years of huge loan payments when you can pay almost nothing and max cash flow and punt the can down the road with no penalty based on a present value calculation

[Br3v]

I'm going to graduate with probably 220K and going into biglaw. Is there any reason why I shouldn't just do repaye and stack cash for as long as I can stay in biglaw? The calculator I've run on the fed loans website makes it seem like a really attractive option. I used to be really freaked out by the psychological weight of loan debt, but now I'm thinking "fuck it, let it ride and see what it do." Am I missing something? It seems like saving/investing 2-4K a month (depending on lifestyle) and having that liquid is much better than throwing it all at loans just to be out of debt as quickly as possible only to leave biglaw for a lower paying job. (Also doing lit so lol at me).

the most financially literate biglawyers i know have unanimously done this at the 200k loan mark. at least for the first year. theres no reason to commit yourself to 10 years of huge loan payments when you can pay almost nothing and max cash flow and punt the can down the road with no penalty based on a present value calculation

Does at the 200k loan mark mean > $200k in loans?

[Johann]

I'm going to graduate with probably 220K and going into biglaw. Is there any reason why I shouldn't just do repaye and stack cash for as long as I can stay in biglaw? The calculator I've run on the fed loans website makes it seem like a really attractive option. I used to be really freaked out by the psychological weight of loan debt, but now I'm thinking "fuck it, let it ride and see what it do." Am I missing something? It seems like saving/investing 2-4K a month (depending on lifestyle) and having that liquid is much better than throwing it all at loans just to be out of debt as quickly as possible only to leave biglaw for a lower paying job. (Also doing lit so lol at me).

the most financially literate biglawyers i know have unanimously done this at the 200k loan mark. at least for the first year. theres no reason to commit yourself to 10 years of huge loan payments when you can pay almost nothing and max cash flow and punt the can down the road with no penalty based on a present value calculation

Does at the 200k loan mark mean > $200k in loans?

yeah. under 100k i think is close to surefire refi. over 100k-200k gray area for first year/maybe longer. 200k+ should be auto RE/PAYE for 1 year and reassess after unless you know for a fact you arent leaving biglaw and also have a high earning partner.

[August Wilson]

Cool. Thanks so much for the input, guys! Really appreciate it.

[ballouttacontrol]

yeah. under 100k i think is close to surefire refi.

disagree there. I think the best decision is virtually always to REPAYE your first year working. If you graduated with like $80k or less in debt, your overall interest rate is going to be somewhere around like 7%. After your $50 or so per month payments, the gov't is still gonna subsidize half of that unpaid interest, so your effective interest rate is gonna be roughly like 3.5%, which the market easily beats. Plus the whole added bonus of actually building assets

[Danger Zone]

yeah. under 100k i think is close to surefire refi.

disagree there. I think the best decision is virtually always to REPAYE your first year working. If you graduated with like $80k or less in debt, your overall interest rate is going to be somewhere around like 7%. After your $50 or so per month payments, the gov't is still gonna subsidize half of that unpaid interest, so your effective interest rate is gonna be roughly like 3.5%, which the market easily beats. Plus the whole added bonus of actually building assets

When does this actually happen (government paying your interest) and how do they calculate it? I can't seem to find much info about the process by which this happens.

[ballouttacontrol]

yeah. under 100k i think is close to surefire refi.

disagree there. I think the best decision is virtually always to REPAYE your first year working. If you graduated with like $80k or less in debt, your overall interest rate is going to be somewhere around like 7%. After your $50 or so per month payments, the gov't is still gonna subsidize half of that unpaid interest, so your effective interest rate is gonna be roughly like 3.5%, which the market easily beats. Plus the whole added bonus of actually building assets

When does this actually happen (government paying your interest) and how do they calculate it? I can't seem to find much info about the process by which this happens.

I believe it's supposed to be automatic every month, though I haven't actually run the numbers to check that FedLoan Servicing is actually doing it for me.. could be worth verifying I suppose.

how they calculate it? ... interest - payment = unpaid interest...

[Pokemon]

yeah. under 100k i think is close to surefire refi.

disagree there. I think the best decision is virtually always to REPAYE your first year working. If you graduated with like $80k or less in debt, your overall interest rate is going to be somewhere around like 7%. After your $50 or so per month payments, the gov't is still gonna subsidize half of that unpaid interest, so your effective interest rate is gonna be roughly like 3.5%, which the market easily beats. Plus the whole added bonus of actually building assets

When does this actually happen (government paying your interest) and how do they calculate it? I can't seem to find much info about the process by which this happens.

I believe it's supposed to be automatic every month, though I haven't actually run the numbers to check that FedLoan Servicing is actually doing it for me.. could be worth verifying I suppose.

how they calculate it? ... interest - payment = unpaid interest...

Yep, however a lot of big lawyers on repaye have high payments anyway so they end up killing a lot of the interest thus gov pays very little of unpaid interest.

[Danger Zone]

It's definitely not done monthly. There hasn't been a single credit to my account and I've been doing REPAYE since April 2016. And balla, I meant more like is it based on what your payment is supposed to be or what you actually pay? Because I pay more than I have to and actually end up paying off all interest every month, but if I just did a regular payment there'd be interest left over.

[ballouttacontrol]

Yep, however a lot of big lawyers on repaye have high payments anyway so they end up killing a lot of the interest thus gov pays very little of unpaid interest.

Point is to do it in your 1st and maybe 2nd years (year being 12 months from when you first get approved for REPAYE). 1st year is based on SA tax return, 2nd year is based on stub year tax return. Both of these result in tiny tiny payments and lots of free $ in the form of subsidized unpaid interest

After that yea definitely Refi if you are someone with a low ish balance and you're sticking around in biglaw. Meanwhile, you've amassed some sweet retirement funds, good portion of a down payment, wtv..

[ballouttacontrol]

It's definitely not done monthly. There hasn't been a single credit to my account and I've been doing REPAYE since April 2016. And balla, I meant more like is it based on what your payment is supposed to be or what you actually pay? Because I pay more than I have to and actually end up paying off all interest every month, but if I just did a regular payment there'd be interest left over.

1st point: I believe the way it works (at least with FedLoan Serv) you don't see a credit, but rather you're just charged for half of the unpaid interest. Example: $100k principal @ 6% interest rate, with REPAYE minimum payment of $50. In this case, your monthly undiscounted interest would be $500. Your $50 would be credited against that, so you would have $450 unpaid interest if not for REPAYE. After REPAYE, this should show up as an increase of $225 on your unpaid interest balance. Note, under REPAYE, unpaid interest never capitalizes until you leave the plan.

I would verify this right now, but suckass FedLoan Servicing seems to have been down like all night

2nd Point: Tough one. Gut says you might miss out on that aspect of REPAYE. I don't see anything that's on-point for this tho..
Random semi-official source..
Page 24 hypos: https://studentaid.ed.gov/sa/sites/defa ... -and-a.pdf
Not particularly helpful tho

[Pokemon]

It's definitely not done monthly. There hasn't been a single credit to my account and I've been doing REPAYE since April 2016. And balla, I meant more like is it based on what your payment is supposed to be or what you actually pay? Because I pay more than I have to and actually end up paying off all interest every month, but if I just did a regular payment there'd be interest left over.

I think What you actually pay. So if you are paying all of your interest you get no credit. This is why lawyers do not benefit a ton from this since even on repaye they are paying almost all of their interest.

[Johann]

Yeah but you can get sub 3% on 10 year refi and still build assets with market returns and be done paying off loans a year earlier. Plus by doing refi a year later you are taking away one of the benefits of PAYE - non compounding interest and just compounding it 1 year later. I guess it's sort of debatable for preferences of cash flow, but I think you're gonna come out a couple grand behind every time unless you get shitcanned and don't find work for a long time.

[beepboopbeep]

Yeah but you can get sub 3% on 10 year refi and still build assets with market returns and be done paying off loans a year earlier. Plus by doing refi a year later you are taking away one of the benefits of PAYE - non compounding interest and just compounding it 1 year later. I guess it's sort of debatable for preferences of cash flow, but I think you're gonna come out a couple grand behind every time unless you get shitcanned and don't find work for a long time.

That's part of the point though, right? Risk of early refi is you get canned before you have savings built up to float (and can't build them up as easily because you're pumping a few grand each month into debt)

Don't get me wrong here, I'm one of those who refied in their first year and so far am glad I did. But it's particular to my situation and risk tolerance and stuff. I don't think it's objectively wrong to do repaye even if you come out slightly behind.

[Anonymous User]

I graduated with just over 200k in debt (undergrad and law), and refinanced my first year on a 7 year plan at 4.5%. Having done the biglaw thing for a couple years, I think I will be here a few more. Someone who has 200k in debt, and refis their first year, ends up staying in biglaw for 5+ years and exits to a position making 200k a year was better off refinancing, correct?

Seems like, for corporate associates, it is pretty easy to stay in biglaw for 3 or 4 years (if you want to do it for that long), after which point most in-house positions (or offers I am seeing) offer something like $170-$200k in comp. Curious if I made the right choice, and for others planning that sort of path, what the right path for them is?

[Johann]

I graduated with just over 200k in debt (undergrad and law), and refinanced my first year on a 7 year plan at 4.5%. Having done the biglaw thing for a couple years, I think I will be here a few more. Someone who has 200k in debt, and refis their first year, ends up staying in biglaw for 5+ years and exits to a position making 200k a year was better off refinancing, correct?

Seems like, for corporate associates, it is pretty easy to stay in biglaw for 3 or 4 years (if you want to do it for that long), after which point most in-house positions (or offers I am seeing) offer something like $170-$200k in comp. Curious if I made the right choice, and for others planning that sort of path, what the right path for them is?

depends on so many things and what you consider the "right choice." surely looking at things with a hindsight bias would not be the right analysis to determine the right choice i.e. can't really look at salaries and market returns out of the ordinary. so its about risk preference. calculating a present value on these things is so damn hard because people can also repay money back on the same plan differently (e.g. more forbearances under PAYE, making above loan payments, etc) let alone factoring in how people make repayments on different payment plans.

theres def some baseline questions you should ask yourself to get the best analysis:
1) is there a chance youll go into PSLF/gov work?
2) are there legitimate reasons you want to maximize your cash flow (e.g. wedding expenses, credit card debt pay downs, buying a house, making other investments like bitcoin and political gambling)
3) if you lose your job, what are your backup options? i.e. exit options, resume (school ranking), lit vs corp
4) would you ever consider going back to school?

those questions greatly change the calculus.

BUT YES, assuming you keep making 200k every year for the rest of your career, at 200k in debt, i doubt the present value calculation for you is better under RE/PAYE.
HOWEVER, if you did fuck up, its because of that 4.5% interest rate. that is atrocious and you should refi through a referral here (i recommend JenDarby).

[JenDarby]

7 year plan at 4.5%.

HOWEVER, if you did fuck up, its because of that 4.5% interest rate. that is atrocious and you should refi through a referral here (i recommend JenDarby).

you could absolutely beat that rate on a similar or even longer term with First Republic Bank (5yr/2.35%, 7yr/2.95%, 10yr/3.45%, 15yr/3.95%) or other lenders. I re-refinanced my rising 4.5% variable rate with CommonBond to a longer term and lower rate with FRB, substantially lowering my monthly payments

message me if you're interested and I'll make an email introduction with my banker (full disclosure, we'll both get a $200 referral bonus deposited into our checking accounts if you refi)

[Tiago Splitter]

7 year plan at 4.5%.

HOWEVER, if you did fuck up, its because of that 4.5% interest rate. that is atrocious and you should refi through a referral here (i recommend JenDarby).

you could absolutely beat that rate on a similar or even longer term with First Republic Bank (5yr/2.35%, 7yr/2.95%, 10yr/3.45%, 15yr/3.95%) or other lenders. I re-refinanced my rising 4.5% variable rate with CommonBond to a longer term and lower rate with FRB, substantially lowering my monthly payments

message me if you're interested and I'll make an email introduction with my banker (full disclosure, we'll both get a $200 referral bonus deposited into our checking accounts if you refi)

Can you get these rates even with 200k debt?

[bk1]

7 year plan at 4.5%.

HOWEVER, if you did fuck up, its because of that 4.5% interest rate. that is atrocious and you should refi through a referral here (i recommend JenDarby).

you could absolutely beat that rate on a similar or even longer term with First Republic Bank (5yr/2.35%, 7yr/2.95%, 10yr/3.45%, 15yr/3.95%) or other lenders. I re-refinanced my rising 4.5% variable rate with CommonBond to a longer term and lower rate with FRB, substantially lowering my monthly payments

message me if you're interested and I'll make an email introduction with my banker (full disclosure, we'll both get a $200 referral bonus deposited into our checking accounts if you refi)

Can you get these rates even with 200k debt?

Up to 300k.

[Anonymous User]

7 year plan at 4.5%.

HOWEVER, if you did fuck up, its because of that 4.5% interest rate. that is atrocious and you should refi through a referral here (i recommend JenDarby).

you could absolutely beat that rate on a similar or even longer term with First Republic Bank (5yr/2.35%, 7yr/2.95%, 10yr/3.45%, 15yr/3.95%) or other lenders. I re-refinanced my rising 4.5% variable rate with CommonBond to a longer term and lower rate with FRB, substantially lowering my monthly payments

message me if you're interested and I'll make an email introduction with my banker (full disclosure, we'll both get a $200 referral bonus deposited into our checking accounts if you refi)

Even if I live in a state where FRB isn't at? I even cold called one of their bankers one day and they straight said no because of where I work and reside (TX)

[bk1]

Even if I live in a state where FRB isn't at? I even cold called one of their bankers one day and they straight said no because of where I work and reside (TX)

If you're not in one of their areas, you're SOL as far as I know.