@davidlobsterwallace
Fellow New Yorker here, welcome to the forums!
I am going to address you questions inline one by one
1. Do we pay off the student loans now? Like, today? All of them? If not all, how much?
Not all... You are not thinking like a person with options and for a couple with your salaries and asset base you have many options. I am going to suggest some out of the box things here that others on the boards may not agree with or even be aware of, but then again my demographic matches yours fairly closely.
You have a brokerage portfolio of $1.1M and student loan debt of ~$400k @ 7.9%. Everyone here is telling you that is a hair on fire emergency, and well it is. But you can refinance that debt to much cheaper rates. Your just not thinking like a wealthy person, student loans may not be able to be refinanced directly but you have access to very cheap borrowing due to your other assets and income. As you might have noticed I started this paragraph with the brokerage portfolio, you are an accredited investor with over a million liquid in a taxable brokerage account(s). If you are not familiar with the firm Interactive Brokers you need to, they generally cater to more sophisticated investors, not your typical Mustachian. However one of the great features they offer is extremely low margin rates to portfolio margin accounts. Margin borrowing is taking a loan out using your portfolio as collateral. most brokerages only allow you to do this to buy additional stock, IB lets you take the proceeds and do what you want. Here is a link to the interest fees page:
https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2 As you can see, borrowing up to $1M will only run you 1.09% so you can refi your student loans and save 6.81% annually not sell your investments and no longer have a hair on fire emergency.
You would never have a margin call as you only need to borrow $400k against your $1.1M and you can decide how to accelerate the payback with your savings.
You make too much to have gotten any tax benefit from having a student loan anyway so there is no reason to not shift the loan to a margin loan and if i am not mistaken margin interest is an itemizable deduction so you get a tax benefit for it as well. Cheddar or dandarc can confirm that, they are accounts on this thread.
Oh and by not selling to pay off the loans you have no capital gains either... who ever said all debt was bad?
2. How much should we start saving for Future Baby's college tuition? How are those of you with young or prospective spawn forecasting those kinds of needs? If you extrapolate out the current growth in tuition prices, it's something like $130k in 18 years. Is anybody actually saving close to $600,000 for this purpose?!
I am personally saving to fully fund both of my children's college education and at private school levels, they may or may not need that much, as they begin there elementary education I can adjust accordingly. NY state has one of the best 529's in the country, it is run by Vanguard, the fees are the lowest you can have, the investment options are broad. In fact if the state people live in has a crappy plan NYS is the recommended plan to use. The caveat is it the hardest to get your assets out of if you don't need them for education, so don't over fund if education isn't going to be in the cards. But lets be frank, you are both lawyers, you kid is going to college. NYS gives you a tax deduction up to $10k for married filling jointly so depending on your tax bracket annually savings of $685 to $882. Its something... woo hoo... The account works like a Roth on withdrawals, as long as it is an education expense completely tax free.
3. Do we need to leave Manhattan to live the dream? (The dream is not necessarily not working at all, but it is not having to work exhausting, soul-crushing hours at a moment's notice)
No but it makes it harder... We live in the burbs, moved back to where we grew up to have the family, both of our families still live here. Manhattan can be a big money drainer, but it is an awesome place to be, sometimes I just forgot how lucky I am (although not on my daily commute).
So you have options in the area, you just have figure out what it is that your dream is, NYC is not for everyone, but if you love it you love.
4. How long to hold onto DC rental property? Should we pay off the mortgage instead? I love the house (We lived there for 2+ years), and it is in a rapidly gentrifying neighborhood so the price is escalating, but will likely stabilize in the next couple years. Tenants are awesome, but currently not much spread: we are at break-even or slight net positive after mortgage interest deduction. I would like to move back to DC eventually, and would absolutely consider living there, but the house is also 100 years old and I can't help but thinking that something's bound to go wrong. If I knew 100% that I was going to move back to DC and live there, I'd pay it off, but at 3.5% and nothing out of pocket per month (the rental income also pays the taxes and homeowners insurance) it doesn't seem like an insane amount to pay for the optionality.
Your rate is low, don't pay it off, if it is going up now don't make a hasty financial decision as time is on your side and this is clearly more than a financial decision for you. Everything isn't just about dollars and cents, so since there is no pressure take it off the table and deal with some other things first.
My guess is there are other things you could do in general as you to optimize you finances and you gave a fair amount of info but with more details we could discuss further...
Like I said above you have lots of options, so take your time.
By the way what type of lawyers, I am always on the lookout for new lawyers to
kill use
-Mister FancyPants