Too many student loans and out of cash

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Too many student loans and out of cash

Postby Anonymous User » Tue Sep 18, 2018 3:26 pm

I have ~250-300k debt and am paying around $2500-3000 a month in loans. I'm in my second year clerking, and although my spouse works (we also have a kid), my bank account is now in the low triple digits.

Can I go into forebearance?
Thoughts on refinancing?
Any advice?

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Pneumonia

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Re: Too many student loans and out of cash

Postby Pneumonia » Tue Sep 18, 2018 3:31 pm

You can ask for forbearance. And it sounds like you should. Too few students take advantage of forbearance, especially while clerking.

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Re: Too many student loans and out of cash

Postby albanach » Tue Sep 18, 2018 3:38 pm

Anonymous User wrote:I have ~250-300k debt and am paying around $2500-3000 a month in loans. I'm in my second year clerking, and although my spouse works (we also have a kid), my bank account is now in the low triple digits.

Can I go into forebearance?
Thoughts on refinancing?
Any advice?


Why are you not on income based repayments? Surely your clerking years count towards PSLF? What if you leave there and go into gov't?

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Re: Too many student loans and out of cash

Postby Anonymous User » Tue Sep 18, 2018 6:14 pm

I'm going to biglaw after. Should I forebear the minimal I can to keep afloat or forebear a more significant chunk and pay it back when I have the big law salary?

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Re: Too many student loans and out of cash

Postby Pneumonia » Tue Sep 18, 2018 7:33 pm

Anonymous User wrote:I'm going to biglaw after. Should I forebear the minimal I can to keep afloat or forebear a more significant chunk and pay it back when I have the big law salary?


Honestly I would forebear all of it and put whatever excess income you have into savings.

Obviously this isn't the best advice from an expected-value point of view. One year of interest on 300k is no joke. But you will likely have some sort of gap between your last clerk paycheck and your first biglaw paycheck. You may also have to move (idk).

But assuming you don't already have an emergency fund, substantial savings, a relative who can give you an interest free-loan at short notice, etc., then forebear+save is the obvious call here.

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Re: Too many student loans and out of cash

Postby nixy » Tue Sep 18, 2018 8:48 pm

Yeah, forebear, or at least get on something income-based (which, I know unhelpful to say now, but you should have done that from the start).

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Re: Too many student loans and out of cash

Postby UBETutoring » Thu Sep 20, 2018 2:23 pm

I'm sure someone else did the math, but if you average $100k over 30 years, you pay significantly less on income based repayment than actually paying back that kind of money. You'd pay back $250k total. If your goal is to move in house after 2 or 3 years, I think 30 yr repayment is always the way to go.

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Re: Too many student loans and out of cash

Postby totesTheGoat » Thu Sep 20, 2018 4:35 pm

UBETutoring wrote:I'm sure someone else did the math, but if you average $100k over 30 years, you pay significantly less on income based repayment than actually paying back that kind of money. You'd pay back $250k total. If your goal is to move in house after 2 or 3 years, I think 30 yr repayment is always the way to go.



This, of course, assumes that you want that sword of damocles hanging over your head. Personally, I'm living like somebody making 1/3 of my salary and dumping every extra penny into knocking these things out in <5 years.

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Re: Too many student loans and out of cash

Postby Anonymous User » Fri Sep 21, 2018 11:45 am

totesTheGoat wrote:
UBETutoring wrote:I'm sure someone else did the math, but if you average $100k over 30 years, you pay significantly less on income based repayment than actually paying back that kind of money. You'd pay back $250k total. If your goal is to move in house after 2 or 3 years, I think 30 yr repayment is always the way to go.



This, of course, assumes that you want that sword of damocles hanging over your head. Personally, I'm living like somebody making 1/3 of my salary and dumping every extra penny into knocking these things out in <5 years.

I think a lot of it inevitably comes down to how you value money, and likely your life perspective. Personally, money is worth a lot to me when I have less of it and I like having six-figures in tangible assets to move around in case there is a bad day. If I make a million dollars a year, and lose an extra 100k a year then so be it, but I'd rather have a 100k if the market crashes again. As someone whose experienced both poverty and wealth, I can say that being poor sucks more than being rich is awesome. But if you're really confident, your income will always be 150k plus, then yes, you're right from a purely financial standpoint.

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Re: Too many student loans and out of cash

Postby albanach » Fri Sep 21, 2018 11:54 am

UBETutoring wrote:I'm sure someone else did the math, but if you average $100k over 30 years, you pay significantly less on income based repayment than actually paying back that kind of money. You'd pay back $250k total. If your goal is to move in house after 2 or 3 years, I think 30 yr repayment is always the way to go.


By paying significantly less, do you mean when the balance gets discharged at the end of IBR? Because then, unless you're in PSLF, you are taxed on the forgiven portion. That has the potential to be a very big tax bill, and the IRS are very good at getting their money.

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Re: Too many student loans and out of cash

Postby UBETutoring » Thu Oct 18, 2018 12:15 pm

albanach wrote:
UBETutoring wrote:I'm sure someone else did the math, but if you average $100k over 30 years, you pay significantly less on income based repayment than actually paying back that kind of money. You'd pay back $250k total. If your goal is to move in house after 2 or 3 years, I think 30 yr repayment is always the way to go.


By paying significantly less, do you mean when the balance gets discharged at the end of IBR? Because then, unless you're in PSLF, you are taxed on the forgiven portion. That has the potential to be a very big tax bill, and the IRS are very good at getting their money.

Over 10% of borrowers have already defaulted, and many more are in forbearance. I think the odds are fairly strong that those tax bills in 20 years from now never materialize, and that future political candidates will perceive anything but vacating them as political suicide.

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Re: Too many student loans and out of cash

Postby albanach » Thu Oct 18, 2018 1:04 pm

UBETutoring wrote:Over 10% of borrowers have already defaulted, and many more are in forbearance. I think the odds are fairly strong that those tax bills in 20 years from now never materialize, and that future political candidates will perceive anything but vacating them as political suicide.


I expect many of the borrowers will be able to discharge the tax debt through bankruptcy. Of course as a lawyer, you might be forced to sell the majority of your assets to avoid bankruptcy or potentially losing your license to practice after a C&F review.

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Re: Too many student loans and out of cash

Postby UBETutoring » Thu Oct 18, 2018 1:56 pm

albanach wrote:
UBETutoring wrote:Over 10% of borrowers have already defaulted, and many more are in forbearance. I think the odds are fairly strong that those tax bills in 20 years from now never materialize, and that future political candidates will perceive anything but vacating them as political suicide.


I expect many of the borrowers will be able to discharge the tax debt through bankruptcy. Of course as a lawyer, you might be forced to sell the majority of your assets to avoid bankruptcy or potentially losing your license to practice after a C&F review.

Or a very trustworthy spouse who gets a very nice divorce settlement ;) Kidding; nobody would ever do that.

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Re: Too many student loans and out of cash

Postby BigLawer » Thu Oct 18, 2018 2:25 pm

UBETutoring wrote:I'm sure someone else did the math, but if you average $100k over 30 years, you pay significantly less on income based repayment than actually paying back that kind of money. You'd pay back $250k total. If your goal is to move in house after 2 or 3 years, I think 30 yr repayment is always the way to go.


Curious why the in-house move makes a difference? Most in-house attorneys post biglaw make what a first year biglaw associate makes all in. I think you would still be paying it off. I imagine it is mostly if you go gov/non-profit or something that would make a difference.



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