Student loan payments: get advice and actual numbers here Forum

[bk1]

I have $230,000 in federal loans; wife has $140,000 in federal loans. We're both junior associates at a big law firm. Wife will be leaving to clerk for 2 years. I might leave to clerk for 1 year in the near future. Our effective interest rate is around 6-7%. In 5 years, we're hoping to have a kid/ buy a house/car.

Should I look to refinance? Should she? Would it make more sense to keep our federal loans and try to aggressively make loan repayments? Looks like So-Fi is offering me 4.49% fixed for a 10-year plan or 2.98% variable for a 10-year plan.

Could you guys make the 10 year refi payments while clerking (either one or both of you)?

Kid/house/car are not really helpful in isolation. You can get a reliable car for 5k, or maybe you want to get a new compact sedan for 20-25k. Similarly, a reasonable house in your area might be 500k or it might be 1mm. We have no idea how much you have saved up for any of this. In any event, aggressive loan repayment of 370k and wanting to buy a house in 5 years generally do not seem very compatible.

[chili_davis]

tag

[skers]

Definitely depends on your long-term savings/spending goals and how much you're willing to sacrifice lifestyle for debt service. The Sofi monthly payment on a clerk's salary is no joke, esp. with both of you clerking.

[Are_we_there_yet?]

I have $230,000 in federal loans; wife has $140,000 in federal loans. We're both junior associates at a big law firm. Wife will be leaving to clerk for 2 years. I might leave to clerk for 1 year in the near future. Our effective interest rate is around 6-7%. In 5 years, we're hoping to have a kid/ buy a house/car.

Should I look to refinance? Should she? Would it make more sense to keep our federal loans and try to aggressively make loan repayments? Looks like So-Fi is offering me 4.49% fixed for a 10-year plan or 2.98% variable for a 10-year plan.

Could you guys make the 10 year refi payments while clerking (either one or both of you)?

Kid/house/car are not really helpful in isolation. You can get a reliable car for 5k, or maybe you want to get a new compact sedan for 20-25k. Similarly, a reasonable house in your area might be 500k or it might be 1mm. We have no idea how much you have saved up for any of this. In any event, aggressive loan repayment of 370k and wanting to buy a house in 5 years generally do not seem very compatible.

You can get into a home with about 5% down (granted you'll pay PMI), and depending on the market spend about what you are in rent - all while building equity. If your in a location you plan to stay I would prioritize homeownship.

[Anonymous User]

Actually, 5% (or lower) down payment doesn't necessarily mean you need to pay PMI. There are lots of first time homebuyer programs at banks that offer no PMI with this exact down payment. I used such an offer on my first home.

[Anonymous User]

Actually, 5% (or lower) down payment doesn't necessarily mean you need to pay PMI. There are lots of first time homebuyer programs at banks that offer no PMI with this exact down payment. I used such an offer on my first home.

While PMI might not be a line item in your mortgage it's almost guaranteed factored into your interest rate that stays the same through the life of the loan - similar to when a bank gets you a loan with "no closing costs." It can be better to have the PMI as it's own line item because you can get your home reappraised and lose the PMI if the value has hit the 20%.

Anyways not the thread for this conversation.

[initech]

Been lurking this thread for a while, figured I'd throw in my sitch:

Second Year BigLaw Associate, non-NYC

Debt: started with ~$210,000, now at ~$161,000
Payments: About $2,700 a month, but we averaged ~$4,800 a month during my first year
Income: $190,000 + S.O.'s ~$70,000
Plan: Originally had fed loans up to ~7%; Refi'd with SoFi early in my first year (4.8% fixed 7-year); Will try to re-refi if I can get a better rate
Important info: Trying to pay off loans as quickly as possible (would like to be done sometime in 2019); saving for down payment on a home; not planning on having children for a few years
Bonus points: Besides emergency fund and savings for a home, every extra dollar is going to loans

[zerato5]

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[beach_terror]

Ok I hope this is the right thread. 0L looking heavily at one school. It looks like my net COA will be about 24k per year on average (includes cost of living). Which makes my total estimated debt at repayment $84,882. The school is the top state school, and the median salary is about 67k private sector. How manageable will this debt be after I graduate assuming I'm right at the median? For 10 years repayment it looks like ~1,000 per month.

Literally in the first post:

Mod comments: This thread is intended as a place to compile data about actual debt loads and payments from law school graduates. 0Ls, we hope you find this thread helpful, but remember that this is the Legal Employment forum where 0Ls are not supposed to post. If you have specific questions about anything posted here, this thread would be a better place to ask: viewtopic.php?f=4&t=220038#p7251652

[Anonymous User]

I just finished paying off my loans and I found this thread very helpful over the past couple of years. I thought I'd add my info - I made a ton of mistakes along the way, so consider this an issue spotting activity

Graduated in 2012
Debt: ~$120,000, at ~7% govt rates, plus $9k at 3% from my law school (received some financial aid during law school)
Payments: $1400/month on the big debt; $150/month on the tiny debt
Income: Started at biglaw in secondary market at slightly below NYC market rate, topped out at $200k in 2016. No real bonuses.
Bank account had like, $10k in it when I started working (and that $10k was the extra money I took out in loans)

Initially, I focused on the small debt, and immediately started off paying a little extra each month on the smaller debt while I saved a 6-month emergency fund. After that was built up, I paid a little extra on both the big debt and little debt each month ($1700 or so on the big debt, $200 on the small debt). I paid off the small debt entirely in early 2014, and then focused on the big debt. Outside of maxing out my 401k and maintaining my emergency fund, I put any leftover funds each month into my loans - $1000 one month, $500 another, whatever I had, trying to keep my account balances the same at the end of each month. Biggest expenses other than loans were rent, food, and my dog. I also put any tax refund, small bonus, or retroactive salary increases on the loans.

I almost refinanced in 2015 with SoFi, but got scared of getting fired and not being able to use public interest loan forgiveness (despite no indications of a potential to get fired, or not be able to get another biglaw job if I did). My law school offers public interest loan forgiveness and allows refinanced loans to be covered as long as they're on a 10 year schedule, so really this choice made no sense. I finally pulled the trigger in Feb. 2016, and refinanced with SoFi on a 5 year, fixed interest plan with 3.99%. Didn't go with the variable rate because I make terrible choices and didn't think about the fact that I would be finished paying the loans off before there was any sort of meaningful rate hike. The loans were at $60k at that point. At the end of 2016, I owed less than $20k so I used some of my savings to pay it off.

[spyke123]

Been lurking this thread for a while, figured I'd throw in my sitch:

Second Year BigLaw Associate, non-NYC

Debt: started with ~$210,000, now at ~$161,000
Payments: About $2,700 a month, but we averaged ~$4,800 a month during my first year
Income: $190,000 + S.O.'s ~$70,000
Plan: Originally had fed loans up to ~7%; Refi'd with SoFi early in my first year (4.8% fixed 7-year); Will try to re-refi if I can get a better rate
Important info: Trying to pay off loans as quickly as possible (would like to be done sometime in 2019); saving for down payment on a home; not planning on having children for a few years
Bonus points: Besides emergency fund and savings for a home, every extra dollar is going to loans

How long are you planning to keep your monthly payment at 2700? That seems a bit low considering your goal of full payment by 2019

[initech]

Been lurking this thread for a while, figured I'd throw in my sitch:

Second Year BigLaw Associate, non-NYC

Debt: started with ~$210,000, now at ~$161,000
Payments: About $2,700 a month, but we averaged ~$4,800 a month during my first year
Income: $190,000 + S.O.'s ~$70,000
Plan: Originally had fed loans up to ~7%; Refi'd with SoFi early in my first year (4.8% fixed 7-year); Will try to re-refi if I can get a better rate
Important info: Trying to pay off loans as quickly as possible (would like to be done sometime in 2019); saving for down payment on a home; not planning on having children for a few years
Bonus points: Besides emergency fund and savings for a home, every extra dollar is going to loans

How long are you planning to keep your monthly payment at 2700? That seems a bit low considering your goal of full payment by 2019

Sorry, that wasn't very clear. $2,700 is my minimum payment through SoFi. We've been paying an extra ~$2,000 per month, so about $4,700-4,800 monthly. Our goal is to do $5,200 a month this year.

I'll likely look into refinancing again with a shorter plan if things stay the way they are right now - I initially chose the 7-year plan rather than the 5-year to hold on to some flexibility in case of an emergency.

[Anonymous User]

Would appreciate any opinions out there. This thread has been very helpful, thank you.

-Biglaw 2nd year non-nyc
-Current loan balance: $39k at 3.25% with SOFI (started job w/ $70k debt in aug 2015)
-3 month emergency fund of about 5k
-Savings of 12k in a 1% interest earning account
-maxing out 401k (no match so this is about 12% of income)
-Roth IRA has about 17k
-Using vanguard index fund to invest in stocks, about 3k right now

Would anyone use that 12k savings to pay down the debt? My current thought process was to just keep on saving since the interest rate on my loan is only 3.25%. I know that I'm only earning 1% in the savings account but I figured this is the safe route since I would like to use it on a down payment within 4-5 years. Most personal finance i read on reddit or bogleheads seems to say don't invest in stocks if you want to use the money in this type of near term time frame (4-5 years).

Appreciate any thoughts.

[bk1]

Would appreciate any opinions out there. This thread has been very helpful, thank you.

-Biglaw 2nd year non-nyc
-Current loan balance: $39k at 3.25% with SOFI (started job w/ $70k debt in aug 2015)
-3 month emergency fund of about 5k
-Savings of 12k in a 1% interest earning account
-maxing out 401k (no match so this is about 12% of income)
-Roth IRA has about 17k
-Using vanguard index fund to invest in stocks, about 3k right now

Would anyone use that 12k savings to pay down the debt? My current thought process was to just keep on saving since the interest rate on my loan is only 3.25%. I know that I'm only earning 1% in the savings account but I figured this is the safe route since I would like to use it on a down payment within 4-5 years. Most personal finance i read on reddit or bogleheads seems to say don't invest in stocks if you want to use the money in this type of near term time frame (4-5 years).

Appreciate any thoughts.

1. What do you want to do with your money? Would you rather be debt free sooner? Are you looking to buy a house? A car?

2. Are your expenses really ~1650/month? If not, then 5k is not a 3 month emergency fund. Also, your emergency fund should be in a 1% savings account (or similarly safe, liquid, interest bearing account).

3. If 5k isn't enough for a 3 month e-fund, use the 12k to top it off. If your e-fund is set, then decide what you want to do. If you want to make a short term purchase then the savings account is fine. If you want to be debt-free sooner, pay off your debt. If you just want to invest for down the road, use the brokerage account.

4. As far as maximizing value, putting the 12k into your loans is likely not as good a risk-adjusted return as putting it in your brokerage account.

[Anonymous User]

Stupid question here on loans..I have 60k taken out (Current 2L) at 6.3%. Since they are federal loans, and there is no early payment penalty, putting as much money as possible toward my loans is the best plan to save money on interest, right? When I look at my loan it gives me an estimate of the repayment total, but isn't this estimate assuming I'll take 10-years to pay it off? I want to pay it off in year 1. My question: Paying it off in year 1 will be less money than paying it off in 10 years, right?

[bk1]

Stupid question here on loans..I have 60k taken out (Current 2L) at 6.3%. Since they are federal loans, and there is no early payment penalty, putting as much money as possible toward my loans is the best plan to save money on interest, right? When I look at my loan it gives me an estimate of the repayment total, but isn't this estimate assuming I'll take 10-years to pay it off? I want to pay it off in year 1. My question: Paying it off in year 1 will be less money than paying it off in 10 years, right?

1. Paying it off faster will save you on interest. Interest accrues over time, so the longer you take to pay, the more interest you accrue.
2. That said, you may see a higher overall return on your money by refinancing to a lower rate (~3%) and putting your spare money into investments since the risk-adjusted return for index funds generally comes out ahead of paying off low interest debt (especially if you use tax-advantage accounts such as 401k/IRAs).
3. But if you want to pay it off faster, that's fine as well (some people value having lower debt over getting the best possible return on their money and there's nothing wrong with as a general matter).

[Anonymous User]

Stupid question here on loans..I have 60k taken out (Current 2L) at 6.3%. Since they are federal loans, and there is no early payment penalty, putting as much money as possible toward my loans is the best plan to save money on interest, right? When I look at my loan it gives me an estimate of the repayment total, but isn't this estimate assuming I'll take 10-years to pay it off? I want to pay it off in year 1. My question: Paying it off in year 1 will be less money than paying it off in 10 years, right?

1. Paying it off faster will save you on interest. Interest accrues over time, so the longer you take to pay, the more interest you accrue.
2. That said, you may see a higher overall return on your money by refinancing to a lower rate (~3%) and putting your spare money into investments since the risk-adjusted return for index funds generally comes out ahead of paying off low interest debt (especially if you use tax-advantage accounts such as 401k/IRAs).
3. But if you want to pay it off faster, that's fine as well (some people value having lower debt over getting the best possible return on their money and there's nothing wrong with as a general matter).

Hi bk, thanks for the answer -- thats what I thought, but I was getting mind-fucked so I had to ask. I realize refi to 3% is beneficial when the market typically yields around 7%, but do you think it is a fair point that, since I'm dealing with a small amount of debt, even if I refinanced and got more money in the market, at the end of the day, the gain would be fairly minimal -- like maybe 3-5k worth? That's my thinking. I'm the type that wants to get rid of debt asap -- I will live like a monk until I do. It seems all the fees, transaction costs, unpredictability, and effort that goes into refi (especially if the benefit is a mere 3-5k) may not be worth it. Thoughts?

[JenDarby]

With 60k of debt you almost certainly will qualify for a great rate on a refi (likely sub 3% assuming god od credit and decent income). Personally, I would refi asap to free up the option to pay or over a longer period. I'm extremely debt adverse as well, and I refinanced my ~190k on non-biglaw income and am trying to pay it off asasp as well. That being said, I stepped back earlier this year when I moved and needed to buy a car and then decided to put away cash for a down payment.

With a refi your interest rate will likely be cut in over half, so at least frees up the OPTION to put money elsewhere while not wasting tons in interest. Plus biglaw (assuming that's how you plan to pay off 60k in one year) is never a sure thing so you may decide you want to get out ASAP, in which case a nice cash buffer could help.

[beach_terror]

Does anyone know of any companies that will consider your total salary including bonuses from the prior year when giving you a rate? My bonus totals this year were over 100% of my salary but SoFi doesn't take that into account.

[RaceJudicata]

Does anyone's firm offer a refinance program through a firm client bank? My firm sent out some info not to long ago, nothing in the way of details - just basically announcing a program. If anyone has any experience with such a program, is it worthwhile?

[bk1]

Does anyone's firm offer a refinance program through a firm client bank? My firm sent out some info not to long ago, nothing in the way of details - just basically announcing a program. If anyone has any experience with such a program, is it worthwhile?

The ones that I've seen/heard about are generally the same that the bank offers to the public.

[RaceJudicata]

Does anyone's firm offer a refinance program through a firm client bank? My firm sent out some info not to long ago, nothing in the way of details - just basically announcing a program. If anyone has any experience with such a program, is it worthwhile?

The ones that I've seen/heard about are generally the same that the bank offers to the public.

Think there is any upside to picking the firm program rather than a publicly offered program? Assuming rates are the same or very similar.

[bk1]

Does anyone's firm offer a refinance program through a firm client bank? My firm sent out some info not to long ago, nothing in the way of details - just basically announcing a program. If anyone has any experience with such a program, is it worthwhile?

The ones that I've seen/heard about are generally the same that the bank offers to the public.

Think there is any upside to picking the firm program rather than a publicly offered program? Assuming rates are the same or very similar.

I don't think it matters (maybe their underwriting standards are looser for the firm program? I dunno, probably not in any meaningful way since most biglawyers easily satisfy most refi underwriting standards anyways).

[Danger Zone]

Yeah my firm's partnership provides zero benefit. Best off just going with your best refi offer

[Anonymous User]

My question: Paying it off in year 1 will be less money than paying it off in 10 years, right?

Yes.